CITY OF MERCED
"Gateway to Yosemite"
August 22, 2016
Kirkland Greene, Records Clerk I|
City Clerk's Division
City of Merced
678 W. 18'h Street, 1st Floor
Merced, CA 95340
County Executive Office
County of Merced
2222 "M" Street, 3rd Floor
Merced, CA 95340
ATTN: Ms. Stephanie Dietz, Management Analyst III
RE: Property Tax Sharing Agreement Between the
City of Merced and County of Merced
Ms. Dietz:
Please find attached two originals of the Property Tax Sharing Agreement between the City of Merced and the County of Merced, which was approved by the City Council on August 15, 2016.
As we discussed previously, one of these two originals was inadvertently overlooked by Mayor Thurston when signing these documents. Therefore, after the County has fully-executed both originals, please return the original without the Mayor's signature to the City Clerk's Office at the address above. Or, if you prefer, please call our office at (209) 388-8650 when the contract is available, and we will be glad to pick up the City's original at your office whenever it is convenient for you.
The original with the Mayor's signature is for your office to retain for the County's files. If you ave any questions or concerns, please do not hesitate to contact our office. Again, we wish t lank you in advance for vour kind and prompt assistance with this matte Respectfully,
& Kickland Arease
Kirkland Greene,
Records Clerk II
678 West 18th Street • Merced, California 95340
PROPERTY TAX SHARING AGREEMENT
BETWEEN THE CITY OF MERCED AND COUNTY OF MERCED
This Agreement, is made and entered into this 16t _day of August, 2016 by and between the County of Merced, a political subdivision of the State of California, (hereinafter referred to as "County"), and the City of Merced, a Municipal Corporation incorporated under the laws of the State of California, (hereinafter referred to as "City"), and pursuant to Revenue and Taxation Code of the State of California.
WHEREAS: California Revenue and Taxation Code Section 99 authorizes cities and counties to enter into master property tax sharing agreements to provide adjustments to the allocation of property taxes upon annexation; and, WHEREAS: City and County recognize annexation will not decrease County's responsibilities for providing municipal and countywide services in the areas of county administration, adult and juvenile detention and correction, health and human services, libraries and office of emergency services; and WHEREAS: City and County recognize that it is important that any property tax sharing arrangements between City and County should be determined in advance to facilitate sound planning for development and the provision of services as a result of that development; and,
WHEREAS: City and County have worked together to develop a fair and equitable approach to property tax sharing, maximizing locally available revenues; and,
WHEREAS: City and County seek to align the interests of both jurisdictions in a way that promotes and financially encourages future development; and, WHEREAS: As provided for in this agreement, City and County intend to ensure the timeliest, efficient and cost-effective delivery of services provided to the public.
WHEREAS: It is the purpose of this Agreement to serve as a Property Tax Sharing Agreement pursuant to Section 99 of the California Revenue and Taxation Code for property tax revenue attributable to the territory annexed to the City subsequent to the date of this Agreement; and
MERCED COUNTY CONTRACT NO 2016185
:
: WHEREAS: Property tax revenue attributable to the territory annexed prior to the date of this Agreement shall remain apportioned as previously set forth; and Now therefore, in consideration of the mutual covenants and promises herein contained, the City and County hereby agree as follows:
1. Recitals
The foregoing recitals are true and correct and are incorporated herein as part of this Agreement.
2. Definitions
(a) ANNEXATION - shall mean the inclusion, attachment, or addition of territory to the City pursuant to the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000, following the effective date of this Agreement.
(b) ANNEXATION AREA or ANNEXATION AREAS - shall mean properties annexed from the County into the City following the effective date of this Agreement.
(c) AD VALOREM PROPERTY TAX - shall mean the tax imposed on real and tangible personal property based upon the value of the property. (d) BASE PROPERTY TAX YEAR - shall mean the assessed valuation applicable to the property and improvements within the area being annexed at the time the Tax Rate Area is established by the State Board of Equalization.
(e) COUNTY SERVICES PAYMENT - shall mean a payment made to the County by the City to help offset the City's share of cost for countywide services provided.
