HomeMy WebLinkAbout23 - Santa Ana Heights - Bay Knolls - Emerson-Churchill AnnexationsITEM 23
TO: Members of the Newport Beach City Council
FROM: Dave Kiff, Assistant City Manager
SUBJECT: Resolution 2002 -_ and Memorandum of Understanding (MOU)
Relating to Santa Ana Heights, Bay Knolls, and Emerson/Churchill
Annexations
RECOMMENDED (1) Adopt Resolution 2002 -_ relating a property tax exchange agreement for the
ACTIONS: City's pending annexation of three unincorporated areas between Newport
Beach and Costa Mesa.
(2) Authorize the City Manager to enter into a Memorandum of Understanding
(MOU) substantially similar to the attached draft MOU relating to the Santa
Ana Heights Specific Plan and the City's operation of a fire station in Santa
Ana Heights.
BACKGROUND: State law (the Cortese - Knox - Hertzberg Local Government Reorganization Act of
2000 -- Government Code §56000 et seq.) governs the way cities, counties, and
special districts address boundary issues like incorporations, annexations,
detachments, changes in "spheres of influence ", mergers and consolidations, and
combinations of these actions called "reorganizations." Readers can access the
Act at www.leginfo.ca.gov.
The Act describes the membership and role of the Local Agency Formation
Commission ( LAFCO) in each county. Orange County LAFCO, a seven - member
body that meets monthly in Santa Ana, addresses boundary changes for our
region (www.oclafco.ca.gov).
On September 26, 2000, the City Council adopted Resolution 2000 -81 directing
City staff to process an annexation application for the Newport Coast, Santa Ana
Heights, and the Bay Knolls community. The City filed its application to annex
these territories on March 19, 2001. The Newport Coast portion of the City's
annexation effort became effective January 1, 2002. The City Council added
another neighborhood (about nine homes in the Emerson/ Churchill tract) to its
pending application on May 28, 2002, when it adopted Resolution 2002 -36.
The east Santa Ana Heights and Bay Knolls /Emerson annexations are
anticipated to become effective July 1, 2003 following a LAFCO hearing in
September 2002.
Part I: Proposed Resolution - Property Tax Exchange Agreement. One of the last
steps before LAFCO can hear the City's application for any annexation is the
adoption by the City Council and the Orange County Board of Supervisors Of
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nearly - identical resolutions directing the transfer and allocation after annexation
of the 1 % Basic Levy that all property owners pay. In most of Newport Beach,
the city government itself receives about 17% of the 1 % Basic Levy paid by
Newport Beach property owners, with the remaining 83% going to schools,
community colleges, the County of Orange, and special districts.
On October 28,1980, the City and the County of Orange entered into a Master
Property Tax Transfer Agreement ( MPTTA) governing the exchange of the 1 %
Basic Levy in future annexations. The MPTTA determines how the City and the
County split that portion of the Levy that goes today to the County General
Fund. The Agreement directs that the City and the County always follow the
following ratio for any annexation:
0.51937804992 to the City and
0.48062195008 to the County.
In most circumstances, the MPTTA would be appropriate to use for east Santa
Ana Heights and Bay Knolls/ Emerson. But the County and the City - in an
attempt to assist the County in "getting out of the municipal service business' -
have discussed providing a small incentive for Newport Beach to also annex
smaller unincorporated islands between Newport Beach and Costa Mesa that
remain administered by the County's redevelopment agency ( "RDA ") and thus
have a significant portion of their total property tax apportionments restricted
(see the next section for more information about how redevelopment works).
As such, the attached resolution proposes a split different from the MPTTA for
the three annexation areas, but only for the propertytax base that does not go to
redevelopment and only for that share of the property tax base that today goes to
the County General Fund. The City and the County propose that, following
annexation, the non -RDA property tax share that currently goes to the County
General Fund be split in the following manner:
0.70 to the City and
0.30 to the County.
Because the County Board of Supervisors is directed by State Law to act on
behalf of special districts to apportion property taxes from special purpose
districts in an annexation, the proposed resolution directs the Board to also
apportion 100% of the non -RDA 1% Basic Levy now received by the Orange
County Fire Authority the Orange County Library District to the City upon the
annexation's effective date.
And a Link to the Recent Past. In 2001, the City and the County adopted joint
resolutions for the City's proposed Newport Coast annexation that directed the
County to, if the City was successful in annexing Bay Knolls at a later date,
provide that the property tax apportionment of the County General Fund
amounts from the Newport Coast would increase to:
0.52937804992 to the City and
0.47062195008 to the County.
Page 3
Part II: An MOU -- City Compliance with the Santa Ana Heights Specific Plan &
the Operation of a new Fire Station. The County of Orange's redevelopment
agency (called the Orange County Development Agency or OCDA) coordinates
specific public works projects in many of the unincorporated islands affected by
our annexation proposal. Like any redevelopment agency, OCDA funds capital
projects for a "blighted" area by selling bonds based on what's called property tax
"increment."
