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HEARING: Chief Administrative Office and the Board of Supervisors Fire/EMS/Jurisdictional Reorganization Ad Hoc Committee recommending the Board consider the following, with regard to the Meeks Bay Fire Protection District dissolution and annexation of District Area to the North Tahoe Fire Protection District, LAFCO Project 2022-01:
1) Conduct a public hearing in accordance with California Revenue and Taxation code 99.02(e), to consider the effects on fees, charges, assessments, taxes, or other revenues resulting from the transfer of General Fund Annual Tax Increment (ATI) to the North Tahoe Fire Protection District upon completion of the dissolution of the Meeks Bay Fire Protection District and annexation by the North Tahoe Fire Protection District;
2) Adopt and authorize the Chair to sign Resolution 074-2024 accepting the exchange of property tax base and increment for the annexation of all parcels within the Meeks Bay Fire Protection District into the North Tahoe Fire Protection District service area, Local Agency Formation Commission Project 2022-01;
3) Adopt and authorize the Chair to sign Resolution 075-2024 approving the negotiated transfer of General Fund ATI to North Tahoe Fire Protection District upon completion of the dissolution of the Meeks Bay Fire Protection District and annexation by the North Tahoe Fire Protection District;
4) Adopt and authorize the Chair to sign Resolution 076-2024 finding a public benefit will be derived from providing a one-time payment of $992,000 to North Tahoe Fire Protection District to facilitate the reorganization of the Meeks Bay and North Tahoe Fire Protection Districts to stabilize and enhance the sustainability of fire protection services to residents and visitors in the Lake Tahoe West Shore area of the County; and
5) Adopt and authorize the Chair to sign Resolution 077-2024 finding a public benefit will be derived from reimbursing North Tahoe Fire Protection District for Local Agency Formation Commission fees and costs, up to $42,000, related to the reorganization of the Meeks Bay and North Tahoe Fire Protection Districts to stabilize and enhance the sustainability of fire protection services to residents and visitors in the Lake Tahoe West Shore area of the County.
FUNDING: Discretionary Transient Occupancy Tax; General Fund.
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DISCUSSION / BACKGROUND
Background
Fire and emergency medical (non-transport) services in El Dorado County are delivered by 12 independent special districts and the City of South Lake Tahoe. Revenues and service levels vary across districts and following the implementation of Proposition 13 in 1978 there have been discussions about how to ensure the fire service in the County is sustainable into the future.
While the County does not have direct responsibility for the provision of fire protection services, the Board of Supervisors has engaged in various efforts to support the fire districts over the years. In the early 2000s, the County provided General Fund financial support to several districts with the lowest property tax shares, a program known as “Aid to Fire.” This program was discontinued in 2016, with the recognition that the year-to-year funding to individual districts was not sustainable for the County financially and it was not addressing the structural issues facing the fire service. A countywide, system-wide perspective would be needed and any assistance from the County should support increased coordination and efficiency.
The 2017-18 Grand Jury issued a report that recommended consolidation of districts and further recommended that the County lead such an effort. The Board of Supervisors’ response agreed that consolidation should be considered as one of the potential options for bolstering the fire service, but stopped short of adopting the recommendation that the Board direct creation of a plan to consolidate districts. This was based on consistent feedback from the districts indicating they felt the ideas for consolidating or reorganizing districts should be driven by the districts, and not the County. The Chief Administrative Office and the Board’s Fire and EMS Ad Hoc Committee continued to engage in the sustainability discussions alongside the districts and in 2019, the Board of Supervisors included in its Strategic Plan a theme to “Support Fire Districts’ Reorganization and Consolidation when requested.” At the time, it was contemplated the support might include assistance with costs of the LAFCO process, including needed fiscal and municipal service studies, or other one-time costs, such as infrastructure investments, that would help remove barriers to district reorganizations.
In the Fall of 2022, Meeks Bay and North Tahoe filed an application with Placer LAFCO for annexation of Meeks Bay by North Tahoe. In 2023, the El Dorado County Fire Protection District and Diamond Springs-El Dorado Fire Protection District agreed to begin the process of annexation. In the same year, the Cameron Park Community Services District began exploring the possibility of seeking an agency to take on its responsibility for fire protection services. In addition, the City of South Lake Tahoe approached the County about potentially annexing several unincorporated parcels into the City.
In light this activity, on September 12, 2023, the Board expanded the scope of the Fire/EMS Ad Hoc Committee to include jurisdictional reorganizations, directed the CAO to work with the Ad Hoc Committee to develop a policy on County involvement in jurisdictional reorganizations, and authorized the issuance of a Request for Qualifications (RFQ) for consulting firms to assist with analysis, negotiations, and development of a policy related to jurisdictional reorganizations. We received no responses to the RFQ, so staff is working on reaching out to known vendors for proposals.