(f) EDUCATIONAL REVENUE AUGMENTATION FUND (ERAF) - shall mean a requirement of the County Auditor-Controller to shift a certain percentage of annual allocations of local property tax revenues from counties, cities and special districts to a specified fund which is utilized by the State of California to reduce its financial obligation to public schools and
:
: help meet its minimum state funding requirements pursuant to Proposition
98. (g)ERAF FACTOR - shall mean the percentage required by California Revenue and Taxation Code sections 97, et seq., to be multiplied by an affected agency's AB 8 gross level in order to determine the amount of funds to be transferred to the specified ERAF FUND.
(h) INCREMENTAL PROPERTY TAX REVENUE - shall mean the total increase or decrease in the assessed valuation over the base property tax year within the annexed area.
3. Reporting
From and after the first fiscal year following the effective date of each annexation, County Auditor-Controller will report, as part of the regular AB8 report process, to City Manager Office and County Executive Office the calculation and the actual amount of the Ad Valorem Property Tax revenue from the Annexation Area available for allocation and distribution pursuant to this Agreement.
4. Sharing of Property Tax
From and after the first fiscal year following the effective date of each annexation:
(a) City shall receive 100% of Ad Valorem Property Tax Revenue from each Annexation Area that would otherwise be allocated and distributed for County Fire Services.
(b) City shall receive 100% of the Ad Valorem Property Tax Revenue from each Annexation Area that would otherwise be allocated and distributed to the County General Fund, less City ERAF.
5. Payment for County Services
(a) From and after the first fiscal year following the effective date of each Annexation, the City shall reimburse the County through a County Services Payment in an amount that equates to 63% of the post-ERAF Ad Valorem
:
Property Tax Revenue collected from each Annexation Area, as specified in Section 4(b).
(b) The City agrees to allow the County Auditor-Controller to withhold the County Services Payment amount as specified in Section 5(a) from the property tax revenue due to the City at the time an apportionment is allocated and distributed.
6. Agricultural Mitigation
The City agrees to participate in future discussions to establish an agricultural mitigation program for productive agricultural land converted to urban development.
7. City and County General Plan Cooperation
(a) The City has adopted an updated general plan (2030 General Plan). The 2030 General Plan identifies an Urban Growth Boundary, a Sphere of Influence Boundary, and a Planning Area Boundary.
(b) The City and County understand that legislative bodies may not bind future legislative bodies, and that one legislative body may not delegate its legislative or police power to another legislative body. (c) To ensure communication and coordination, in addition to avoiding conflict with the City in the implementation of the 2030 General Plan, the County agrees to refer the following applications which are accepted by the County within the City's 2030 General Plan Planning Area Boundary to the City for its review and comments:
Major and Minor Subdivisions
• I Conditional Use Permits
• Zone Changes
• General Plan Amendments
• Administrative Permits
• Annexations
The County will consider all comments provided by the City prior to taking action on the application.
(d) The City's 2030 General Plan designates land outside of the Urban Growth Boundary, but within the Sphere of Influence Boundary, as Agriculture/Rural. To assist and support the County in implementing County General Plan policies concerning the preservation of agricultural resources, the City agrees to refer all applications resulting in the expansion of City limit boundaries into the unincorporated area of the County to the County for its review and comments. The City will consider all County comments prior to forwarding the applications to LAFCO.
8. Term of This Agreement
This Agreement shall commence as of the date of execution by City and County, which date is stated at the beginning of this Agreement and continue for a period of ten years, provided that either party may terminate this Agreement at any time as long as six months prior written notice before the end of any fiscal year (June 30) is given to the other party to this Agreement.
9. Modification
(a) It is mutually understood and agreed that should any changes in state statutory law, court decisions, changes in ERAF methodology or calculations which purports to negate allocations made under this agreement or state administrative decision or direction result in redistribution of tax revenues previously distributed, any increases or decreases from the original property tax allocation amounts or penalties will be adjusted using the 63% to the County and 37% to the City formula as outlined in Section 5(a). (b) It is mutually understood and agreed that should any changes in ERAF occur due to any state statutory law, court or State of California voter decisions, or changes in ERAF methodology or calculation, or state administrative decision or direction that results in the redistribution of future property tax revenue which negate the basic purposes of this Agreement, the property tax allocation from the Annexation Areas, outlined in Section 4 and 5 collectively, shall be thereafter adjusted to the following method:
i. The City shall receive 100% of Ad Valorem Property Tax Revenue from each Annexation Area that would otherwise be allocated and distributed for County Fire Services.
