CALAFCo Conference 2007 Bright Lights, City Spheres Fostering City/County Agreements

Moderated by: Josh Susman, City Member, Nevada LAFCo & CALAFCo Executive Board Panel: Ron Freitas, Community Development Director, Stanislaus County Walter Kieser, Managing Principal, Economic and Planning Systems Pat McCormick, Executive Officer, Santa Cruz LAFCo Charlie Woods, Community Development Director City of Turlock

Introduction Are Cities and Counties natural adversaries, or is there a case for collaboration? Are sustainable agreements better than sustained conflict? What characterizes a good agreement, How does it get established … and … How can LAFCO help?

Why does LAFCo Care? LAFCo’s legislative mandate: To promote rational urban boundaries & efficient service delivery. Sustainable Services: Lopsided agreements hamper the ability of a city or a district to provide sustainable services. LAFCo’s traditional role: To serve as an impartial “honest broker”.

What Kinds of Agreements? Property Tax Apportionment City annexations cannot be considered until City and County have agreed how to divide the property tax (§ 99 Revenue & Taxation Code). City/County Sphere Agreements Cities and Counties must meet and confer before a City submits a sphere proposal to LAFCo (§ (b) Gov’t Code).

Terms of Engagement  Property Tax  Sales Tax  TOT (Hotel Tax)  Mitigation Fees  Special District Feasibility  Regional Housing needs/credits  Infrastructure Funding  Infrastructure Standards  Urban Design  Land Use/Urban Growth Boundary  Sphere Boundaries  Timing of Annexations (including islands and developed areas) Sphere Agreements and Annexation Agreements can address a broad range of issues:

LAFCO has no ability to “override” as is the case with incorporation-related tax exchanges. LAFCO can encourage parties to reach an agreement that properly balances interests. LAFCO must ascertain that these requirements have been met before proceeding with annexations and Sphere of Influence actions. Terms of a property tax exchange agreement can affect feasibility of a reorganization proposal.

What’s to Fight About? The fight can be vicious because the stakes keep shrinking: Property tax revenue growth depressed due to initiatives (Proposition 13), legislation (AB-8), and State budget- related decisions (ERAF). Service costs rising faster than revenues, creating stress on local government’s ability to sustain public services. City/County conflicts over revenue-generating land uses. The temptation for cities to “leap frog” or “cherry pick” more lucrative territory, while avoiding unincorporated developed areas.

Other Issues … Impacts to special districts may add complexity to the city/county exchange. The unilateral aspect of the property tax exchange agreement can be a source of conflict Conflicts can lead to poor land use decisions and diminished service efficiency. Conflicts regarding regional housing needs allocation/housing element “credits”.

The Public Benefits When Agencies Cooperate Numerous urban development and public service issues that benefit from cooperation of cities and counties: regional infrastructure financing agricultural preservation habitat conservation planning affordable housing

A wide range of variation in the form and scope of agreements -- The range includes simple pre-established and universal exchange percentage for all cities in the county to ad hoc agreements negotiated for each annexation. More complex agreements common in areas where rapid growth and large-scale municipal annexations are common. Some agreements involve the exchange of other taxes (e.g. sales taxes, TOT) either directly or on an in lieu basis. Agreements sometimes involve other issues, e.g. infrastructure financing, sphere boundaries, etc.

Case Studies Santa Cruz County (Watsonville) Stanislaus County (Turlock) San Joaquin County (Stockton)

Santa Cruz County City gets County’s support for sphere amendment/annexation County gets to claim units for next RHNA cycle Both parties share planning and development costs

A Short History of an Odd Couple

o Money for nothing and your permit for free o Necessity isn’t always your mother – sometimes it’s your crazy aunt o Doing the right thing isn’t easy when people are laughing at you o Come on down and let’s make a deal or Best Wishes Bob o Please, please, please me; or kissing your sister

o Isn’t poaching illegal? Certainly not nice! o Oops, or I hate it when that happens o County and Turlock negotiate new agreement (third mutual support) o So how’s that working for you? o It’s like déjà vu all over again o Can LAFCO be a regional planning agency without a plan?

San Joaquin County: the Process Prompted by cities’ desire to annex considerable territory. County concerns regarding fiscal effects, infrastructure needs, and cooperative planning. County initiated fiscal analysis framework to quantify issues and test agreement terms. Considerable time and effort involved in negotiating and approving agreement.

San Joaquin County: the Deal Fixed share of property tax (80/20). County public facilities fee adopted by all Cities. Special provisions for related special district reorganization and small cities. Cooperation on SOI land use planning and related standards.

Lessons Learned Established agreements are preferable to ad hoc approaches. Consultations during Sphere of Influence actions can anticipate issues, facilitate agreements, and promote logical urban boundaries.

More Lessons Establishing principles regarding the desired outcome important such as: Assurance of adequate funding for recurring regional services. Cooperation on regional issues (infrastructure funding, environmental impact mitigation, etc.). Logical urban boundaries (e.g. annex developed unincorporated islands; avoid leap frog development). Reorganization of special districts to reduce overlapping authorities.

Lessons Learned, continued Objective, mutually acceptable analysis of circumstances (e.g. fiscal effects, etc.) is valuable for reaching agreement. Relatively simple exchange formula is much easier to evaluate and to administer. Opportunities for cooperation on common objectives (infrastructure, planning standards, housing) should be considered as part of agreement.

Questions?