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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: 06/18/2019 ITEM NO: 17 ITEM NO: 11 DATE: JUNE 11, 2019 TO: MAYOR AND TOWN COUNCIL FROM: LAUREL PREVETTI, TOWN MANAGER SUBJECT: ADOPT A RESOLUTION MAKING DETERMINATIONS AND ORDERING 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: Adopt a Resolution (Attachment 1) making determinations and ordering 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 through unanimous vote directed staff to proceed with the implementation of the State legislated 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 the city/town. On June 4, 2019, the Los Gatos Town Council held a public hearing, considered public testimony, and unanimously voted to approve a resolution (Attachment 2) initiating the annexation of 308 unincorporated parcels within 24 unincorporated urban islands. In addition, the Town Council set June 18, 2019 as the public hearing date for final consideration of annexation. PAGE 2 OF 11 SUBJECT: ADOPT A RESOLUTION MAKING DETERMINATIONS AND ORDERING 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: JUNE 11, 2019 S:\COUNCIL REPORTS\2019\06-18-19\17 Pocket Annexations\Staff Report.FINAL.docx 6/13/2019 1:20 PM BACKGROUND (continued): As detailed in the June 4, 2019 staff report, the Town has conducted extensive public outreach since the February 5, 2019 Council direction. In addition to the mandated public outreach, staff implemented a multitude of additional outreach measures. The outreach to the unincorporated County pocket residents and the Los Gatos community at large has included the following to date: • Mailed a courtesy letter to all 308 island households informing them of the Council’s initial February 5 direction; • Launched an annexation webpage, including frequently asked questions and maps of the islands being considered; • Held a courtesy community meeting for island residents to answer questions and provide annexation information; • Published hearing notices in both the San Jose Mercury News and the Los Gatos Weekly; • Sent public hearing notification postcards to island residents, registered voters residing within islands, residents within a 300-foot buffer zone of the islands, and registered voters within a 300-foot buffer zone of an island; o 2,643 cards were sent for the June 4, 2019 Public Hearing o 2,643 cards were sent for the June 18, 2019 Public Hearing • Publicized these Town Council public hearings in the Town’s “What’s New” email notification blast; • Responded to individual resident phone calls and e-mails; • Held the first required Town Council public hearing on June 4, 2019; and • Conduct the second required Town Council public hearing on June 18, 2019. During the June 4, 2019 Town Council meeting, several speakers questioned if all residents received the initial courtesy annexation letter and other noticing. Of the initial 308 individual letters mailed to island residents, the Postal Service returned four as undeliverable. This equates to a 1.3% return rate which is consistent with bulk mailings. In addition, island residents identified that 14 addresses did not receive the initial courtesy notice and staff has verified that all 14 addresses were included in the original 308 resident mailing. The two larger mailings to 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 had an undeliverable return rate of 2.4% out of 5,286 mailings. The undeliverable return rate of 2.4% is also consistent with bulk mailings especially given the inclusion of voter role data. PAGE 3 OF 11 SUBJECT: ADOPT A RESOLUTION MAKING DETERMINATIONS AND ORDERING 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: JUNE 11, 2019 S:\COUNCIL REPORTS\2019\06-18-19\17 Pocket Annexations\Staff Report.FINAL.docx 6/13/2019 1:20 PM BACKGROUND (continued): As of the posting date of this staff report, the Town has received additional communication from four of the pocket residents in attendance on June 4, 2019 and four new communications from pocket residents. Staff continues to respond to calls and email inquiries. Attachment 3 contains public comments. DISCUSSION: The approval of the proposed resolution is the final step in the streamlined annexation process. In addition to some of the aforementioned streamlined requirements, the annexation process under Government Code Section 56375.3 must also take into consideration certain other criteria and comply with all conditions imposed by the Santa Clara Local Agency Formation Commission (LAFCO). The criteria are: • The islands are 150 acres or less and are surrounded or