North Tahoe/Meeks Bay Annexation
North Tahoe, located in Placer County, has been providing fire protection services to Meeks Bay, located in El Dorado County, since 2014 through a contract for services. The districts have been working since at least 2018 to reorganize their districts through the dissolution of Meeks Bay and the annexation of the district’s Area to North Tahoe. The annexation would result in one district encompassing all the territory in each of the two current districts. An alternative governance study and standards of coverage plan were developed in 2018, and a representative from North Tahoe Fire reported to the Board of Supervisors in April, 2019, that he anticipated an overall savings upon full reorganization of the districts (Legistar file 19-0551). In December, 2021, North Tahoe requested $42,000 to reimburse the districts for the LAFCO costs related to the annexation. The Board of Supervisors approved that allocation on January 25, 2022 (Legistar file 22-0083).
The efforts were delayed for a number of reasons, including turnover on the Meeks Bay Board of Directors and turnover at El Dorado LAFCO, where the annexation was initially planned to be processed. Under state law, the annexation would have been processed through Placer LAFCO, because the greater area of affected territory lies within Placer County; however, consent was provided by both Placer and El Dorado LAFCOs to process the annexation through El Dorado LAFCO because the Executive Officer had been closely involved with the project since its inception. When the El Dorado LAFCO Executive Officer, left their position, the annexation application was redirected to Placer LAFCO.
The application was filed in the Fall of 2022, which triggered the requirement under California Revenue and Taxation Code to adjust the allocation of property tax revenue for the agencies affected by the reorganization. This property tax negotiation process is to be facilitated by the County, in consultation with the affected districts. During this process, the County was contacted by Meeks Bay Board Members requesting the County provide financial support for the annexation, citing rising costs of providing service, pension liabilities (currently estimated at $2.4 m), capital needs, and a potential reduction in revenue (approximately $70,000 annually) related to the reduction of Meeks Bay’s special taxes and assessments to the level paid by North Tahoe residents. In October, 2023, a working group composed of two Meeks Bay Board Members, two North Tahoe Board members, the Fire Chief for both districts, and CAO staff began meeting to discuss the property tax allocation and the districts’ additional requests. During these meetings the districts also expressed a desire for increased property tax allocations.
Given the unique history and circumstances described above, on January 9, 2024 the Board of Supervisors approved in concept a proposal for financial assistance related to the Meeks Bay Fire Protection District (Meeks Bay) dissolution and annexation of District Area to the North Tahoe Fire Protection District (North Tahoe).
The proposal shall not serve as a precedent and shall not be construed to set an expectation for the Board to consent to similar transfers in the future.
The proposal included the following:
1. A one-time lump sum payment of $992,000;
2. Property tax increment for each tax rate area in Meeks Bay to be brought up to at least the average for all tax rate areas in North Tahoe;
3. Meeks Bay special taxes and assessments remain at current levels;
4. Station 67 or a station that will meet standards of coverage will continue to be staffed and operated at current level of service.
CAO staff relayed this information to both districts following the meeting. On March 27, 2024, the Chief Administrative Office was notifed that both district boards had approved all of the above conditions with the exception of #3, and requested that an item be placed on the Board agenda for May 14, 2024, to adopt a resolution for the redistribution of property tax base and increments in accordance with the approved proposal. Staff and the Ad Hoc Committee recommend the Board approve the proposal with the removal of the requirement to maintain the Meeks Bay special taxes and assessments at their current levels. Both district boards have stated their desire for all residents of the district, once the annexation is completed, to pay the same level of taxes. The CAO and Ad Hoc Committee feel it is appropriate to defer to the governing bodies' request in this instance.
Public Hearing and Resolution to Transfer General Fund ATI (Actions #1 and #2)
Pursuant to California Revenue and Taxation code 99.02(e), in order for the County to voluntarily agree to transfer a portion of its General Fund ATI to North Tahoe, the County and North Tahoe must each hold a public hearing to consider the effects on fees, charges, assessments, taxes, or other revenues. In order bring property tax increment for each tax rate area in Meeks bay up to at least the average for all tax rate areas in North Tahoe, increment in four of Meeks Bay's six tax rate areas will need to be shifted from the General Fund share of increment. The total percentage of General Fund increment to be shifted in all four tax rate areas is just under 12%, and is estimated to be between $8,000 and $12,000 in the first year after the shift. The County's base property tax revenue will not be affected. As stated in the attached resolution, the following conditions exist for this transfer:
1. Revenues are available for this purpose. The proposed transfer is limited to a small portion of future revenue growth in the territory to be annexed. The County’s base property tax revenue will not be affected. The value of the foregone future revenue is de minimis and will be offset by the projected property tax revenue growth in future fiscal years.
