Staff Report
PREPARED BY: ARN ANDREWS
Assistant Town Manager
Reviewed by: Town Manager, Chief of Police, Director of Community Development, Director of Parks
and Public Works, Director of Finance, and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 06/04/2019
ITEM NO: 11
ITEM NO: 11
DATE: MAY 29, 2019
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: ADOPT A RESOLUTION INITIATING ANNEXATION OF CERTAIN URBAN
UNINCORPORATED ISLANDS WITHIN THE TOWN OF LOS GATOS URBAN
SERVICE AREA PURSUANT TO SECTIONS 56757 AND 56375.3 OF THE
CALIFORNIA GOVERNMENT CODE
RECOMMENDATION:
After conducting a public hearing, adopt a Resolution (Attachment 1) initiating annexation of
certain urban unincorporated islands within the Tow of Los Gatos Urban Service Area pursuant
to sections 56757 and 56375.3 of the California Government Code.
BACKGROUND:
On February 5, 2019, the Los Gatos Town Council directed staff to initiate the streamlined
annexation process for multiple urban unincorporated islands. An urban unincorporated island
(or pocket) is unincorporated land that is located within a city/town Urban Service Area (USA)
and substantially, or completely, surrounded by a city/town. Following is the outline of the
streamlined island annexation process per State Government Code Section 56375.3:
• Conduct community outreach;
• Work with LAFCO and the County to initiate island annexation;
• Conduct public hearing by the Town Council to initiate annexation (June 4, 2019);
• Conduct public hearing by the Town Council to approve annexation by resolution (June
18, 2019); and
• Final certification of annexation by LAFCO.
PAGE 2 OF 6
SUBJECT: ADOPT A RESOLUTION INITIATING ANNEXATION OF CERTAIN URBAN
UNINCORPORATED ISLANDS WITHIN THE TOWN OF LOS GATOS URBAN
SERVICE AREA PURSUANT TO SECTIONS 56757 AND 56375.3 OF THE
CALIFORNIA GOVERNMENT CODE
DATE: MAY 29, 2019
S:\COUNCIL REPORTS\2019\06-04-19\Annexations\Staff Report.FINAL.docx 5/30/2019 9:59 AM
BACKGROUND (continued):
Recognizing the inefficiencies associated with the continued existence of urban islands, in 2001
the California State Legislature enacted special legislation which made it easier for local
governments to annex small urban islands within their jurisdictions that were 75 acres or less.
The legislation was further revised in 2005 (Government Code Section 56375.3) to allow for a
streamlined process for the annexation of islands less than 150 acres in size. The streamlined
annexation process allows cities to annex property without protest or election requirements.
The annexation of urban pockets also implements longstanding, county-wide policies stating
that urban development should occur within cities which are responsible for planning and
providing services within their Urban Service Areas. These basic urban development policies
were agreed to by the County, the 15 cities, and the Local Agency Formation Commission
(LAFCO) over 35 years ago. Ever since, the policies have provided the fundamental framework
for land use relationships between the County and the 15 cities. The 1994 County General Plan
reiterates the County's policy that unincorporated pockets should eventually be annexed to
their surrounding cities.
Additionally, the County supports annexation of pockets because provision of urban services in
Santa Clara County is primarily a city/town responsibility. Cities/towns and counties generally
exist for very different purposes. Cities/towns are the units of government primarily
responsible for planning for and providing services and facilities to urban/suburban areas. The
vast majority of the Town’s efforts and budgets are used to perform these functions. Counties,
by comparison, exist primarily to provide various health services, human services, and law and
justice services. The overwhelming majority of the County's budget is used for these purposes.
Providing urban services to neighborhoods will continue to be a diminishing County role. As the
pockets continue to decline as a percentage of County population and it becomes increasingly
more inefficient for the County to serve the remaining pockets, it becomes less likely that the
County will allocate substantially increased resources to provide improved services and facilities
to the pockets especially since they can be provided more efficiently by the surrounding
cities/towns. As such, residents of urban pockets generally receive fewer urban services and
reduced infrastructure maintenance compared to the Town residents in neighborhoods
surrounding them.