The City and County shall share the Ad Valorem Property Tax Revenue from each Annexation Area that would otherwise be allocated and distributed pre-ERAF to the County General Fund, with the County receiving 76% and the City 24%.
iii. In the event the method in (b) i and (b) ii is used because of changes in ERAF, but such changes in ERAF negate the basic purpose of the formula in (b) i. and (b) ii. this Agreement shall be considered terminated and a new agreement will be negotiated between the City and the County within 120 days of the effective change in ERAF. (c) Any joint legal costs incurred as a result of resolving a dispute with a third party regarding the revenue distribution outlined in Sections 4 and 5 or in resolving any joint issues related to the modification of property tax revenue distributions will be shared 50% to the County and 50% to the City. In the event that a dispute arises between the County and City, each party will bear its own cost.
10. Notice
All notices, requests, certifications or other correspondence required to be provided by the parties to this Agreement will be in writing and will be personally delivered or delivered by first class mail to the respective parties at the following addresses:
County City
County of Merced City of Merced
County Executive Officer City Manager
2222 M Street 678 W 18" Street
Merced, CA 95340 Merced, CA 95340
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in the County of Merced, State of California, on the dates set forth above.
City of Merced
282K
Title _MAYOR
Date AUG 1 6 2016 Date 8/15/16
APPROVED AS TO LEGALITY AND FORM:
County of Mercec City of Merced
Pou 1. tah By JottensTN
Title James N. Fincher Tille Special Counsel to City
August 22, 2016 Date B-10-16
Date
ROSALYNTS VERTIED
RidleyPlut 8-22-16
FINANCE OFFICE'
No funeste encinleer- dus
8/22/16
:
County of Merced City of Merced
By_
Title Tite Mayor
Date Date 5/is //E
APPROVED AS TO LEGALITY AND FORM:
County of Merced City of Merced
By
Title Tile Special Counsel to Cy
Date Date 6 10-16
3002010
Kley 27 3206
No funds to encular. whe
8/22/14
ATTEST:
CITY CLERK
CALFORN
B'
Assistant/Deputy City Clerk
CITY OF MERCED Merced Civic Center
678 W. 18th Street
• Merced, CA 95340
MERCED ADMINISTRATIVE REPORT
File #: 16-381 Meeting Date: 8/15/2016
Report Prepared by: Brad Grant - Finance Officer
SUBJECT: Revenue Sharing Agreement
REPORT IN BRIEF
Considers approving the Property Tax (revenue) Sharing Agreement with County of Merced.
RECOMMENDATION
City Council - Adopt a motion approving Property Tax Sharing Agreement between the City of Merced and County of Merced.
ALTERNATIVES
1. Approve, as recommended by staff; or
2. Approve, subject to modifications as conditioned by City Council; or,
3. Refer to staff for reconsideration of specific items; or
4. Deny
AUTHORITY
Charter of the City of Merced, Section 200. State of California Revenue and Taxation Code.
CITY COUNCIL PRIORITIES
Economic Development
DISCUSSION
History of Revenue Sharing
The State of California Revenue and Taxation Code requires an agreement for the sharing of property taxes between cities and counties prior to the Local Agency Formation Commission (LAFCO) reviewing an application for annexation.
Prior to the passage of Proposition 13 such an agreement was not required because city tax rates were added to the existing county tax rate as part of an approved annexation.
Prior to Proposition 13, the property tax rate throughout California averaged less than 3% of market value. Additionally, there were no limits on increases for the tax rate or on assessed value changes. Some properties were reassessed 50% to 100% in just one year and their owners' property tax bills increased accordingly.
CITY OF MERCED Page 1 of 3 Printed on 8/10/2016
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File #: 16-381 Meeting Date: 8/15/2016
On June 6, 1978, nearly two-thirds of California's voters passed Proposition 13, reducing property tax rates on homes, businesses and farms by about 57%.
