ITEM 4. 14
CITY MANAGER' S REPORT
DECEMBER 12, 2022 CITY COUNCIL REGULAR MEETING
ITEM: WEST LATHROP SPECIFIC PLAN PROPERTY TAX
SHARING AGREEMENT WITH THE COUNTY OF SAN
JOAQUIN
RECOMMENDATION: Approve Addendum to Revenue Sharing Agreement A- 96- 341) Between the City of Lathrop and County
of San 7oaquin for the West Lathrop Specific Plan
Development
CEQA STATUS: Not a Project as Defined in Section 15378 of the State CEQA Guidelines
SUMMARY:
On June 18, 1996, the City and County entered into a tax sharing agreement for the annexation of the West Lathrop Specific Plan ( WLSP). At the time of annexation, the development was expected to develop with 4 theme parks with associated uses and an anticipated total assessed property value of $ 4 billion. The original plan was anticipated to generate substantial Transient Occupancy Tax ( TOT) and Sales Tax for the City. As a result, the City agreed to take a reduced share of the property tax, specifically a 90%- County/ 10%- City tax split.
In November of 2000, the citizens of Lathrop passed Measure D. Measure D significantly changed the direction of the WLSP project and removed the theme park land use. The project was re- approved in 2003 for 11, 000 dwelling units and 5 million square feet of commercial space. In 2021, the total unit count was increased and today, is approved for 15, 010 residential units and 5 million square feet of commercial space, with an estimated assessed property value of $ 9. 7 billion. With the modification from theme parks to primarily residential, the property tax agreement should have been revisited and adjusted for the change in use.
In August 2022, the City met with the County to explore amending the current property tax sharing agreement between the County and the City as it relates to Tax Rate Areas ( TRA' s) 007- 078, 007- 079, 007- 080, 007- 089 and 007- 091 in the WLSP project area. The County agreed to propose a 60%- County/ 40%- City property tax split for all undeveloped property in the project area to the Board of Supervisors at their December 13, 2022 meeting. This change will bring the property tax share in line with other residential developments within the City.
The revised tax split allocation for WLSP will more equitably distribute property tax revenues between the City and the County based on service responsibility.
CITY MANAGER' S REPORT PAGE 2
DECEMBER 12, 2022 CITY COUNCIL REGULAR MEETING
WEST LATHROP SPECIFIC PLAN PROPERTY TAX SHARING AGREEMENT
WITH SAN JOAQUIN COUNTY
By approving the addendum to the revenue sharing agreement between the City and County, the City will receive an increased share of the property tax as identified in the agreement attached. The revised split will revise the formula within the tax rate area from a split of 90%- County/ 10%- City tax split to a 60%- County/ 40%- City tax split.
While this agreement has no immediate effect on property tax revenue received, it may generate substantially more property tax revenue than previously anticipated in the future development area. This change as proposed at the rate of 60%- County/ 40%- City may generate an estimated additional $ 7. 6 million in property tax revenue for the City when the project is built out.
BACKGROUND:
On June 18, 1996, the City and County entered into a tax sharing agreement for the annexation of the West Lathrop Specific Plan ( WLSP). At the time of annexation, the development was expected to develop with 4 theme parks with associated uses and an anticipated total assessed property value of $ 4 billion. The original plan was anticipated to generate substantial Transient Occupancy Tax ( TOT) and Sales Tax for the City. As a result, the City agreed to take a reduced share of the property tax, specifically a 90%- County/ 10%- City tax split.
The " West Lathrop Specific Plan" references the Specific Plan approved by the City on February 20, 1996, and currently includes Tax Rate Area' s ( TRAs) 007- 078, 007- 079, 007- 080, 007- 089 and 007- 091.
In November of 2000, the citizens of Lathrop passed Measure D. Measure D significantly changed the direction of the WLSP project and removed the theme park land use. The project was re- approved in 2003 for 11, 000 dwelling units and 5 million square feet of commercial space. In 2021, the total unit count was increased and today, is approved for 15, 010 residential units and 5 million square feet of commercial space, with an estimated assessed property value of $ 9. 7 billion. With the modification from theme parks to primarily residential, the property tax agreement should have been revisited and adjusted for the change in use.
