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Home My WebLink About04 - Santa Ana Country Club & South of Mesa Drive AreasCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 4 March 11, 2008 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 2008 -_ Relating to a Property Tax Exchange with the County of Orange for the Santa Ana Country Club and South of Mesa Drive areas ISSUE: How should base property taxes — outside of redevelopment tax increment — be allocated if area residents and members of the Santa Ana Country Club are successful in their attempts to convince LAFCO to reorganize these areas to Newport Beach? RECOMMENDATION: Adopt Resolution 2008- relating to a Property Tax Exchange for the South of Mesa Drive area and Santa.Ana Country Club. 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 26, 2008, the Newport Beach City Council voted 6 -1 to direct the City Manager to bring a property tax exchange resolution for the area known as the Santa Ana Country Club (SACC) /South of Mesa Drive reorganization back to the City Council at its next meeting. More about the Geographic Area. East Santa Ana Heights has always been in the Sphere of Influence (SOI) of Newport Beach. As such, it was annexed in 2003. West Santa Ana Heights was in the SOI of Costa Mesa; however, recognizing that East and West Sana Ana Heights were bound by a County redevelopment area and by other commonalities, Costa Mesa allowed the Sphere of Influence to be changed to Newport Beach and LAFCO allowed its annexation to Newport Beach on January 1, 2008. LAFCO has a policy of attempting to work with cities to gain annexation of unincorporated areas in order to ensure these areas receive better services than could be provided to scattered, isolated areas by the County. Two geographic areas that are within county unincorporated territory but are within the Costa Mesa SOI are known as the "South of Mesa. Drive" area and Property Tax Exchange Resolution — SACC/South of Mesa Drive March 11, 2008 Page 2 the SACC. The residents of South of Mesa Drive and the membership of the SACC have expressed a desire to be reorganized into Newport Beach. When Costa Mesa attempted to annex these two areas in 2002, sufficient signatures (over 90% of registered property owners) were obtained to prevent that annexation (in an annexation area that contains more than 12 registered voters, State law allows 50 % +1 valid signatures of registered voters in.the area to reject the annexation). Numerous residents from these areas, at numerous LAFCO meetings, have sought to be reorganized into Newport Beach. In 2007, these residents gained many significantly more valid signatures than required to petition LAFCO to consider their request to be reorganized into Newport Beach. The residents fulfilled all reorganization application requirements they could fulfill; however, LAFCO, per California Revenue and Tax Code §99(b)(4) does not consider a reorganization application complete unless it has an agreement between the County (on behalf of the County and special districts) and the City as to how property tax revenues will be shared. As the Council learned last week, typically the City uses the "Master Property Tax Transfer Agreement" ( MPTTA) to accomplish the property tax transfers associated with our reorganizations. The MPTTA dates back to October 28, 1980. The MPTTA states that the City and the County of Orange follow the following property tax split for most small reorganizations: • 0.51937804992 to the City; and • 0.48062195008 to the County. _ Because the proposed resident - generated reorganization is larger than 100 acres and is developed, the MPTTA cannot automatically be used. But the City can certainly adopt a MPTTA -like resolution reflecting that same split to begin formal negotiations. Because the County Board of Supervisors is directed by State Law to act on behalf of special purpose 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% Basic1evy 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. In order for LAFCO to consider the residents' application complete, the Orange County Board of Supervisors must adopt an identical resolution. Without that, the residents' application expires. Per the Council's direction, on February 29, 2008, City Manager Homer Bludau sent an e-mail to Tom Mauk, CEO of the County, asking him to agree to commence negotiations. Environmental Review: Not required. 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: l �I " VV Dav Kiff Assistant City Manager Attachments: Resolution 2008- Property Tax Exchange Resolution — SACC/South of Mesa Drive March 11, 2008 Page 3 RESOLUTION 2008- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH RELATING TO A PROPERTY TAX TRANSFER 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 "SOUTH OF MESA DRIVE" AREA AND THE SANTA ANA COUNTRY CLUB WHEREAS, residents and property owners within the "South of Mesa Drive" community and the Santa Ana Country Club (SACC) have petitioned the Orange County Local Agency Formation Commission (OC LAFCO) to reorganize these territories; and WHEREAS, 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 in January 2008, the City of Newport Beach annexed West Santa Ana Heights; and WHEREAS, in 1980, the City Council adopted a Master Property Tax Transfer Agreement ( MPTTA) with the County of Orange that directs that, within certain small annexations of less than 100 acres, 0.51937804992 of the County General Fund share of the 1% Basic Levy shall be transferred to the City and 0.48062195008 of County General Fund share shall remain with the County upon annexation of territory by the City; and WHEREAS, the geographic size of the residents' proposed reorganization is larger than the size (100 acres) whereby the use of the MPTTA is automatic, but the City believes that the split described in the MPTTA remains appropriate for these territories; and WHEREAS, because the City of Newport Beach has its own library system and fire department, the property tax share of the 1 % Basic Levy to the Orange County Library System and to the Structural Fire Fund or Orange County Fire Authority should be transferred to the City in an amount equal to 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 (South of Mesa Drive and /or the Santa Ana Country Club), the property tax transfer between the City of Newport Beach and the County of Orange General Fund will be as described below. • 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 of the County General Fund share of the County General Fund portion shall remain with the County; and be it also Property Tax Exchange Resolution — SACC/South of Mesa Drive March 11, 2008 , Page 4 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 11`" day of March, 2008 EDWARD D. SELICH Mayor of Newport Beach ATTEST: LAVONNE HARKLESS City Clerk of Newport Beach