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HomeMy WebLinkAbout03-20-2019 Agenda Correspondence - Item 20 - LAFCOCity Council Memorandum Date: __________, 2016 Date: March 20, 2019 To: Honorable Mayor and City Council Members From: Gigi Hanna, City Clerk Subject: Revised Item 20: Resolution to Approve Property Tax Exchange between the City of San Bernardino, County of San Bernardino, and the San Bernardino County Fire Protection District Resulting From LAFCO Annexation 3188A (Spring Trails Annexation) LAFCO informed us that the staff report and resolution for this item required some immediate changes. The revised staff report and resolution are included as an attachment to this memorandum and hard copies will be provided at the dais. Please feel free to contact City Clerk Gigi Hanna (hanna_gi@sbcity.org) or Chief Deputy City Clerk John Maier (maier_jo@sbcity.org) should you have any questions. This Page Is Left Intentionally Blank 3/19/2019 4:00 PM Staff Report City of San Bernardino Request for Council Action Date: March 20, 2019 To: Honorable Mayor and City Council Members From: Andrea M. Miller, City Manager By: Trish Rhay, Director of Public Works Lisa Sherrick, Senior Management Analyst Maya Lopez, Administrative Analyst II Subject: Resolution to Approve Property Tax Exchange Between City of San Bernardino, County of San Bernardino and the San Bernardino County Fire Protection District Resulting From LAFCO 3188A (Spring Trails Annexation) Recommendation Adopt Resolution No. 2019-43 of the Mayor and City Council of the City of San Bernardino, California, determining the amount of property tax revenues to be exchanged between and among the City of San Bernardino, the County of San Bernardino, San Bernardino County Fire Protection District (County Fire District) and its Valley Service Zone and County Service Area 70, resulting from the jurisdiction change described by LAFCO3188A. Background The Spring Trails Annexation application has been under consideration for several years. At present, the owner-initiated application is being processed by the Local Agency Formation Commission (LAFCO). A map, which depicts the proposed area to be annexed, is included in Attachment 2. As part of LAFCO’s process, the affected governmental taxing jurisdictions (the County and the City) are required to consider a property tax sharing agreement. On May 2, 2017, the County made its original approval of a resolution accepting the proposed exchange. On May 15, 2017 the City Council considered the proposed exchange of property taxes but decided to not approve the resolution accepting the proposed exchange. The concern of City Council at that time was the uncertainty about the City’s revenues associated with property taxes as the proposed exchange to transfer 100% of the City’s Ad Valorem property taxes to the County Fire District should continue for “newly annexed” areas of the City as well. The City’s May 15, 2017 “no vote” on the proposed resolution to approve the proposed exchange of property taxes initiated a dispute resolution process spelled out in the Revenue and Taxation Code Section 99. That process began with the County and the 3/19/2019 4:00 PM City mutually agreeing on a third-party (David Taussig and Associated, hereafter “Taussig”) to perform a fiscal analysis to identify the cost associated with the relevant agencies’ financial impact of the proposed annexation. That process took several months to get underway, but eventually a financial analyst was selected to do the study through a County RFP process. The study was completed but only evaluated the costs associated with the City and the County, and did not include the costs/revenues associated with the County Fire District, which was the primary basis of the questions raised by the City about the proposed tax exchange. However, during the period of time two things have occurred at the City that are causing staff to again bring forward what is essentially the same proposed property tax exchange put forward in May of 2017. Both items have the positive effect of improving the City’s revenues and, as a result, better enable the City to fund operations associated with the new development. The first is the renegotiated sharing percentage with the County relative to the Vehicle License Fee In-Lieu (VLF) Property Tax revenue. The outcome of that negotiation process now generated an additional $1.8 million annually for the City’s General Fund and the amount will grow as assessed value grows within the community. Additionally, the City has created a new Public Services CFD (2018-1) which places an annual special tax levy on all new development at the rate of $385 per single family residence. After a five-year rate lock, the annual levy grows at a 4% pace year to year. This too will generate a significant revenue stream that will help fund costs otherwise borne by the General Fund associated with new development. With these two significant changes in the revenue projections of the proposed annexation, the developer’s fiscal analysis is much improved and no longer calls for an additional special tax on the property owners to make the development’s revenues balance with anticipated expenditures. The new fiscal pro forma for the project enables the reconsideration of the proposed property tax exchange by the Mayor and City Council. Discussion In preparation for this item, staff has communicated with both the County and LAFCO about the preapproval process. LAFCO advised the County to generate a new property tax exchange calculation incorporating the latest assessed valuation numbers for the area proposed to be annexed. That has been completed with very modest changes to the numbers as the proposed annexation area is entirely undeveloped land at this time. The County requested that the City first approve the property tax exchange agreement, and then it would subsequently take it to their Board of Supervisors for approval if passed by City Council. The County’s conclusion is the same with the updated proposal, which that all ad valorem related property taxes be transferred away from the City and then shared by the County Fire District and its Valley Service Zone and the County itself. The fiscal 3/19/2019 4:00 PM analysis generated by Tausig supported the proposed exchange demonstrating that the County had sufficient costs incurred to serve the proposed annexation area to justify their proposed share of the property tax allocation. The County Fire District only increased their revenue a minor amount consistent with what the City would have otherwise received if it still had the fire service function. It is worth noting as well, that the tax sharing proposal is calculated in the same manner as all other annexations have been prepared and it was only the City’s unique circumstances that caused it to initially raise the questions about whether an alternative was appropriate for this instance. 