The 1996 tax sharing agreement anticipated revenue of $ 9. 4 million for the County and $ 1 million for the City. With the change in zoning, the increase in assessed value and no change to the property tax agreement, the development is anticipated to generate an estimated $ 25. 8 million for the County and $ 2. 9 million for the City. The City share is not sufficient to provide the needed services required by the 40, 000+ new residents. It is clear that economic development efforts generate significant benefits to the County, City, school districts, and other public agencies in terms of CITY MANAGER' S REPORT PAGE 3
DECEMBER 12, 2022 CITY COUNCIL REGULAR MEETING
WEST LATHROP SPECIFIC PLAN PROPERTY TAX SHARING AGREEMENT WITH SAN 70AQUIN COUNTY
quality of life, careers, commutes, and higher property tax revenues associated with increased assessed values. However, the responsibility and associated costs of providing the majority of municipal services to these efforts falls squarely on the City.
By approving the addendum to the revenue sharing agreement between the City and County, the City will receive an increased share of the property tax as identified in the agreement attached. The revised split will revise the formula within the tax rate area from a split of 90%- County/ 10%- City tax split to a 60%- County/ 40%- City tax split. While this agreement has no immediate effect on property tax revenue received, it may generate substantially more property tax revenue than previously anticipated in the future development area. This change as proposed at the rate of 60%- County/ 40%- City may generate an estimated additional $ 7. 6 million in property tax revenue for the City when the project is built out.
REASON FOR RECOMMENDATION:
The revised tax split allocation for the West Lathrop Specific Plan will more equitably distribute property tax revenues between the City and the County based on service responsibility. Staff recommends the City Council authorize the Addendum to Revenue Sharing Agreement ( A- 96- 341) between the City of Lathrop and County of San Joaquin for the West Lathrop Specific Plan Development.
FISCAL IMPACT:
By approving the addendum to the revenue sharing agreement between the City and County the City will receive an increased share of the property tax as identified in the agreement attached. The proposed split will revise the formula within the tax rate area from a split of 90%- County/ 10%- City tax split to a 60%- County/ 40%- City tax split. While this agreement has no immediate effect on property tax revenue received, it may generate substantially more property tax revenue than previously anticipated in the future development area. This change as proposed at the rate of 60%- County/ 40%- City may generate an additional $ 7. 6 million dollars in property tax revenue for the City when the project is built out.
CITY MANAGER' S REPORT PAGE 4
DECEMBER 12, 2022 CITY COUNCIL REGULAR MEETING
WEST LATHROP SPECIFIC PLAN PROPERTY TAX SHARING AGREEMENT
WITH SAN ) OAQUIN COUNTY
ATTAC H M E NTS:
A. Resolution Approving the Addendum to Revenue Sharing Agreement (A- 96- 341) Between the City of Lathrop and County of San Joaquin for the West Lathrop Specific Plan Development
B. Addendum to Revenue Sharing Agreement ( A- 96- 341) Between the City of Lathrop and County of San Joaquin for the West Lathrop Specific Plan Development
CITY MANAGER' S REPORT PAGE 5
DECEMBER 12, 2022 CITY COUNCIL REGULAR MEETING
WEST LATHROP SPECIFIC PLAN PROPERTY TAX SHARING AGREEMENT WITH SAN ] OAQUIN COUNTY
APPROVALS:
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Ca ' Date
Director Finance
1- z- zz
Salvador Navarrete Date
City Attorney
Z •{ 22
S en ). Salvatore Date
City Manager
RESOLUTION NO. 22-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LATHROP APPROVING THE ADDENDUM TO REVENUE SHARING AGREEMENT ( A96- 341) BETWEEN THE CITY OF LATHROP AND COUNTY OF SAN
OAQUIN FOR THE WEST LATHROP SPECIFIC PLAN DEVELOPMENT
WHEREAS, on June 18, 1996, the City and County entered into a tax sharing agreement for the annexation of the West Lathrop Specific Plan WLSP). The original plan was anticipated to generate substantial Transient Occupancy Tax ( TOT) and Sales Tax for the City. As a result, the City agreed to take a reduced share of the property tax, specifically a 90%- County/ 10%- City tax split; and
WHEREAS, in November of 2000, the citizens of Lathrop passed Measure D. Measure D significantly changed the direction of the WLSP project and removed the theme park land use; and