2. The transfer will not result in any increase in the ratio between the amount of County General Fund revenues that are generated by regulatory licenses, use charges, user fees, or assessments and the amount of revenues of the County used to finance its current level of service. The County will not increase any fee, fine, charge, or assessment as a result of this transfer. The impact of the transfer is de minimus and will not result in a reduction in property tax revenues below current levels.
3. The transfer will not impair the ability of the County to provide existing services. The proposed transfer is limited to a small portion of future revenue growth in the territory to be annexed. The County’s base property tax revenue will not be affected. The value of the foregone future revenue is de minimis and will be offset by the projected property tax revenue growth in future fiscal years.
4. The transfer will not result in a reduction of property tax revenues to school entities. The proposed transfer affects only the County’s General Fund Annual Tax Increment and will not reduce property tax revenues to schools.
The County is not obligated to effect the transfer unless and until North Tahoe conducts the required noticed public hearing in accordance with California Revenue and Taxation code 99.02(e).
Resolution Accepting Exchange of Property Tax Base and Increment for Parcels in Meeks Bay (Action #3)
This resolution is required in order to approve the transfer of all current property tax revenue, including base and increment within Meeks Bay to North Tahoe upon completion of the annexation. This does not affect any County revenues. Placer County must also adopt a resolution to accept the exchange of property tax base and increments, which is anticipated to occur in June, 2024. The first public meeting on the project is anticipated to be held by Placer LAFCO in July, 2024. Based on the current schedule, the annexation could become effective in October, 2024.
Resolution Approving a One-Time Payment to North Tahoe (Action #4)
This resolution documents the public benefit derived from the negotiated payment of $992,000 to North Tahoe as approved conceptually by the Board and orders the Auditor to disburse the funds to North Tahoe within 45 days following the County's receipt and approval of documentation from North Tahoe evidencing the completion of the reorganization. This payment will be funded by Discretionary Transient Occupancy Tax.
Resolution Approving Reimbursement to North Tahoe for Certain Reorganization Costs (Action #5)
On January 25, 2022, the Board of Supervisors approved an allocation of up to $42,000 to North Tahoe to assist with the payment of LAFCO fees related to the reorganization and authorized the CAO to execute a funding agreement. This resolution documents the public benefit derived from providing this assistance and orders the Auditor to disburse the funds to North Tahoe within 45 days following the County's receipt and approval of documentation from the District that includes invoices from Placer LAFCO for all fees and costs, including costs for third-party studies, and evidence of the District's payment to LAFCO. It is not anticipated that the entire allocation will be needed. To date, the estimate provided to North Tahoe by Placer LAFCO is just under $18,000. Staff recommends Discretionary Transient Occupancy Tax be used for this purpose.
It is important to note that the County does not currenty have policy on jurisdictional reorganizations, and the contributions from the County in this instance should not be construed as precedent-setting. Contributions at the level contemplated in this instance would not be fiscally sustainable for the County. This is a unique situation, in that the Meeks Bay Fire Protection District no longer has any employees and has been operationally almost fully integrated into North Tahoe for several years. In addition, it is geographically isolated from other fire services within the County, providing no other viable option for a service provider.
The Chief Administrative Office is in the process of securing a contract with a consultant for on-call services for review and analysis of future jurisdictional reorganization proposals. This consultant will also assist with development of a policy guiding the County’s role in reorganizations and providing guidance on if or when the County should participate financially.
ALTERNATIVES
The Board could choose not to approve the revised proposal, which would likely result in delay or discontinuation of the annexation project.
PRIOR BOARD ACTION
Legistar Item #22-0083 (January 25, 2022) authorized a contribution from the County General Fund to North Tahoe and Meeks Bay to pay for LAFCO costs.
Legistar Item #23-1629 (September 12, 2023) expanded the scope of the Fire/EMS Ad Hoc Committee to include jurisdictional reorganizations.
Legistar Item #24-0073 (January 9, 2024) approved the original proposal
OTHER DEPARTMENT / AGENCY INVOLVEMENT
County Counsel, Meeks Bay Fire Protection District, North Tahoe Fire Protection District, Placer County LAFCO
FINANCIAL IMPACT
For the lump sum payment, the County’s DTOT Special Projects Designation will be reduced by $992,000, leaving approximately $750,000 in that designation. The payment for LAFCO fees will further reduce the designation by up to $42,000. The proposed adjustments to the annual tax increment factors would not reduce the amount of base General Fund property tax the County receives in the area being annexed, but it would reduce the County’s future share of revenue growth in the area. The amount forgone by the County would vary based on the actual growth in the equalized tax roll, but is estimated to be between $8,000 and $12,000 in the first year following the effective date of the adjustments.
CLERK OF THE BOARD FOLLOW UP ACTIONS
Forward a signed copy of the resolution to the Chief Administrative Office.
STRATEGIC PLAN COMPONENT
N/A
CONTACT
Sue Hennike, Assistant CAO