2018/19 Goals and Objectives Approving the proposed property tax exchange agreement is consistent with Goal No. 4: Ensure Development of a Well-Planned, Balances, and Sustainable City and Goal No. 6: Operate in a Fiscally Responsible and Business-Like Manner. The approval of the proposed tax exchange agreement enables the continues development of property in the north end of town and the annexation of that property into the City of San Bernardino, providing additional new housing opportunities for the community. Fiscal Impact The actual property tax at issue today is very small, only $332 (Exhibit A) as calculated by the County. Total build out valuation is estimated at $110 million, and thus if the City were to receive its typical 17% share, that amount would be approximately $187,000 that was the subject of the discussion when first considered in May of 2017. As discussed earlier, the additional revenue generating solutions developed by the City are anticipated to result in the annexation being cost neutral to the City; at full 5-year build out the Public Safety CFD will result in an additional $83,000 to increase at 4% annually. Conclusion It is recommended that the Mayor and City Council of the City of San Bernardino, California, adopt Resolution 2019-43 determining the amount of property tax revenues to be exchanged between and among the City of San Bernardino, the County of San Bernardino, San Bernardino County Fire Protection District and its Valley Service Zone and County Service Area 70, resulting from the jurisdictional change described by LAFCO 3188A. Attachments Attachment 1 Resolution Attachment 2 Map of Proposed Annexation Area Attachment 3 County Tax Exchange Proposal Attachment 4 LAFCO 3188A Plan for Service Hoffman Report Attachment 5 David Taussig and Associates Report Attachment 6 LAFCO Notification of Failure to Complete Property Tax Transfer Ward: All Synopsis of Previous Council Actions: • May 15, 2017 – Resolution to approve property tax exchange agreement with County of San Bernardino not approved by City Council. Resolution No. 2019-43 RESOLUTION NO. 2019-43 RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, DETERMINING THE AMOUNT OF PROPERTY TAX REVENUES TO BE EXCHANGED BETWEEN AND AMOUNG THE CITY OF SAN BERNARDINO, THE COUNTY OF SAN BERNARDINO, SAN BERNARDINO COUNTY FIRE PROTECTION DISTRICT AND ITS VALLEY SERVICE ZONE AND COUNTY SERVICE AREA 70, RESULTING FROM THE JURISDICTION CHANGE DESCRIBED BY LAFCO 3188A WHEREAS, The City Manager is hereby authorized and directed to execute Amendment Number One to a Consulting Services Agreement with Spicer Consulting Group.the owner initiated an application processed by Local Agency Formation Commission (LAFCO) proposing the area to be annexed therefore requiring the affected governmental taxing jurisdiction (the City and the County) to consider the tax sharing agreement; and WHEREAS, through Dispute Resolution spelled out in the Revenue and Taxation Code Section 99, fiscal analysis was provided through a third-party identifying the impact on relevant agencies, and since then there have been changes to City Vehicle License In-Lieu (VLF) revenue and the City’s recent implementation of CFD’s requiring the County to generate a new property tax exchange calculation WHEREAS, the County requested that the City first approve the property tax exchange agreement before the proposed annexation can move forward BE IT RESOLVED BY THE MAYOR AND CITY COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: SECTION 1. The above recitals are true and correct and are incorporated herein by this reference. SECTION 2. The Mayor and City Council hereby approve the negotiated exchange of property tax revenue between the City of San Bernardino, the County of San Bernardino, the San Bernardino County Fire Protection District and its Valley Service Zone, and County Service Area 70, attached hereto as Attachment 3 and incorporated herein by reference, resulting from the above-described jurisdictional change. SECTION 3. 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 shall be allocated in future years pursuant to the provisions of Section 98 of the Revenue and Taxation Code. Resolution No. 2019-43 SECTION 2,4.The authorization to execute the above-referenced Agreement is rescinded if the Agreement is not fully executed by all parties and returned to the Office of the City Clerk within sixty (60) days following the effective date of this Resolution. SECTION 35. The City Council finds this Resolution is not subject to the California Environmental Quality Act (CEQA) in that the activity is covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment. Where it can be seen with certainty, as in this case, that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. SECTION 46. Severability. If any provision of this Resolution or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications, and to this end the provisions of this Resolution are declared to be severable. SECTION 5. Effective Date. This Resolution shall become effective immediately. APPROVED and ADOPTED by the Mayor and City Council and signed by the Mayor and attested by the City Clerk this day of , 2019. John Valdivia, Mayor City of San Bernardino Attest: __________________________________ Georgeann Hanna, MMC, City Clerk Approved as to form: __________________________________ Gary D. Saenz, City Attorney Resolution No. 2019-43 CERTIFICATION STATE OF CALIFORNIA ) COUNTY OF SAN BERNARDINO) ss CITY OF SAN BERNARDINO ) I, Georgeann Hanna, MMC, City Clerk, hereby certify that the attached is a true copy of Resolution No. _____, adopted at a regular meeting held at the ___ day of _______, 2019 by the following vote: Council Members: AYES NAYS ABSTAIN ABSENT SANCHEZ _____ _____ _______ _______ BARRIOS _____ _____ _______ _______ VACANT _____ _____ _______ _______ SHORETT _____ _____ _______ _______ NICKEL _____ _____ _______ _______ RICHARD _____ _____ _______ _______ MULVIHILL _____ _____ _______ _______ WITNESS my hand and official seal of the City of San Bernardino this ___ day of ____________ 2019. ______________________________ Georgeann Hanna, MMC, City Clerk