WHEREAS, the project was re- approved in 2003 for 11, 000 dwelling units and 5 million square feet of commercial space. In 2021, the total unit count was increased and today, is approved for 15, 010 residential units and 5 million square feet of commercial space, with an estimated assessed property value of $ 9. 7 billion; and
WHEREAS, the " West Lathrop Specific Plan" references the Specific Plan approved by the City on February 20, 1996, that currently includes Tax Rate Area' s ( TRA" s) 007- 078, 007- 079, 007- 080, 007- 089 and 007- 091; and
WHEREAS, by approving the addendum to the revenue sharing agreement between the City and County, the City will receive an increased share of the property tax as identified in the agreement attached. The revised split will revise the formula within the tax rate area from a split of 90%- County/ 10%- City tax split to a 60%- County/ 40%- City tax split; and WHEREAS, while this agreement has no immediate effect on property tax revenue received, it may generate substantially more property tax revenue than previously anticipated in the future development area. This change as proposed at the rate of 60%- County/ 40%- City may generate an estimated additional $ 7. 6 million in property tax revenue for the City when the project is built out; and
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Lathrop, does hereby approve the Addendum to Revenue Sharing Agreement ( A- 96- 341) between the City of Lathrop and County of San Joaquin for the West Lathrop Specific Plan Development and authorize execution of the agreement in a final form substantially similar to that attached to the staff report.
Resolution No. 22- Page 1 of 2
The foregoing resolution was passed and adopted this 12th day of December, 2022, by the following vote of the City Council, to wit:
AYES:
NOES:
ABSTAIN:
ABSENT:
Sonny Dhaliwal, Mayor
ATTEST: APPROVED AS TO FORM:
Teresa Vargas, City Clerk Salvador Navarrete, City Attorney Resolution No. 22- Page 2 of 2
TAX ALLOCATION AGREEMENT BETWEEN THE CITY OF LATHROP AND
COUNTY OF SAN JOAQUIN FOR THE ALLOCATION OF PROPERTY TAX FOR
THE WEST LATHROP SPECIFIC PLAN AREA
This Tax Revenue Allocation Agreement between the CITY OF LATHROP, a municipal corporation (" City"), and the COUNTY OF SAN JOAQUIN, a political subdivision of the State of California (" County") for the West Lathrop Specific Plan Area WLSP"), is entered into this day of December 2022 pursuant to Resolution No. adopted by the Board of Supervisors of County and Resolution No. adopted by the City Council of City.
RECITALS
A. City and County staff wish to amend the original Revenue Sharing Upon Annexation Agreement ( A-96- 341) to adopt a revised allocation for property developed on or after December 1, 2022 in the WLSP area.
B. This Agreement involves the following Tax Rate Areas ( TRA): 007-078, 007- 079, 007- 080 and 007- 091.
C. The City and County recognize that the purpose of this agreement is to make equitable allocation and distribution of available revenues consistent with the terms of existing law as mutually understood by the parties and to maximize each party' s ability to deliver essential government services in the WLSP Area.
D. This Agreement is intended to satisfy the requirements of Revenue and Taxation Code § 99( b).
AGREEMENT
NOW, THEREFORE, in consideration of the promises and acts described herein, the City and County agree as follows:
Section 1. Recitals
1. 1. The foregoing recitals are true and correct and are part of this agreement.
ATTACHMENT u
jj " 1
Section 2. Establishment of Separate Tax Rate Area
2. 1. County will work with the County Auditor-Controller to establish a separate Tax Rate Area (TRA) for a portion of WLSP Area and will report to City the actual amount of the 1% ad valorem property tax revenues' available for allocation and distribution from the TRAs under this agreement.
2. 2. All currently developed property2 in TRA 007- 091 as of November 30, 2022 shall remain in TRA 007-091.
2. 3. All currently undeveloped property in TRA 007- 091 as of December 1, 2022 shall be transferred to the new TRA created under Section 2. 1.
2. 4 The allocation for TRAs 007- 078, 007- 079 and 007- 080, shall be changed pursuant to section 3. 0 of this agreement. Additionally, the allocation of the new TRA created under Section 2. 1 shall be set pursuant to Section 3. 0 of this agreement.
Section 3. Property Tax Allocation
3. 1. Base Allocation to County: Shall mean the assessed valuation applicable to property and improvements within the area being annexed at the time the application for annexation was submitted to LAFCo3 ( Base Amount), shall be allocated to and when collected shall be paid to County.