Property tax increment is the amount of property taxes generated during and
after an area is redeveloped above a base amount. State law directs that property
taxes at or below the base be apportioned to all of the entities that typically get
property taxes -- schools, community colleges, special districts, and more. But
everything above the base (with a few exceptions for growth and for schools) can
be directed to a redevelopment agency. The agency then issues redevelopment
bonds that will construct the improvements based on the anticipated increment.
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A redevelopment agency bases its projections of increment upon an adopted
redevelopment plan. The redevelopment plan typically shows where
commercial, residential, or industrial properties will replace blighted areas. For
the eastern Santa Ana Heights community, the redevelopment plan's zoning and
land uses is reflected in the Santa Ana Heights Specific Plan.
In anticipation of annexation, on August 8, 2000, the City Council adopted
Resolution 2000 -73 and thereby adopted the Santa Ana Heights Specific Plan as
the City's own plan for eastern Santa Ana Heights. However, to protect the
County's redevelopment bonds and the anticipated flow of tax increment, the
County of Orange has asked the City to confirm that the City will not rezone or
redesignate land uses within the Santa Ana Heights Specific Plan without the
permission and consent of the Orange County Development Agency (the Orange
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County Board of Supervisors). The proposed MOU would make this
confirmation.
Santa Ana Heights Fire Station. In March 2001, the City established a temporary
fire station on Zenith Street serving Santa Ana Heights and the airport area when
a nearby Orange County Fire Authority (OCFA) station closed in December
2000. Since that time, Chief 'rim Riley and I have worked to find a site for a
permanent station should the City be successful in annexing eastern Santa Ana
Heights. One such location is on Birch Street in a commercially -zoned area.
The County's executive administration and the County's redevelopment agency
staff are amenable to funding all or a significant part of the construction of the
station provided that the City pledge to equip it, staff it, and provide traditional
mutual and automatic aid to the remaining unincorporated regions around
eastern Santa Ana Heights. The proposed MOU would make this commitment
on the City's behalf.
THIS AGENDA This Agenda Item proposes the adoption of a resolution and authorization for
ITEM: the City Manager to execute an MOU (in substantially similar form to the
attached draft MOU) relating to the City's proposed annexation of Santa Ana
Heights, Bay Knolls, and the Emerson/ Churchill tract:
The Resolution agrees upon a 70% (City) and 30% (County) property tax
split (but only of the base property taxes — not the increment) for each
territory. This same resolution re- affirms the City and the County's
intent to give the City a slightly higher percentage of the property tax
generated in the Newport Coast upon annexation of the Bay Knolls
community; and
The MOU affirms the City's intent to respect the Santa Ana Heights
Specific Plan following annexation and the City's intent to equip and
staff a permanent fire station in eastern Santa Ana Heights following
annexation should the County use redevelopment funds to acquire land
for and to construct the station.
County staff intends to place the MOU (in substantially similar form) and the
Resolution on the Orange County Board of Supervisors' Agenda also in August
or early September, 2002.
ATTACHMENTS: Attachment A — Resolution 2002 -_
Attachment B -- Draft MOU
Page 5
RESOLUTION 2002-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH
RELATING TO A PROPERTY TAX TRANSFER AGREEMENT WITH THE
COUNTY OF ORANGE ON BEHALF OF THE COUNTY,
THE ORANGE COUNTY FIRE AUTHORITY,
AND THE ORANGE COUNTY LIBRARY DISTRICT
RELATING TO THE ANNEXATIONS OF EAST SANTA ANA HEIGHTS,
BAY KNOLLS, AND THE EMERSON /CHURCHILL TRACT
WHEREAS, the City of Newport Beach has proposed the annexation and /or
reorganization of territories adjacent to or within the City's western and northern sphere of
influence. These territories are known as eastern Santa Ana Heights ( "Santa Ana Heights "), Bay
Knolls, and the Emerson/ Churchill tract; and
WHEREAS, all or portions of these territories are within specific redevelopment project
areas administered by the Orange County Development Agency (OCDA) which direct most
property tax increment to the OCDA; and
WHEREAS, in January 2002, the City of Newport Beach annexed the Newport Coast
community to Newport Beach; and
WHEREAS, in 1980, the City Council adopted a Master Property Tax Transfer
Agreement with the County of Orange that directs that 0.51937804992 of the County General
Fund share of the I% Basic Levy be transferred to the City and 0.48062195008 remain with the
County upon annexation of territory by the City; and
WHEREAS, on August 14 2001, the Board of Supervisors and the City Council agreed to
adjust the Master Property Tax Transfer Agreement for the Newport Coast property tax
apportionments upon a future annexation of the Bay Knolls area in order to assist the City of
Newport Beach in funding municipal services to the Bay Knolls area because that territory falls
within an OCDA project area; and
WHEREAS, because the City has its own library system and fire department, the City's
share of the 1 % Basic Levy from the Orange County Library System and the Structural Fire
Fund or Orange County Fire Authority share will equal 100% of these agencies' respective
shares; and
WHEREAS, the eastern Santa Ana Heights, Bay Knolls, and Emerson/ Churchill
neighborhoods, being all or in part covered by redevelopment project areas, will produce less
property tax dollars for non - redevelopment public agencies than had the areas not been under
redevelopment, now, therefore be it
RESOLVED by the City Council of the City of Newport Beach that the City Council
hereby:
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1. States that, upon the effective date of each specific annexation, the property tax
transfer between the City of Newport Beach and the County of Orange General
Fund will be as follows for the annexation areas known as eastern Santa Ana
Heights, Bay Knolls, and Emerson /Churchill:
• 0.70 of the County General Fund share of the non - redevelopment 1 °% Basic
Levy be transferred to the City of Newport Beach; and
• 0.30 shall remain with the County.