PAGE 3 OF 6
SUBJECT: ADOPT A RESOLUTION INITIATING ANNEXATION OF CERTAIN URBAN
UNINCORPORATED ISLANDS WITHIN THE TOWN OF LOS GATOS URBAN
SERVICE AREA PURSUANT TO SECTIONS 56757 AND 56375.3 OF THE
CALIFORNIA GOVERNMENT CODE
DATE: MAY 29, 2019
S:\COUNCIL REPORTS\2019\06-04-19\Annexations\Staff Report.FINAL.docx 5/30/2019 9:59 AM
DISCUSSION:
Property Tax Diversion
According to a 2015 Cities Service Review prepared by LAFCO, Los Gatos has the most
unincorporated islands of any other municipality within the County. The Town of Los Gatos
currently has 30 urban islands of various sizes within the valley floor and hillsides of the Town.
Of the 30 urban islands, three of them are greater than 150 acres in size and the remaining 27
are smaller than 150 acres. This annexation includes 24 of the 27 urban islands under 150
acres. The majority of these islands are on the valley floor and six are adjacent, or near, to
Blossom Hill Road (technically hillsides). All of these urban islands are either completely or
substantially surrounded by the Town. The remaining six are in periphery, hillside locations.
The 24 urban islands consist of approximately 116.1 acres of which the largest island is 40 acres
and the smallest island is 0.1 acres (Attachment 2).
Since 2001 when the streamlined State legislation was adopted, the Town has opted not to
utilize the streamlined annexation process and thereby forego collection of property tax for
residential parcels that are entirely within the Town’s borders. Among other things, annexation
of the islands will end the diversion of property tax revenue to the County for these parcels.
While the County does provide basic provision of services (garbage, recycling etc.) to these
residents, pocket residents utilize the core infrastructure of the Town to same degree as
existing Los Gatans. Pocket residents use Town arterial streets as they commute to and from
work, schools, and other venues. However, unlike all other Los Gatos residents, their property
tax does not help to support the maintenance and enhancement of the Town even though they
are Los Gatans for all intents and purposes.
If the Town proceeds to annex the 24 proposed pockets, the Town would end the diversion of
property tax and receive the property tax revenue from these parcels. The urban islands under
consideration are comprised of approximately 308 single-family residential parcels, with an
approximate assessed valuation of $389,874,550 or an average of $1.26 million per parcel.
Based on the Town’s current percentage of property tax distribution, the pocket properties
would equate to approximately $1.0 million in annual property tax revenue for the Town.
Public Engagement and Noticing
As previously discussed the streamlined annexation process requires a sequence of public
noticing in addition to voluntary public engagement. Following is a summary of engagement
and public noticing efforts to date.
PAGE 4 OF 6
SUBJECT: ADOPT A RESOLUTION INITIATING ANNEXATION OF CERTAIN URBAN
UNINCORPORATED ISLANDS WITHIN THE TOWN OF LOS GATOS URBAN
SERVICE AREA PURSUANT TO SECTIONS 56757 AND 56375.3 OF THE
CALIFORNIA GOVERNMENT CODE
DATE: MAY 29, 2019
S:\COUNCIL REPORTS\2019\06-04-19\Annexations\Staff Report.FINAL.docx 5/30/2019 9:59 AM
DISCUSSION (continued):
Public Engagement
Following Council’s February 5, 2019 direction to initiate the streamlined annexation process,
staff drafted a courtesy letter informing all 308 island households of the Council’s decision
(Attachment 3). The letter provided summary information about the early formation of County
pockets and the inherent inefficiency in their continuation, the State legislation authorizing the
streamlined annexation process, and how residents can gain additional information and be
involved in the process. In addition, the letter informed the island residents of the newly
developed annexation webpage ( https://www.losgatosca.gov/2528/Annexation ) and of a
community meeting scheduled for May 6, 2019 at the Addison Penzak JCC of Los Gatos. As a
result of the mailing, staff received inquiries from six unique residents to date.
The community meeting was designed to be an information session, creating an opportunity to
meet key Town officials and get annexation questions answered. The meeting was attended by
the Town Manager, Assistant Town Manager, Chief of Police, Director of Parks and Public
Works, Director of Community Development, Library Director, IT Manager, and Town Clerk.
The meeting started with a brief presentation entitled “One Los Gatos – A Community
Together” (Attachment 4). Staff responded to questions focusing on Town requirements for
sidewalks, permit costs, leaf blower regulations, and other issues. As a follow-up to the
community meeting, staff added a “Frequently Asked Questions” section to the annexation
webpage so residents that did not attend would have the benefit of the questions and
responses. The meeting was attended by 19 island residents, two of which self-identified as
residents of the Blossom Manor unincorporated island who are unaffected by this proposed
annexation.
