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HomeMy WebLinkAbout05 - SAH & Emerson Property Tax Exchange AgreementCITY OF NEWPORT BEACH CITY COUNCIL. STAFF REPORT Agenda Item No. 5 May 23, 2006 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Dave Kiff, Assistant City Manager 949/644 -3002 or dkiff @city.newport- beach.ca.us SUBJECT: Resolution 2006 - Relating to a Property Tax Exchange Agreement for West Santa Ana Heights & the Emerson Tract ISSUE: How should base property taxes — outside of redevelopment tax increment — be allocated if the City is successful in annexing West Santa Ana Heights? RECOMMENDATION: Adopt Resolution 2006- relating to a Property Tax Exchange Agreement to allocate property taxes after the annexation of West Santa Ana Heights and reaffirming the City's earlier adoption of Council Resolution 2002 -55 relating to the 70 -30 property tax split for the Emerson Tract. DISCUSSION: 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 ( "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 (www.oclafco.ca.gov), a 7- member body that meets monthly in Santa Ana, addresses boundary changes for our region. On February 14, 2006, the City Council adopted Resolution 2006 -15 directing City staff to process a reorganization application for West Santa Ana Heights ( "WSAH "), the Emerson Tract ( "Emerson"), and a single parcel off of Industrial Way that holds part of the City's General Services Department's corporate yard ( "Corporate Yard Parcel "). Master Property Tax Exchange Resolution - WSAN May 23, 2006 Page 2 The City filed our application to annex these territories a short time later. 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 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 15 -16% of the 1% Basic Levy paid by Newport Beach property owners, with the remaining 84 -85% going to schools, community colleges, the County of Orange, and special districts. More than 25 years ago, 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. When the City was preparing to annex East Santa Ana Heights, the City and the County agreed to modify the MPTTA. The resulting Agreement — which was intended to provide a small incentive for Newport Beach to also annex other smaller unincorporated islands (like WSAN) that remain administered by the County's redevelopment agency ( "RDA ") and thus have a significant portion of their total property tax apportionments restricted — proposed a split different from the MPTTA for East Santa Ana Heights, Bay Knolls, and the Emerson Tract. The different split would apply only to the property tax base that does not go to redevelopment. The City and the County proposed that, following annexation, the non -RDA property tax share that went or would go to the County General Fund would be split in the following manner: • 0.70 to the City; and • 0.30 to the County. This 70 -30 split applies to East Santa Ana Heights, Bay Knolls, and the Emerson Tract following the Council's adoption of Resolution 2002 -55 (see attachment) in September 2002. Note that Resolution 2002 -55 included the Emerson property — as such, that Resolution is still valid and Emerson's property tax apportionment does not have to be negotiated again. In my discussions with the County staff in recent weeks, the County CEO's office said that it was not interested in providing the same 70 -30 split for West Santa Ana Heights. As such, the proposed resolution envisions using the MPTTA for WSAN. Because the City owns the Corporate Yard parcel, it does not pay property taxes on it — therefore there is nothing to split or to negotiate with the City of Costa Mesa regarding that parcel. Master Property Tax Exchange Resolution - WSAH May 23, 2006 Page 3 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 in WSAH by the Orange County Fire Authority and the Orange County Library District to the City upon the annexation's effective date. If Council approves this Resolution, the City will ask the County to adopt a nearly identical resolution on the OC Board of Supervisors' Agenda as soon as possible. Environmental Review: The City Council's approval of this Agenda Item does not require environmental review. Public Notice: This agenda item may be noticed according to the Brown Act (72 hours in advance of the public meeting at which the City Council considers the item). Submitted by: Dave iff Assistant City Manager Attachments: Resolution 2006 - Resolution 2002 -55 Master Property Tax Exchange Resolution - WSAH May 23, 2006 Page 4 RESOLUTION 2006- 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 REORGANIZATION OF WEST SANTA ANA HEIGHTS WHEREAS, on February 14, 2006, 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 West Santa Ana Heights ( "WSAH "), the Emerson Tract ( "Emerson ") and a parcel off of Industrial Way that now includes a part of the General Services Department's Corporate Yard ( "Corporate Yard Parcel "): 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 July 2003, the City of Newport Beach annexed the eastern Santa Ana Heights and Bay Knolls communities; and WHEREAS, in 1980, the City Council adopted a Master Property Tax Transfer Agreement ( MPTTA) with the County of Orange that directs that 0.51937804992 of the County General Fund share of the 1% 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 13, 2002, the Board of Supervisors and the City Council (via the Council's Resolution 2002 -55) agreed to adjust the MPTTA for the eastern Santa Ana Heights community, Bay Knolls, and the Emerson Tract so that — until such time as the redevelopment project area expires — the 1 % Basic Levy share of the property tax apportionments upon annexation would be split 70% to the City and 30% to the County in order to assist the City of Newport Beach in funding municipal services to these areas because portions of the areas fall 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; now, therefore be it RESOLVED by the City Council of the City of Newport Beach that the City Council hereby states that, upon the effective date of each specific annexation noted herein (West Santa Ana Heights and Emerson Tract), the property tax transfer between Master Property Tax Exchange Resolution - WSAH May 23, 2006 Page 5 the City of Newport Beach and the County of Orange General Fund will be as described below. For the Emerson Tract, per Council Resolution 2002 -55: • 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; and • The property tax transfer will revert to the ratio specified in the Master Property Tax Agreement at the time when the Orange County Development Agency ceases to collect tax increment from the areas subject to this annexation. Said ratio is as follows: 0.51937804992 of the County General Fund share of the 1% Basic Levy be transferred to the City and 0.48062195008 remain with the County, and For the West Santa Ana Heights area: • 0.51937804992 of the County General Fund share of the County General Fund portion of the 1 % Basic Levy shall be transferred to the City of Newport Beach; and • 0.48062195008 shall remain with the County; and be it also RESOLVED by the City Council of the City of Newport Beach that the City hereby 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; and be it also RESOLVED by the City Council of the City of Newport Beach that the City hereby 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 23`d day of May, 2006 DON WEBB Mayor of Newport Beach ATTEST: LAVONNE HARKLESS City Clerk of Newport Beach RESOLUTION 2002- 55 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 1% 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: I 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. • The property tax transfer will revert to the ratio specified in the Master Property Tax Agreement at the time when the Orange County Development Agency ceases to collect tax increment from the areas subject to this annexation. Said ratio is as follows: 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. 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 131h day of August, 2002. ATTEST: LAVONNE HARKLESS City Clerk of Newport Beach TOD W. RIDGEW Mayor of Newport 7 STATE OF CALIFORNIA } COUNTY OF ORANGE } ss. CITY OF NEWPORT BEACH } I, LaVonne M. Harkless, City Clerk of the City of Newport Beach, California, do hereby certify that the whole number of members of the City Council is seven; that the foregoing resolution, being Resolution No. 2002 -55 was duly and regularly introduced before and adopted by the City Council of said City at a regular meeting of said Council, duly and regularly held on the 13th day of August, 2002, and that the same was so passed and adopted by the following vote, to wit: Ayes: Heffernan, O'Neil, Bromberg, Glover, Adams, Proctor, Mayor Ridgeway Noes: None Absent: None Abstain: None IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the official seal of said City this 14th day of August, 2002. (Seal) City Clerk Newport Beach, California r