2. Accepts that, upon the effective date of the City's annexation of the Bay Knolls
community, the property tax exchange for the previously - certified Newport Coast
Annexation will be as follows:
• 0.52937804992 of the County General Fund share of the 1% Basic Levy
generated from the Newport Coast annexation area be transferred to the
City of Newport Beach; and
• 0.47062195008 shall remain with the County.
3. Requests that, upon the effective date of each specific annexation, 100% of the non-
redevelopment property tax revenues accrued from the reorganized or annexed
territory to the Orange County Library District shall be transferred to the City of
Newport Beach.
4. Requests that, upon the effective date of each specific annexation, 100% of the non-
redevelopment property tax revenues accrued from the reorganized or annexed
territory to the Orange County Fire Authority shall be transferred to the City of
Newport Beach.
ADOPTED this 13th day of August, 2002.
TOD W. RIDGEWAY
Mayor of Newport Beach
ATTEST:
LAVONNE HARKLESS
City Clerk of Newport Beach
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-- DRAFT --
MEMORANDUM OF UNDERSTANDING
BETWEEN THE CITY OF NEWPORT BEACH
AND THE COUNTY OF ORANGE
REGARDING SANTA ANA HEIGHTS
The City of Newport Beach ( "City ") and the County of Orange ( "County "), collectively
known as the Parties, have hereby entered into this Memorandum of Understanding (MOU) on
2002 ( "Effective Date ") in regards to the following issues in eastern Santa Ana Heights
( "SAH "):
1. City has proposed the annexation and /or reorganization of territories adjacent to or
within the City's western and northern sphere of influence. These territories are known
as eastern SAH, Bay Knolls, and the Emerson /Churchill tract; and
2. County, operating as the Orange County Development Agency ( "OCDA "), has adopted
and confirmed a Redevelopment Plan ( "Plan ") for the SAH community; and
3. County has adopted the SAH Specific Plan ( "Specific Plan ") which describes the land
use and zoning associated with the eastern SAH community; and
4. In August 2000, City amended its General Plan to include the Specific Plan in City's
General Plan; and
5. The redevelopment plan relies upon the land uses and zoning described in the Specific
Plan to derive the property tax increment revenue needed to pay back redevelopment
bonds issued for capital projects in the SAH Project Area; and
County seeks City's assurance that it will respect the land use designations and zoning
within the Specific Plan so that the Plan can continue to provide the tax increment
revenue upon which the redevelopment bonds rely; and
7. The Plan and State Law describe various capital improvements that can be constructed
with redevelopment funds; and
City has previously expressed its desire to have the OCDA acquire land for and
construct a fire station at a suitable site in Santa Ana Heights and that following OCDA
or private sector construction of such a facility and following City's annexation of the
territory, City would equip and operate the station on behalf of eastern Santa Ana
Heights, the Airport Area, and the remaining unincorporated areas (via existing mutual
and automatic aid agreements);
Now, therefore, the Parties agree as follows:
1. City will respect, protect, and not amend without the written consent of County, the land
use designations and zoning within the Specific Plan so that the Plan will continue to
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support adequate property tax generation used to pay principal and interest on
redevelopment bonds issued for the purposes of capital projects within the Project Area;
2. City and County will support OCDA's use of redevelopment funds for the acquisition of
land and the costs of construction of a permanent fire station in eastern Santa Ana
Heights;
3. City shall, following construction and following annexation, equip and staff the station in
a manner that serves the residents and businesses of eastern Santa Ana Heights, the
Airport Area, and nearby unincorporated areas pursuant to existing automatic aid and
mutual aid agreements.
IN WITNESS WHEREOF, County and City have caused this Memorandum of Understanding to be
executed the day and year first above written.
CITY OF NEWPORT BEACH
a municipal corporation.
Homer L. Bludau, City Manager
APPROVED AS TO FORM:
Robert L. Burnham, City Attorney
COUNTY OF ORANGE
Dr. Michael Schumacher, County Executive Officer
APPROVED AS TO FORM:
Benjamin DeMayo, County Counsel