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HomeMy WebLinkAboutAgenda Statement 1979/12/18 Item 10CITY OF CNUI.A VISTA COUNCIL AGENDA STATEMENT Item No. 10 For meeting of 12/18/79 ITEM TITLG SUBMIIITED Resolution/d7~ Accepting Negotiated Property Tax Exchange Relating to Jurisdictional Changes City Manager ~- C_ ITEM ~XPLANdTION (4/5TN'S VOTE REQUIRED YES- NO X Assem ly Bi 1 8 precludes the City from finalizing any annexations until the City and Count ogre upon an equitable distribution of property tax monies. As the situation now s ands, the County receives a certain dollar amount of taxes on a given piece of prope ty an would continue to receive that amount plus incremental growth unless the prope ty is annexed to the City. It is this dollar amount currently going to the County that ust b distributed in some equitable formula developed through negotiation. The n gotia ion process is required because under the terms of AB 8 no specific formu a was rovided by the State legislature. The legislature's failure to provide a spe ific ormula was intentional because it was probably felt that no one single formu a wou d be equitable when applied throughout the State and it became evident that the d'strib tion of taxes would be an extremely difficult and complex matter. The C'ty ha a 20+ acre parcel of land located at the southeast corner of Bonita Road and 0 ay La es Road (owned by ADMA Corporation) that initiated annexation to the City many onths ago. It has now reached a point where the .last hurdle in the annexation is th need to determine an equitable distribution of some $1,996 in property tax monie that currently are derived by the County. While we will be dealing with the $1,99 as t e money involved in the transfer formula, the dollars only represent the base figure against which a percentage would apply, regardless of what the total dollars may b in s bsequent years (i.e., the percentage factor would remain constant). The C unty f San Diego and their designated negotiation representative spent several weeks in developi g a formula for the distribution of these funds and, as a result of that work, the City ha tentatively agreed to accept 13.57% for the City versus 68.83% for the County. When this rmula is applied against the $1,996 used to calculate the percentages, the City woul recei e $331 in property taxes (including $5.15 per year for San Diego Flood Control and 9.75 r the Bonita-Sunnyside Fire Protection District) and the County would receive EXHIBITS continued on suoalemental Paae 2 greem nt Resolution` Ordinance- Plat_ Notification List_ ther ENVIRONMENTAL DOCUMENT: Attached- Submitted on FINANICIAL IMPACT STAF RECD ENDATION 1) Approve resolution; 2) Institute action to establish a task for e for San Diego County to develop an equitable formula for distribution of property tax s in he case of annexations; 3) If this fails, seek State Legislature action thr ugh t e League of California Cities to amend AB8 provisions pertaining to a pro erty ax distribution for annexations; and 4) Establish moratorium on annexations BOAR /COMM SSION RECOMMENDATION not yet initiated. COUN IL AC ION U oT ~ ~ I-- ;,U ~~- Form A-113 (Rev. 5/77) Supplemental Page 2 Item No. 10 ' Meeting of 12/18/79 $1,680. (The sum of these totals exceeds the $1,996 because of the flood control and fire protec ion 'strict amounts.) The Co nty's formula and the resultant percentage is based on an analysis which developed a rati of unty costs in providing municipal type services to properties in the County versus the st of providing regional type services to not only unincorporated properties but all pro rties within the County. The County has carefully justified both net cost figures by a plying all revenues derived by the County from sources other than the property tax through he formula they have developed. If their calculation of providing "municipal type s rvic is reasonably accurate, it would appear that the County, under the terms of Assem ly Bil 8, is receiving a much lower proportionate share of property taxes generated by all prop ties already in the City and requiring regional type services than they are seeking fro property that would like to annex to cities. For example, if the ADP1A property had been in the City in 1978-79, the City would have recei ed ap, oximately $1,025 in property taxes out of the $1,996 the County formula was based upon d the County, for providing continued regional services, would have received $971 nder e terms of AB 8. Our calculations in arriving at these figures are based on the fact hat t City actually received $1,765,000 in property taxes in 1978-79, without inclu ing S to bail-out funds, with a net total assessed valuation in the City for that year of $32 ,271,442. A tax levy, if the City had been levying a tax of approximately 55$ p r $10 would have had to be levied against all assessed valuation of the City in or er to enerate the $1,765,000 that we actually received. Consequently, if we multiply the assesse valuation of the ADM,4 property in 1978-79 (which was $187,200) times the 55Q p r $10 we arrive at the $1,025. We ca take he process one step further and use the same rationale in calculating taxes for t e 197 80 fiscal year. The assessed valuation of the ADMA property increased to $190, 44 in 1979-80 and the total assessed valuation of the City increased to $380,500,299. Applying this new assessed valuation to the property tax estimated to be derived (not inclu ing 1 g-term financial assistance under AB 8), the City would receive approximately $1,13 in p perty tax revenue from the ADMA property. Under the County formula, the ADMA prope ty wo ld generate only one-third of the amount of taxes an equivalent parcel already in th City generates. An ex ggera ed example of what would happen under the County formula provides a clearer pictu e of he problem. Property currently within the City under the terms of AB 8 produ es ab ut $3,000,000 a year in property taxes, with an assessed valuation of $380,000,000. If an area n the County with an assessed valuation equal to that of the City were to annex to th City property taxes accruing to us by reason of the annexation would produce but one-t ird, r $1,000,000 in property taxes. The