1% AD VALOREM PROPERTY TAX REVENUES is defined to mean: The 1% ad valorem property tax authorized by Article 13A, section 1 of the California Constitution, assessed on the full value of the property in the Annexation Areas, to include both the base property tax revenues and the incremental property tax revenues. " Base property tax revenues" means property tax revenues accruing to each affected agency in the applicable fiscal year, based on the AB- 8 gross levy prior to adjustments and revenue transfers relative to the Educational Revenue Augmentation Fund ( ERAF). " Incremental property tax revenues" means the amount of property tax revenues attributable to growth in assessed valuation for the affected tax rate area identified for the Annexation Areas.
z DEVELOPED PROPERTY is defined to mean (a) any residential property for which a building permit has been issued in accordance with the zoning of the West Lathrop Specific Plan and ( b) any non- residential property ( mixed use, employment center, transit oriented development, etc.) that is within the boundaries of a final subdivision map that is intended to create individual development parcels or is otherwise recorded for purposes of development in accordance with the zoning of the West Lathrop Specific Plan.
3 LAFCo adopted Resolution No. 963 on October 18, 1996, making determinations and approving the proposed annexation to the City of Lathrop of the West Lathrop Specific Plan Area.
2 3. 2. Excess of Base Allocation to County:
3. 2. 1 That portion of the levied taxes each year in TRA 007- 091 in excess of the Base Amount, shall be allocated to the County pursuant to section 3. 1, 90 percent shall be allocated to and when collected shall be paid to the County.
3. 2. 2 That portion of the levied taxes each year in TRAs 007- 078, 007- 079, 007- 080 and the newly created TRA in excess of the Base Amount, shall be allocated to the County pursuant to section 3. 1, 60 percent shall be allocated to and when collected shall be paid to County.
3. 3. Allocation to City:
3. 3. 1 That portion of the levied taxes each year in TRA 007- 091 in excess of the Base Amount, shall be allocated to the County pursuant to section 3. 1, 10 percent shall be allocated to and when collected shall be paid to City.
3. 3. 2 That portion of the levied taxes each year in TRAs 007- 078, 007- 079, 007- 080 and the newly created TRA in excess of the Base Amount, shall be allocated to the County pursuant to section 3. 1, 40 percent shall be allocated to and when collected shall be paid to City.
3. 4. Property Tax Allocation Agreement. City and County agree that this Agreement shall apply to determine the allocation between the parties of property tax and revenue generated from the WLSP Area in lieu of the negotiation process set forth in California Revenue and Taxation Code Section 99( e).
Section 4. Additional Documents
4. 1. City and County agree to cooperate in the execution of any additional documents which may be required to carry out the terms of this agreement.
Section 5. Effective Date
5. 1. This agreement shall become effective upon the latest of the dates it is signed below by the City Mayor and the County Chairman of the Board.
Section 6. Termination
6. 1. This Agreement governs the revenue sharing between CITY and COUNTY for the West Lathrop Specific Plan Area and may be terminated by either party hereto upon six months' notice. Said termination shall not affect annexations for which the 3 LAFCo Executive Officer has issued a certificate of completion prior to the effective date of termination.
Section 7. Indemnification
7. 1. In the event that this agreement is the subject of a legal challenge, each party will provide for their own defense and will cooperate in the defense of the terms of this agreement and the implementation of any judgement issued in such a lawsuit.
Section 8. Counterparts
8. 1. This agreement may be executed in two counterparts, each of which shall constitute an original.
4 IN WITNESS WHEREOF, the City of Lathrop has authorized the execution of this Agreement by its Mayor, and San Joaquin County has authorized its execution by the Chairman of its Board of Supervisors in accordance with Resolution No. 2022- on the dates set forth below.
CITY OF LATHROP COUNTY OF SAN JOAQUIN
By: By:
Sonny Dhaliwal Chuck Winn
Mayor Chairman, Board of Supervisors
Dated: Dated:
ATTEST: ATTEST:
By: By:
Teresa Vargas Rachel DeBord
City Clerk Clerk of the Board
APPROVED AS TO FORM:
By: By:
Salvador Navarrete Kimberley D. Johnson
City Attorney County Counsel
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