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HomeMy WebLinkAboutMinutes - City Council - unsigned - 1992-05-12 - Adjourned Regular Meeting1 05/12/92 City Council, Adjourned Regular Meeting Council Chambers Redding, California May 12, 1992 5:30 p.m. The meeting was called to order by Mayor Moss with the following Council Members present: Anderson, Arness, Dahl, Kehoe and Moss. Also present were City Manager Christofferson, Assistant City Manager McMurry, City Attorney Hays, Director of Public Works Galusha, Director of Planning and Community Development Perry, Director of Finance Downing, Principal Planner Keaney, Housing Supervisor Maurer, Assistant Finance Director Sundin, Associate Planner Morgon, Budget Services Officer Starman, City Clerk Strohmayer, and Secretary to the City Council Rudolph. BUDGET FORMAT (B-130-070) Director of Finance Downing reviewed the Report to City Council dated May 7, 1992, incorporated herein by reference, outlining the recommendations of the ad-hoc budget committee consisting of Council Members Anderson and Arness. Ms. Downing related that the Finance Department agrees, in concept, with the recommendations of the ad-hoc budget committee. Therefore, it is the recommendation of staff that Council approve the budget format changes as recommended by the ad-hoc budget committee. This reorganization would require programming changes and additional staff time; however, staff believes the changes could be accomplished within the time frame available. Council Member Anderson stated that the recommended budget format changes represent a starting point for fiscal year 1992-93 and, if needed, additional modifications can be made the following fiscal year. MOTION: Made by Council Member Dahl, seconded by Council Member Anderson, to approve the budget format changes as recommended by the ad-hoc budget committee, in the Report to City Council dated May 7, 1992. The Vote: Unanimous Ayes FUNDING CITY SERVICES IN NEW ANNEXATIONS (T-010-650 & A-150) Planning and Community Development Director Perry reviewed the Report to City Council dated May 6, 1992, incorporated herein by reference, regarding the financing of City services in newly-annexed areas. Mr. Perry explained that the problem with new annexation is the gradual reduction in the General Fund cash flow to pay for certain services. As a consequence, the City will have to do one of the following if annexations are to continue: 1) Accept a lower, overall funding level or level of service for public safety and other activities funded by the General Fund. This would have little short-term impact and a significant long-term impact; or 2) Establish a mechanism to recapture lost revenue. Mr. Perry reviewed the various alternatives which have surfaced to date: 1) Accept annexations that produce less property tax than equivalent property already in the City; 2) Not annex; 3) Not annex and provide City services outside the City; 4) Establish a funding mechanism to compensate for all or part of reduced revenues such as: a) A deferred annexation fee for development in areas that annex after January 1, 1992; b) An urban service fee in the form of a utility tax; c) A community facilities district under Mello-Roos that could pay for police, fire, and recreation services; d) A combination of the above; 5) Renegotiate the property tax exchange agreement with the County or provide the County with a replacement funding mechanism in order to restore the property tax back to prior levels in annexing areas; 6) Redefine local government to: a) Eliminate nonbasic services (need to define basic services); b) Establish a greater cost recovery for existing services and new services; c) Require nonbasic services to obtain funding 2 05/12/92 other than from the General Fund; d) Form maintenance districts for park, street, storm drain, and landscaping; 7) Seek voter approval of a Citywide tax to make-up the difference; 8) Defer developing solutions until later; 9) Seek legislative relief for local government funding shortfalls; and 10) Seek a City/County merger. Mr. Perry suggested that Council select certain alternatives for indepth discussion. MOTION: Made by Council Member Anderson, seconded by Council Member Dahl, to eliminate all alternatives except item #3, not annex and provide City services outside the City, and item #4, establish a funding mechanism to compensate for all or part of reduced revenues, as indicated in the report to City Council dated May 6, 1992. The Vote: Unanimous Ayes Mayor Moss related that this is not just a Council discussion, and requested staff's input as issues are addressed. Mr. Perry provided an overview of methods which could be utilized as a funding mechanism to compensate for all or part of the reduced revenue. Mayor Moss opined that the deferred annexation fee is one of the more punitive options, as most of the small landowners have no interest in future development. City Attorney Hays suggested that Council determine the revenue it is actually trying to recapture, either the lost property tax revenue resulting from the new Property Tax Exchange Agreement, or the costs to provide services to the area. He noted that these two different rationales represent a significant difference in numbers. Mr. Perry related that the dollar figures referenced are aimed at recapturing the lost property tax revenue. Council Member Anderson conveyed that the City should try to achieve equity among the newly-annexing residents and the existing residents. Council Member Kehoe requested specific cost figures associated with providing services to newly-annexing areas. Council Member Arness questioned whether the cost of acquiring electrical facilities in annexing areas should be borne by the annexing property, rather than the ratepayer. City Attorney Hays related that the proposal regarding applying an urban- service fee to utility services has certain associated problems. In speaking with outside Counsel, it was suggested that the implementation of a utility users tax to only a portion of the community could possibly face a constitutional challenge under equal protection arguments. Council has the ability to impose a utility users tax, as it is viewed as a general revenue tax producing revenue for community-wide purposes; however, if the tax is only applied to a given area, it begins to take on the appearance of a special purpose tax. He is not aware of any communities which have only applied a utility users tax to specific portions of the community. Council Member Anderson stated that based upon conversations with a large developer, developers might prefer the deferred annexation fee, rather than a Mello-Roos. He suggested possibly a combination of both the deferred annexation fee and the Mello-Roos District, thereby, providing the developer with an option. Council Member Dahl stated he opposes both a utility users tax and a deferred annexation fee. He indicated that the Mello-Roos District is the most viable option. City Attorney Hays conveyed the importance of determining what monies are to be recaptured, particularly