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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.