substantially surrounded by the Town. • The islands are not gated communities where services are provided by a Community Services District. • The islands are substantially developed. • The islands are not considered prime agricultural land. • The annexation is consistent with the adopted General Plan of the Town. • The island is receiving benefits from the annexing city/town or will receive benefits from the annexing city/town after annexation. The 24 islands under consideration for annexation meet all of these criteria. Provided below is additional information as it relates to certain of the criteria. The annexation is consistent with the adopted General Plan of the Town. The Town’s adopted General Plan 2020 contains the following Goal and Policy. Goal LU-3 To coordinate with surrounding jurisdictions and other local and regional agencies that may affect Los Gatos’s future development patterns and character. Policy LU-3.1 Cooperate with the County of Santa Clara to encourage the annexation of unincorporated islands into the Town. The Town will not require the installation of curbs, gutters, sidewalks, or street lights as a condition of annexation nor will the se improvements be imposed on annexed areas unless the residents of the area request PAGE 4 OF 11 SUBJECT: ADOPT A RESOLUTION MAKING DETERMINATIONS AND ORDERING 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: JUNE 11, 2019 S:\COUNCIL REPORTS\2019\06-18-19\17 Pocket Annexations\Staff Report.FINAL.docx 6/13/2019 1:20 PM DISCUSSION (continued): such improvements and are willing to participate in the cost of such improvements. This does not prevent the Town from requiring such improvements as a condition of approval of any zoning or subdivision approval if such conditions are normally made on those items and the improvements would be in keeping with the neighborhood. The consideration and annexation of these islands would meet this stated Goal and Policy of the General Plan. The island is receiving benefits from the annexing city/town or will receive benefits from the annexing city/town after annexation. As noted in staff’s informational materials provided to island residents and the L os Gatos community at large, residents of urban pockets generally receive fewer urban services and reduced infrastructure maintenance compared to the Town residents in neighborhoods surrounding them; however, pocket residents pay about the same amount in taxes and fees as their Town neighbors. URBAN SERVICES Service Town Comments Property Tax & Assessed Valuations No change Annexation would not increase property taxes nor assessed valuations. Police Services Increased Service Los Gatos maintains an independent Police Department with higher service level coverage than currently provided. Schools No Change School District boundaries are unaffected by annexation. Children will continue to attend the same schools they currently attend. Fire Protection No Change The Santa Clara County Fire Department provides service to the Town and the County islands. Road Maintenance Increased Service In general, the Town has more resources to maintain roads. PAGE 5 OF 11 SUBJECT: ADOPT A RESOLUTION MAKING DETERMINATIONS AND ORDERING 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: JUNE 11, 2019 S:\COUNCIL REPORTS\2019\06-18-19\17 Pocket Annexations\Staff Report.FINAL.docx 6/13/2019 1:20 PM Service Town Comments Library Increased Service Los Gatos maintains a state-of-the-art Town Library. Annexation Costs Fee Elimination Currently, homeowners proposing renovations or new construction would need to annex into the Town and pay the required annexation fees. The streamlined annexation process takes care of this requirement, saving property owners time and money. By annexing into the Town, unincorporated pocket residents will receive increased urban services at little or no increase in cost. In general, total Parcel Tax and Special Assessment tax bills are anticipated to be slightly lower after annexation. The tables below represent a typical property tax bill from a pocket resident as compared to a Los Gatos resident. TAXES and FEES Taxing Agency Santa Clara County Rate Town of Los Gatos Rate Land, Improvements, Personal Property Property Tax 1% of assessed value 1% of assessed value County Retirement Levy .03880 .03880 CO Bond 2008 Hospital Facility .0072 .0072 CO Housing Bond 2016 .0105 .0105 Community College Bonds .0198 .0198 Elementary or Unified School Bonds .0486 .0486 High School Bonds .0304 .0304 Mid-Peninsula Open Space 2014 .0018 .0018 CO Library Retirement .0024 NA Total Assessed Rates 