same ratio would hold true regardless of th size of an annexation. Under these circumstances, if the City continued to provide the s me le el of service to the newly annexed area, it would require a reduction in the overall lev is of service throughout the entire community. It would also appear to us that nder he County's formula,regional service costs would be financed by shifting a gre ter p rtion of the property tax monies to the County at the expense of cities. We ha a spe t considerable time in attempting to follow the rationale of County staff in the f rmula they are proposing and have carefully analyzed the rationale we have used in our f rmula It is obvious the City's approach and end result would maintain more of a statu quo r historical distribution of tax resources between the County and City than the C unty' formula. I think it can be acknowledged that both the City and the County are f ced w th a dilemma. The cities have little incentive to annex territories now in the C unty f the County formula is to be used. On the other hand, cities may be receiving a fai ly hi h proportion of the total property tax "pie" generated by the $4 per $100 tax 1 vy pe mitted under Proposition 13. That "fairly high" share refers only to that prope ty cu rently within the City. Again, under the County proposal, the County would recei e a d sporportionately high share of property tax from property that wants to annex to th City. In vi It De of th in ma order ~w of ur analysis, we cannot recommend that the City accept the County formula as •tains to this parcel or other parcels that are being annexed to the City as a lent s lution to the tax exchange problem. We do believe, however, that in the case ADtIA annexation the position of the owners must be considered by the City Council :ing a final determination as to what distribution may be considered equitable in to mo e this annexation along. ^,~h continued on Supplemental Page 3 Supplemental Page 3 Item No. 10 Meeting of 12/18/79 Owner of tl Count 's for Conti ue to We car we al! formu' The C annex tax e which the C equit be ad the r on re formu formu would 2. 3. property cite the following reasons in urging the City Council to accept the Tula initially, with the understanding that the City and County would regotiate a formula more equitable to the City: The owners point out that they have worked for many months in annexing this property to the City. Until both the County Board of Supervisors and the City agree on a tax exchange formula, the property cannot be annexed and the owners of the property cannot proceed with the filing of a tentative map or proceed with arranging necessary financing for the project. The owners of the property point out that the cost of construction is rising approximately 2% a month and, when a 2% a month increase is applied to a $10,000,000 project, every month of delay increases the cost of construction and consequently increases the cost of housing. not d~spute the validity of the arguments of the owners of this property; however, o mus acknowledge that the long-range financial implications of an inequitable a has to be our primary concern. ty Co ncil has two alternatives. First, they can delay the final steps in the tion rocess by not adopting the attached resolution agreeing to the County's Chang proposal. Second, they can adopt the resolution agreeing to the formula, would allow the annexation to be completed, but with a clear understanding with unty oard of Supervisors that through further negotiations a new formula more ble t the City might be developed and, in that event, a new resolution would pted both bodies reflecting the results of those negotiations. Adoption of solut on as prepared would only place the County Board of Supervisors officially ord a indicating that they are willing to look further at the tax exchange a. I cannot be said the negotiations would definitely result in a different a. I fact, the City would have little of a "negotiating base" since the property be an exed and, if the County maintained its current position, no change could occur. In th fina analysis, if the impasse cannot be broken this City would only realize from ow on 13.57% of the total taxes (whatever that amount might be as a result of total Bevel pment) available for distribution between the County and the City on this parti ular iece of property. ERA:m1b The ~esolu{ion for this item will be available at the time of the Council meeting. rA "t~ G `~ r j.,'~ j %i,• FFICE OF~iHE Will T.H de city of 19, 1979 Chula Vista, California Honorable Thomas D. Hamilton, irman, Board of Supervisors inistration Center 0 Pacific Highway Diego, CA 92101 Tom: enclosing a copy of a resolution adopted by the City cil at its meeting of December 18, 1979. Although the cil did desire to reach agreement on the property tax ange for the ADMA Company, Inc. Reorganization, it did feel it could do so unless the language of the resolutions ted by both the City and the County contain provisions a potential change of the formula for the property tax ange and that both parties agreed that it o~ould apply oactively to the ADMA properties at such time as a new ula were negotiated. 0 City Attorney urged us to include such language in our r solution as a statement of policy or intent which would h e allowed the annexation proceeding to be concluded; hocaever, t e Council feels that the present formula, especially as a lied to the whole range of annexations that will likely b contemplated in the future, is so inequitable that it is d sirable to obtain a commitment from the County in the same v in as expressed in the City's resolution. /: ~ h EN R • 276 FOURTH AVENUE • CHULA VISTA, CALIFORNIA 92010 • TELEPHONE (714) 575-5044 r Two 19, 1979 Th ref ore, I would request that your office insure that the ma ter is docketed for your first meeting in January. Further, as soon as possible, I would desire to set up a meeting between yo rself and one other member of the Board and myself and an ther member of our Council, to undertake a more in-depth an lysis of the problems of property tax exchanges for ter- ri ories being annexed to cities. truly yours, Wi 1 T. Hyde, ~~^~~ jss ~~ City Council City Dtanager City Attorney ./