HomeMy WebLinkAboutANNEX PROP TAX ALLOC 09-02-80DATE:
AUGUST 28, 1980
Inter-Corn
TO:
FROM:
SUBJECT:
HONORABLE MAYOR AND CITY COUNCIL
DAN BLANKENSHIP, CITY ADMINISTRATOR
PROPERTY TAX ALLOCATION FOR ANNEXATIONS
The following is a brief status report on the progress to resolve the present annexation
impasse caused by the unresolved property tax allocation problem.
Senate Bill 2376 which would have temporarily solved the problem was voted on by the
Senate August 27, 1980 and failed to receive the required two-thirds vote necessary to
pass it. Unless there is a motion to reconsider the matter, this solution may be dead
for six months.
On the other hand, the County and Cities negotiating teams have reached agreement on a
formula which will be on the Board's September 2nd agenda for agreement in concept and
direction to draft the final agreement language. The attached letter from Supervisor
Riley explains the agreement which is totally in line with the resolution you adopted at
the August 4, 1980 meeting. There are some details such as a developed area annexation
over 100 acres being excluded and requiring separate negotiations (a rare problem) and
an undeveloped area annexation'over 100 acres may be separately nego ~ated if the parties
mutually agree to do so (this does not affect our Irvine annexation).
RECOMMENDED ACTION:
COUNCIL APPROVE THE PROPOSED AGREEMENT IN CONCEPT AND ENCOURAGE THE
BOARD, ORANGE COUNTY DIVISION OF THE LEAGUE OF CITIES, AND OTHER
ORANGE COUNTY CITIES TO APPROVE AND SUPPORT IT.
Respectfully submitted,
City Administrator
DB/bb
cc:
Finance
Community Development
Ken Fleagle
Bob Ledendecker
James Rourke
THOlVlAS F. RILEY
PHONE: 834-3550 IAREA CODE 714)
August 27, 1980
Mr. Dan Blankenship
Tustin City Administrator
Main at Centennial
Tustin, California 92680
Dear Dan:
After a lengthy period of negotiation, the city-county committee
appointed to develop an equitable method of allocating property tax
revenue when cities annex county territory has approved a conceptual
agreement for said allocation in accord with AB 8. This proposed
agreement has been recommended to the Orange County Board of
Supervisors.
The committee's recommendation appears on the consent calendar of
the Board meeting agenda for Tuesday, September 2, 1980. Enclosed
is a copy of the proposed agreement and its transmittal letter.
Please call me or my aide, Doreen Harshall, if you have questions
or comments on this matter. You may wish to express your views at
next Tuesday's meeting.
This has been a difficult issue, and I look forward to its resolution.
Sincerely,
Supervisor, Fifth District
TFR:mbr
Enclosure
SUPERVISOR, FOURTH DISTRICT
RALP ~ B. CLARE
ORANGE COUNTY HALL OF A~NINISTRATION
IO CIVIC C[NT[R PLAZA; SANTA ANA, CALIFORNIA 9Z701
September 2, 1980
Honorable Board of Supervisors
lO Civic Center Plaza
Santa Aha, CA 92701
SUBJECT:
SYNOPSIS:
AB 8 Determination of Tax Allocation Upon Annexation
Negotiating teams appointed by the Orange County Board of
Supervisors and the Orange County Division of the League of
California Cities are recommending a~.conceptual agreement
for allocating property tax revenue/involving municipal
annexations.
Honorable Board Members:
In the aftermath of Proposition 13, the State Legislature directed cities
and counties to develop local methods for allocating property tax revenue
when cities annex county territorY. The Board of Supervisors and the Orange
County Division of the League of California Cities each appointed negotiating
committees to determine an equitable method of distribution of these property
taxes in conformance with the regulations specified in AB 8 of 1978.
During discussions of this issue, two key positions emerged. The County rep-
resentatives desired to protect revenue in the County General Fund. The City
representatives desired to achieve the historic property tax relationships
which existed prior to Proposition 13.
A proposed conceptual agreement is attached which generally achieves this
goal. Both the County and City committees believe this agreement will safe-
guard the County General Fund while recognizing that cities need a fair share
of tax revenue to finance mupicipal services.
This conceptual agreement is being forwarded to the Board of Supervisors and
the Steering Committee of the Orange County Division of the League of Cities
simultaneously. If both the Board and the League Committee approve this approach,
a final document will be prepared. This final agreement will be brought back
to the Board of Supervisors for final action and would then be referred to
the City Councils of each of Orange County's 26 cities for individual ratifi-
cation.
If this conceptual agreement is approved, a formal agreement should be before
the Board within 30 days.