Under Proposition 13 property tax values were rolled back and frozen at the 1976 assessed value level. Increases on assessed values on any given property were limited to no more than 2% per year, as long as the property was not sold and the tax was limited to 1% of assessed value. Once sold, the property was taxed at 1% of the sale price, and the 2% yearly cap became applicable to future years. This allowed property owners to finally be able to estimate the amount of future property taxes and determine the maximum amount taxes could increase.
Subsequent to the passage of Proposition 13 and upon annexation of properties into cities, the reduced tax rate of 1% had to be shared. This sharing requirement produced the need for an agreement between cities and counties.
History of Revenue Sharing Between the City and County
In 1980 the City of Merced and County of Merced adopted tax sharing agreements detailing the split of the 1% of property taxes. The 1980 agreements were in place until the County withdrew them by letter, dated May 11, 1995. At that time the City was in the process of submitting an application for the proposed Bellevue Ranch.
In 1997 the City of Merced and County of Merced entered into a new tax sharing agreement which expired December 31, 2014.
Negotiations
Because of the housing explosion in the early 2000's and prior to the expiration of the agreement the City worked with the County to come up with a more equitable revenue sharing arrangement. As part of this process the City engaged the services of an outside consultant to prepare a fiscal analysis that could be used to support a fair and equitable revenue split. This analysis was presented to the County but was not acceptable to them, so no new agreement was reached.
Because no annexation can be completed until a revenue sharing agreement is in place, the City Council has made this a priority and negotiations have continued with the County since the agreement ended.
New Agreement
City and County staff have come to agreement on language and deal points. The main points are as follows:
City shall receive 100% of property taxes from annexed areas that would otherwise be allocated and distributed for County Fire Services.
City shall receive 100% of property taxes from annexed areas that would otherwise be allocated and distributed to the County General Fund, less the City Education Revenue Augmentation Fund (ERAF) share.
City shall reimburse the County 63% of the post-ERAF property taxes for County services provided to CITY OF MERCED Page 2 of 3 Printed on 8/10/2016
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File #: 16-381 Meeting Date: 8/15/2016
City residents from the property taxes that would otherwise be distributed to the County General Fund.
The net combined distribution results in the City receiving 53% and the County 47%.
If this methodology must be changed because of changes in statutory law, court decisions or changes in ERAF methodology there is a provision for adjusting any resulting increases or decreases by the agreed upon formula and for sharing in legal fees if disputes arise and legal costs are The Agreement provides that future discussions will be held with the County in order to establish an agricultural mitigation program for productive agricultural land converted to urban development.
The Agreement provides for City and County General Plan cooperation.
The Agreement is for a period of ten years but may be terminated with six months prior written notice before the end of any fiscal year.
IMPACT ON CITY RESOURCES
With a tax sharing agreement in place annexations can be submitted to the Local Agency Formation Commission (LAFCO) and upon approval development can occur which will result in additional revenue to the City.
ATTACHMENTS
1. Property Tax Sharing Agreement
CITY OF MERCED Page 3 of 3 Printed on 8/10/2016
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APPROVED BY: I Stiphanu plit 10/23
City Manager
APPROVED BY: 08/10/23
Finance Officer
FINANCE ENTRY
Contract No: 377
Vendor Number: 693
Funds Available: Funds to be encumberd as needed
AC 8/8/23 F28/11/23
ATTEST:
CITY CLERK
8:16-23
Assistant/Deputy City Clerk
INCORPORATED APRIL
MERCED
City of Merced
Memo
August 8, 2023
To: City Clerk
From: Melanie Karle, Accountant I|
Finance Department
The contract for Merced County for the Property Tax Sharing Agreement is being entered into the Tyler contract module. This will allow us to transition the contract from Central Square into Tyler. The original contract number is 300206, beginning on August 15, 2016 and has no end date. The amount of the contract varies due to the constant growth in Merced. The contract will need to be set up using the "limitless" method with the requirement of a purchase order. Going forward, Finance will enter a requisition against the contract and will be able to track the contract utilizing Tyler's contract module.
Respectfully,
Melanie