in a Mello-Roos District, as it determines the formula which is part of the formation of the district. The boundary for a Mello-Roos District can be different from the area being annexed. There may be areas which are already developed and do not have future development potential. The City might get into a circumstance where the annexation would not be approved if included in a Mello-Roos District. In this instance, a 3 05/12/92 decision would need to be made whether or not the City is willing to allow that particular area to be exempt from the Mello-Roos District knowing that the long-term impact is the 500 acre parcel which would be subdivided at a later date, representing a real increase in service. In response to Council Member Arness, Mr. Hays explained that a Mello-Roos District can be used for a non-existing service or to provide for an increased level of service. If the service is already being provided, a Mello-Roos District cannot be formed to generate revenue to perform that service. In response to Mayor Moss, Mr. Hays explained that indexes such as the Consumer Price Index or Opec Oil Index can be used as a mechanism for future adjustments. There is, however, a pending bill which would only allow the City to increase the fee by 2% or less, same as property taxes. There is nothing in the law, as it is written today, which establishes the method of rate adjustment. The district, rate, and escalator can all be established at the time of formation. Mr. Perry conveyed that the City is just the conducting authority for public hearings concerning annexations which have already been approved by LAFCO, and it is not the City's decision whether the annexation will occur. Mr. Hays commented that some of the annexations are fully developed. It is unlikely that the residents in fully-developed areas would support the implementation of a Mello-Roos District. He explained that voting on a Mello- Roos District is by acre. It is important to note that there may be circumstances in which a Mello-Roos is not approved and the property annexes anyway, thereby leaving the City with no additional revenue. Mayor Moss stated that it important for Council to separate those annexations which have already been approved by LAFCO and the remaining property within the City's current sphere of influence eligible for annexation. In response to Council Member Dahl, City Manager Christofferson stated that the lost property tax revenue figure is nominal compared to the cost of providing services to the area. Council Member Dahl stated that it would be easier to utilize the figure representing lost property tax revenue, as the cost of providing services is subjective and highly debatable. Property taxes paid by existing residents do not pay for the cost of providing police and fire protection. The additional sales tax revenue produced by the newly-annexing areas could be utilized to pay for the additional public safety services. Mayor Moss conveyed that with a Mello-Roos District approximately $170.00 per unit is required to replace lost property tax revenue. He suggested $250.00 be considered as the starting basis. Council Member Anderson expressed a concern with maintaining parity between the existing residents and the newly annexing residents. Existing residents do not currently pay for the cost of providing police and fire services to their areas. In addition, he conveyed that the boundary of the Mello-Roos District should be co-terminus with the annexation boundaries. Mr. Perry stated that the City's objective is to create a successful Mello- Roos District, and annexations and boundaries should be established to accomplish this goal. Mr. Hays commented that if future development occurs in an annexation which has been recorded without a Mello-Roos District, one of the conditions of approval could be to join a Mello-Roos District. Council Member Anderson expressed a desire to proceed with the formation of a Mello-Roos District. He requested a long-term plan showing Mello-Roos boundaries co-terminus with annexation boundaries. Mr. Perry stated that the only choice Council has with the annexations which have already been approved by LAFCO would be the utilization of a deferred annexation fee. 4 05/12/92 Council Member Arness concurred with Council Member Anderson that the boundaries of the Mello-Roos District should be contiguous with the annexation request. He suggested that providing utility services, with the exception of electricity, to the County and not annexing still permits growth and monies spent by the Enterprise Funds and the General Fund can be recaptured. He is concerned about public perception regarding City growth and the cost of acquiring power facilities in annexing areas. Current City residents are experiencing increased fees and a dilution of General Fund monies due to growth. Mayor Moss related that most individuals annex for sewer and water service, not electricity. Current annexation procedures provide for orderly boundary growth, and under Council Member Arness' proposal, this discipline would not exist. Council Member Kehoe voiced support of utilizing the Mello-Roos District as the vehicle for recapturing lost revenue; however, he does not favor arbitrarily subscribing a number. He would like to review the actual costs associated with annexation. Mr. Perry indicated that this information could be provided; however, it would be very subjective, and would not represent actual numbers. In response to Tony LaBella, Mr. Hays replied that one of the conditions that Council could request LAFCO to require of annexations in their infancy stage would be to join a Mello-Roos District. In response to Council Member Arness, Mr. Hays indicated that LAFCO has the authority to condition an annexation. The City can only make recommendations as to the conditions it would like to see appended to the annexation. Mr. Perry related that if LAFCO changes the annexation boundaries, a new property tax exchange agreement is required. At that point, Council would have the option of not re-enacting the agreement. Dan Fredericks, 15538 Prospect Drive, related that he is under contract to develop a large parcel in the Texas Springs annexation. He voiced support of an equitable fee, in whatever form Council chooses, as long as it is not excessive and is assessed at the time services are actually required. He does not favor recapturing funds to pay for the cost of providing services and urged Council to focus on recapturing the lost property tax revenue. MOTION: Made by Council Member Dahl, seconded by Council Member Anderson, directing staff to commence development of a Mello-Roos District and prepare proposed fee levels for Council's consideration. The Vote: Unanimous Ayes 5 05/12/92 ADJOURNMENT There being no further business, at the hour of 7:08 p.m., Mayor Moss declared the meeting adjourned to 5:15 p.m., May 18, 1992, at the City Hall Conference Room, 760 Parkview Avenue, Redding, California. APPROVED: _______________________________ Mayor ATTEST: ________________________________ City Clerk