Public Noticing
In addition to the aforementioned public engagement, the streamlined annexation process
requires two public hearings; therefore, the Town Council will conduct two public hearings to
consider island annexation. The first Council meeting will consider adoption of a “Resolution to
Initiate Annexation” of island properties (see Attachment 1). If the Resolution is adopted, a
second public hearing will be held to consider adoption of a “Resolution to Approve
Annexation.” The public hearings are scheduled as follows:
• Tuesday June 4, 2019 – Public hearing to initiate annexation: Town Council holds first
public hearing to initiate annexation by resolution and set the date for the second public
hearing.
PAGE 5 OF 6
SUBJECT: ADOPT A RESOLUTION INITIATING ANNEXATION OF CERTAIN URBAN
UNINCORPORATED ISLANDS WITHIN THE TOWN OF LOS GATOS URBAN
SERVICE AREA PURSUANT TO SECTIONS 56757 AND 56375.3 OF THE
CALIFORNIA GOVERNMENT CODE
DATE: MAY 29, 2019
S:\COUNCIL REPORTS\2019\06-04-19\Annexations\Staff Report.FINAL.docx 5/30/2019 9:59 AM
DISCUSSION (continued):
• Tuesday June 18, 2019 – Public hearing to approve annexation: Town Council holds the
second public hearing to consider the annexation and adopts a resolution making
findings pursuant to State Government Code 56757 and 56375.3, which provides for
annexation without protest and election requirements.
Both public hearings required extensive public noticing by LAFCO to ensure that all impacted or
potentially impacted residents would be aware of the proceedings. Public noticing included
both newspaper advertisements and direct mailer postcards. The direct mailings included
mailings for island residents, registered voters residing within islands, residents within a 300-
foot buffer zone of islands, and registered voters within a 300-foot buffer zone of an island. In
total, 2,643 public notice cards were sent for the June 4, 2019 Public Hearing and 2,643 public
notice cards were sent for the June 18, 2019 Public Hearing. The newspaper advertisements
were published in both the San Jose Mercury News and the Los Gatos Weekly. As a result of
these mailings and advertisements, staff received an inquiry from one unique resident to date.
CONCLUSION:
The Town Council should listen to testimony during the public hearing and vote to adopt a
Resolution initiating annexation of certain urban unincorporated islands within the Town of Los
Gatos Urban Service Area pursuant to Sections 56757 and 56375.3 of the California
Government Code.
COORDINATION:
This report was coordinated with the Town Manager’s Office, the Town Attorney’s Office,
Community Development Department, Police Department, Department of Parks and Public
Works, and the Finance Department.
FISCAL IMPACT:
As previously mentioned, If the Town proceeds to annex the 24 proposed pockets, the Town
would receive the property tax revenue for these parcels. The urban islands under
consideration are comprised of approximately 308 single-family residential parcels, with an
approximate assessed valuation of $389,874,550, or an average of $1.26 million per parcel.
Based on the Town’s current percentage of property tax distribution the annexed properties
would equate to approximately $1.0 million in annual property tax revenue for the Town.
PAGE 6 OF 6
SUBJECT: ADOPT A RESOLUTION INITIATING ANNEXATION OF CERTAIN URBAN
UNINCORPORATED ISLANDS WITHIN THE TOWN OF LOS GATOS URBAN
SERVICE AREA PURSUANT TO SECTIONS 56757 AND 56375.3 OF THE
CALIFORNIA GOVERNMENT CODE
DATE: MAY 29, 2019
S:\COUNCIL REPORTS\2019\06-04-19\Annexations\Staff Report.FINAL.docx 5/30/2019 9:59 AM
FISCAL IMPACT (continued):
It should be noted, that the Town would have responsibility for providing municipal services to
the additional area, including the long-term maintenance of the annexed streets after the
County completes repairs as negotiated with the Town. Considering that the properties are
either substantially or completely surrounded by the Town, staff believes that service provision
can be provided in an efficient manner with existing service cycles. However, if annexing
requires an incremental increase in future staffing to maintain service levels, proposals will be
submitted as part of the regular annual budgetary process.
ENVIRONMENTAL ASSESSMENT:
This is a project as defined under CEQA but is Categorically Exempt under Section 15061(b)(3).
A Notice of Exemption will not be filed.
Attachments:
1. Resolution
2. Maps of Proposed Island Annexations
3. Courtesy Island Resident Annexation Letter
4. Community Meeting Presentation