Honorable Board of Supervisors
September 2, 1980
Page Two
While this agreement with the cities is being put in final form, the County's
negotiating committee will begin developing a method for dealing with requests
for property tax revenue made by special districts. The recently-adopted
SB 180 allows special districts to negotiate a property tax determination
for themselves, rather than allowing the Board of Supervisors to negotiate
on behalf of the districts. The impact of this bill is now being studied
by County staff and will be forwarded to the Board after preliminary dis-
cussions are held with representatives of special districts.
RECOMMENDED ACTION:
1. Approv~ conceptual agreement;
2. Authori'ze County tax allocation committee
to begin drafting a final agreement;
Direct the County tax allocation committee
to begin discussigg methods of determining
property tax alldcatio~ with special districts
not governed by~'the B~ard of Supervisors. F
Respectfully submitted,
Stan Oftel '
le, al nlla~l
County Con~nittee on Tax Allocation
SO:te
Attachment
August 21, 1980
PROPOSED AGREEMENT BETWEEN THE COUNTY OF ORANGE
AND THE CITIES OF ORANGE COUNTY, TO PROVIDE FOR
PROPERTY TAX DISTRIBUTION IN ANNEXED AREAS
AB-B9
1. The base year for pending jurisdictional changes shall be FY 1980-81.
The parties, to this agreement are the Orange County Board of Supervisors
and the twenty-six cities i.n Orange County (represented by the Orange
County Division, League of California Cities).
Negotiations to reconsider this agreement cay be reopened at any time
in the future by the ~utual consent 'of al~ parties as indicated 'by the
representative bodies of the parties.
When a city annexes a County unincorporated area that is fully developed
or substantially developed~ the following distribution method will be~used:~
a. The County Auditor-Controller shall select, by random sample,
several Tax Rate Areas (TRA's) within each Orange County ~ty.
The city's tax factor (% of the $4.00 tax rate) and the County's
tax factor in these randomly selected TRA's will be averaged to
produce an average city tax factor (for each individual city)
and an average County tax factor (in each individual city).
The sum of the two average tax factors represents the combined
city and County General Fund tax effort in an individual city.
Dividing the average city tax factor or the average County tax
factor by.the sum of the two, produces a percentage ratio
between the two factors that represents the city and County
historic tax ratio for each individual city.
* To be defined
August 21, 1980
Page 2
Property tax affected by this agreement is the: 1) Amount
of revenue in an annexing area that would, were the area not
annexing, be distributed to the Orange County General Fund,
and 2) Amount of revenue in an annexing area that would have
been distributed to certain special districts, but because of
the annexation, the city will be assuming the provision of
those services formerly provided by the special district(s).
c. The combined property tax revenue determined in "b" (above)
in the base year, will be multiplied by the historic City
and County tax ratios and divided among the two jurisdictions
accordingly. ~' ~/ :
-: ! !-.'
d. Each annual increment or increase over the prior year's base,
due to increases in assessed value, will be distributed between
the city and County according to the same division by the
historic tax ratios of the two agencies.
For developed annexations of 100 acres or more, a separate
agreement must be negotiated by the County and the annexin3 city.
e
When a city annexes a County unincorporated area that is undeveloped or less
than substantially developed (as defined in #4) the following distribution
method will be used:
a. The County Auditor-Controller shall follow the same step
as described in #4a.
b. The property tax in question is the same ProPerty tax as
described in #4b.
August 21, 1980
Page 3
The object of this distribution method is to achieve a situation
similar to #4 where the total revenue is distributed according
to each jurisdiction's tax ratio. However, in no case will the
County receive less than the base property tax revenue it
received in the FY preceding the year in which the annexation
will become effective. Therefore, it may be possible that a
city's share, for the first several years, might be less than
the amount the city's historic tax ratio shows that the city
should receive. This situation will be rectified over time.
As mentioned in "c", the. County retains the base property tax
that they received in the p~ior FY. The city receives all
revenue from'special districts that no longer are required to
serve the annexed area {because the city is assuming the
provision of those services) -- as long as the special district
revenue does not exceed the city's historic tax ratio amount.
If it does, the excess amount is then divided between the
!
annexing city and'the County'according to their historic tax
ratios.
If the special district revenue does not bring a city up to its
historic tax relationship with the County, the city then will
receive the entire increment from the annexed area {beginning
immediately with the year the annexation is finalized) each
year until the historic tax ratio is achieved. Obviously,
development will cause this to occur rapidly.
ee
Once a city has reached the historic tax ratio relationship with
the County, all future increment from the annexed area will be
divided according to the historic tax ratio between the two juris=
dictions.
For undeveloped annexations of 100 acres or more a different
separate negotiated agreement may be proposed by mutual consent
of both the County and the annexing city.