1.1595 1.1571 Taxing Agency Santa Clara County Rate Town of Los Gatos Rate Land and Improvements SCVWD-State Water Project .0042 .0042 Total Assessed Rates .0042 .0042 PAGE 6 OF 11 SUBJECT: ADOPT A RESOLUTION MAKING DETERMINATIONS AND ORDERING 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: JUNE 11, 2019 S:\COUNCIL REPORTS\2019\06-18-19\17 Pocket Annexations\Staff Report.FINAL.docx 6/13/2019 1:20 PM DISCUSSION (continued): TAXES and FEES Parcel Tax/Special Assessments Taxing Agency Santa Clara County Rate Town of Los Gatos Rate Los Gatos-Saratoga High SD -Parcel Tax 2016 $49.00 $49.00 Santa Clara Valley Water Dist – Safe, Clean Water $66.26 $66.26 Santa Clara County –Vector Control $5.08 $5.08 Santa Clara County – Mosquito Assessment #2 $8.36 $8.36 Santa Clara County – Library JPA $33.66 NA Los Gatos Union School Dist – Measure B $290.00 $290.00 Santa Clara Valley Water Dist – Flood Control Debt $21.20 $21.20 West Valley Sanitation Dist – Sewer Sanitary/Storm $555.00 $575.38 SF Bay Restoration Auth – Measure AA $12.00 $12.00 Total Parcel Tax/Special Assessments $1,040.56 $1,027.28 In addition to the expectation of enhanced services after annexation, pocket residents already receive benefits from the Town. The following diagrams illustrate that most island residents must travel on Town streets to leave their neighborhoods to go to schools, parks, freeways, businesses, and other services. In other words, pocket residents are almost entirely dependent on accessing Town infrastructure to enter or exit their homes. In addition, pocket residents benefit from shared facilities such as Blossom Hill Park. The recent improvements provided in the maps identify that the Town has invested $2.34 million in capital improvements in neighborhoods either in or around the unincorporated pockets. However, as described in greater detail in the “Fiscal Impact” section of the report, unlike all other Los Gatos residents, the local share of property tax from unincorporated pocket residents does not come to the Town to help support the maintenance and beautification of the assets they utilize. PAGE 7 OF 11 SUBJECT: ADOPT A RESOLUTION MAKING DETERMINATIONS AND ORDERING 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: JUNE 11, 2019 S:\COUNCIL REPORTS\2019\06-18-19\17 Pocket Annexations\Staff Report.FINAL.docx 6/13/2019 1:20 PM DISCUSSION (continued): PAGE 8 OF 11 SUBJECT: ADOPT A RESOLUTION MAKING DETERMINATIONS AND ORDERING 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: JUNE 11, 2019 S:\COUNCIL REPORTS\2019\06-18-19\17 Pocket Annexations\Staff Report.FINAL.docx 6/13/2019 1:20 PM DISCUSSION (continued): PAGE 9 OF 11 SUBJECT: ADOPT A RESOLUTION MAKING DETERMINATIONS AND ORDERING 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: JUNE 11, 2019 S:\COUNCIL REPORTS\2019\06-18-19\17 Pocket Annexations\Staff Report.FINAL.docx 6/13/2019 1:20 PM DISCUSSION (continued): CONCLUSION: The Town Council should conduct a public hearing, consider public testimony, and adopt a Resolution making determinations and the required findings, and ordering the 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. PAGE 10 OF 11 SUBJECT: ADOPT A RESOLUTION MAKING DETERMINATIONS AND ORDERING 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: JUNE 11, 2019 S:\COUNCIL REPORTS\2019\06-18-19\17 Pocket Annexations\Staff Report.FINAL.docx 6/13/2019 1:20 PM 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: 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. 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 local property tax share 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 parcel s. 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. It should be noted, that the Town would have responsibility for providing municipal services to the additional areas, 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, service provision can be provided i n an efficient manner with existing service cycles and staffing levels. However, staff will monitor PAGE 11 OF 11 SUBJECT: ADOPT A RESOLUTION MAKING DETERMINATIONS AND ORDERING 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: JUNE 11, 2019 S:\COUNCIL REPORTS\2019\06-18-19\17 Pocket Annexations\Staff Report.FINAL.docx 6/13/2019 1:20 PM the provision of services and if an incremental increase in future staffing is needed to maintain service levels, proposals will be submitted as part of the regular annual budgetary process. Attachments: 1. Resolution Adopting Annexation 2. June 4, 2019 Resolution Initiating Annexation 3. Public Comments received before 1100 a.m., Thursday, June 13, 2019