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HEARING - Chief Administrative Office recommending the Board consider the following, with regard to the City of South Lake Tahoe Clean-up Reorganization, Local Agency Formation Commission (LAFCO) Project 2024-01:
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 base property tax revenue to the City of South Lake Tahoe upon completion of the annexation by the City of South Lake Tahoe; and
2) Adopt and authorize the Chair to sign Resolution 189-2024 accepting the exchange of property tax increments and approving the negotiated transfer of General Fund base property tax revenue to the City of South Lake Tahoe upon completion of the annexation of 80 parcels within El Dorado County into the City of South Lake Tahoe service area, LAFCO Project 2024-01.
FUNDING: General Fund.
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DISCUSSION / BACKGROUND
Background
On June 6, 2023, upon review of the Fiscal Impact Analysis on potential annexation scenarios, the City of South Lake Tahoe (City) Council passed a motion (5-0) providing direction to pursue the annexation of the “cleanup” parcels consisting of 90 parcels totaling 411.8 acres currently in unincorporated El Dorado County into the City. The main reason for annexation of these parcels is that the City has been providing public services to these areas (including police, fire, and snow removal), because of their location adjacent to City limits but geographically removed from the rest of the inhabited portions of El Dorado County, but has not received any tax revenue from the area to support the provision of these services. On November 16, 2023, the City Planning Commission passed a resolution recommending that the City Council adopt General Plan and City Code amendments, and pre-zone the 90 parcels within the City Sphere of Influence for subsequent annexation of such properties. On March 23, 2024, the City Council held a first reading of the ordinance pre-zoning the parcels and amending South Lake Tahoe City Code Title 6, Chapter 6.55, Article II (Plan Area Maps and Statements), and passed Resolution No. 2024-041 initiating annexation proceedings with LAFCO. The City Council adopted Ordinance No. 2024-1185 on April 23, 2024, and staff subsequently submitted the cleanup annexation application to LAFCO.
On July 5, 2024, the El Dorado County Auditor’s Office was notified by LAFCO that the City submitted their application to LAFCO to annex the 90 parcels to the City with concurrent detachment from the Lake Valley Fire Protection District. This notice also requests the initiation of the tax revenue re-distribution process. On August 13, 2024, the El Dorado County Auditor’s Office notified interested agencies of the initiation of the tax revenue re-distribution process which started the 60 day negotiation period required in California Revenue and Taxation (R&T) Code section 99(b).
Since Spring of 2024, the City Manager and City Attorney have been in conversation with the owners of the Tahoe Valley Campground regarding their concerns about annexation. Based on a letter received on September 27, 2024, City staff has agreed to remove the Tahoe Valley Campground and adjacent public parcels from the annexation application to LAFCO at this time, pending further discussions with the owners. Due to this change, the City requested an extension of 30 days to the negotiation period allowable by R&T Code section 99(b)(4) and a notification of the revised application was sent by LAFCO to affected agencies on October 10, 2024.
Public Hearing and Resolution to Transfer General Fund Base Property Tax Revenue and Distribution of Future Annual Tax Increment (ATI)
Pursuant to R&T Code section 99.02(e), in order for the County to voluntarily agree to transfer a portion of its General Fund base property tax revenue to the City, the County and City must each hold a public hearing to consider the effects on fees, charges, assessments, taxes, or other revenues. The County is proposing a base property tax transfer to the City in the amount of $12,200. This amount is equal to the estimated revenues the County has been receiving to provide the services that the City will now provide. As stated in the attached resolution, the following conditions exist for this transfer:
1. Revenues are available for this purpose. The proposed transfer is concurrent with a reorganization that absolves the County of responsibility to provide law enforcement and public works services to the parcels being annexed by the City. The base property tax to be transferred represents the estimated revenues the County had been receiving to provide those services for which it will no longer be responsible.
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.
3. The transfer will not impair the ability of the County to provide existing services. The proposed transfer is concurrent with a reorganization that absolves the County of responsibility to provide law enforcement and public works services to the parcels being annexed by the City. The base property tax to be transferred represents the estimated revenues the County had been receiving to provide those services for which it will no longer be responsible.
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 Base Property Tax Revenue and will not reduce property tax revenues to schools.
The County is not obligated to effect the transfer unless and until the City conducts the required noticed public hearing in accordance with R&T Code section 99.02(e) which is anticipated to occur on November 5, 2024.
This resolution is also required in order to approve the distribution of future ATI among affected agencies in the respective Tax Rate Areas (TRAs). In accordance with R&T Code sections 99 and 99.01, negotiations have been completed regarding the redistribution of the property tax increments applicable to these parcels. The recommended distribution reflects minor adjustments to most affected agencies. The City, Lake Valley Fire Protection District, and the County’s Road District Tax will change based on the TRA of the parcel being annexed. For the parcels currently in TRA 075-025, the City is proposed to receive a negotiated ATI of 24.3355%. For the parcels currently in TRA 075-036, the City is proposed to receive a negotiated ATI of 21.9744%. Lake Valley Fire Protection District and the County’s Road District Tax is proposed to receive 0% of the future ATI for the parcels being annexed. There is no impact to the school agencies in either TRA. Other details of the proposed exchange of tax increment are included in Exhibits 2024-01-A and 2024-01-B to the Resolution.
The first public meeting on the project is anticipated to be held by LAFCO in Spring 2025.
ALTERNATIVES
The Board could choose an alternate distribution of property tax increments and base property tax transfer.
PRIOR BOARD ACTION
N/A
OTHER DEPARTMENT / AGENCY INVOLVEMENT
County Counsel, City of South Lake Tahoe, El Dorado County LAFCO
FINANCIAL IMPACT
The base property tax transfer is $12,200 and represents the estimated amount of revenues the County had received to provide the services that the City will now provide to the annexed parcels. The proposed adjustments to the annual tax increment factors 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 under $100 in the first year following the effective date of the adjustments.
CLERK OF THE BOARD FOLLOW UP ACTIONS
Obtain the Chair's signature on the Resolution and forward a signed copy to the Chief Administrative Office for distribution.
STRATEGIC PLAN COMPONENT
N/A
CONTACT
Alison Winter, Principal Management Analyst