Study Session - Island AnnexationsMEETING DATE: 4/4/05
~owN of STUDY SESSION
COUNCIL AGENDA REPORT
!pS Gp:~SS
DATE: MARCH 31, 2005
TO: MAYOR AND TOWN COUNCIL
FROM: DEBRA J. FIGONE, TOWN MANAGER
SUBJECT: ISLAND ANNEXATIONS
A. DISCUSS POLICY DECISION TO PROCEED WITH COUNTY
ISLAND ANNEXATIONS WITHOUT PROTEST PROCEEDINGS AS
ALLOWED BY GOVERNMENT CODE SECTION 56375.3
B. PROVIDE DIRECTION TO STAFF WHETHER TO PROCEED WITH
THE COUNTY ISLAND ANNEXATION PROCESS OR SEEK
ADDITIONAL INFORMATION
RECOMMENDATION:
1. Discuss policy decision to proceed with County island annexations without protest proceedings
as allowed by Government Code Section 56375.3.
2. Provide direction to staff whether to proceed with the County island annexation process or seek
additional information.
BACKGROUND:
The purpose of this report is to provide the Town Council with information about the annexation
process as it is presently defined by revised State law and the policies of the County of Santa Clara,
and about the opportunities for annexation of County islands in Los Gatos. Specifically, the report
provides background information about the new legislation, discusses the costs and benefits of
annexation and seeks direction as to whether staff should proceed with the island annexation process.
The Cortese-Knox-Hertzberg (C-K-H) Local Government Reorganization Act of 2000 (Division 3,
Title 5, Section 56000 et. seq. of the California Government Code) is the state code which governs
annexations. Recent revisions to annexation laws tools effect on January 1, 2005. The most
significant change is that an annexation of an island may take place in any area not exceeding 150
acres in size without the requirement to hold protest proceedings or elections.
-C-
Reviewed by: Assistant Town Manager c iiTown Attorney Cleric Administrator
-42 , Finance Community Development Revised: 3/31/05 1:37 pm
PREPARED BY: J HN E. CURTIS -0
irector of Parks and Public Works
Reformatted: 5/30/02 NAB&E\COUNCIL REP0RTS\Annexation2.wpd
X PAMELA JACOBS
Assistant Town Manager
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: ISLAND ANNEXATIONS
MARCH 31, 2005
Attachment 1 is a memorandum from Neelima Palacherla, Santa Clara County Local Agency
Formation Commission (LAFCO) Executive Officer, informing the Town of changes in State law
regarding the annexation of unincorporated islands and the streamlined process for this task. The
letter also identifies criteria for involving the streamlined annexation process.
Prior to this revision to State law, the maximum area that could be annexed without protest
proceedings or elections was set at 75 acres. The new law will sunset on December 31, 2006. After
that time, protest proceedings will be required for these annexations but elections will not be needed.
If a majority protest is not received to defeat the annexation, the annexation is approved without an
election.
Attachment 2 is a list of the unincorporated islands within Town limits. In total, there are 16 islands
of various sizes, with only one island (Blossom Hill Manor) exceeding the 150 acre limit. The
remaining 15 islands are under 150 acres, meet all the criteria required by the revised State law, and
thus would be eligible to be annexed under the streamlined process. Attachment 3 is a map depicting
the locations of the unincorporated islands. Additional unincorporated areas larger than 150 acres
are within Los Gatos' Urban Service Area to the south and southeast; however, these areas do not
meet the criteria for the streamlined process.
DISCUSSION:
Historically, the Town has been supportive of annexations including island areas and individual
properties going through the development process. In the 1970's numerous County islands were
annexed to the Town under a similar law, known as "MORGA" (Municipal Organization Act). In
1999 the Town worked closely with Santa Clara County staff to annex several large remaining
unincorporated islands under the County's Pocket Annexation Program. The annexation attempts
failed when more than 50% of affected property owners protested.
Annexing unincorporated areas to the Town of Los Gatos under the standard process is complex,
time consuming, and often controversial. The change to annexation law provides an opportunity to
annex islands without the protest or election process, eliminating much of the internal controversy
within neighborhoods associated with annexations under the standard annexation process.
The streamlined process includes the following steps, which are also depicted in a flow chart in
Attachment 4:
Preparation to initiate island annexation (includes preparation of annexation exhibits and
review and approval by County Surveyor's office)
• Community information and outreach (recommended but not required)
• Noticed public hearing to adopt resolution to initiate annexation
• Noticed public hearing to adopt resolution approving annexation
• Certified resolution forwarded to LAFCO for finalization
PAGE 3
MAYOR AND TOWN COUNCIL
SUBJECT: ISLAND ANNEXATIONS
MARCH 31, 2005
CONSIDERATIONS REGARDING ISLAND ANNEXATIONS
Costs of Island Annexations
Service Costs
Although the streamlined annexation process will cost less in direct costs due to reduced staff time
and no election costs, the decision to annex must take into account other costs and benefits of
annexation. If the Town were to annex all 15 eligible islands, approximately 400 parcels and 3.6
miles of streets would be added to the Town's jurisdiction. This represents about a 3.2% increase
to the Town's household base and a 3.3% increase to our roadway base. Once the islands are
annexed, the Town will be responsible for providing services to the residents. The residents in these
islands likely already use a number of Town services and facilities, including library, Neighborhood
Center, parks, roads, and Town events, and are not paying for these services through their property
taxes. Other services will be provided for the first time. In general; it is expected that the Town will
be able to absorb the delivery of services currently not provided given the incremental demand they
will present. In the case of street sweeping, the Town will receive $20 per household on an annual
basis from the West Valley Sanitation District as part of the non-point sources program. These
revenues will partially compensate for the additional street sweeping services.
Given the Town's current and projected resource constraints, however, the service demands of the
increased households may impact future service levels. One area that will require evaluation over
time is public safety services as calls for service increase. It should be noted, however, that the
islands eligible for annexation are all residential and do not include commercial districts that
typically contribute proportionately more to calls for service than residential areas.
A service area for which there will be specific, definable demand over time is street maintenance.
According to the County, the streets included in the 15 eligible islands have an average Pavement
Condition Index (PCI) between 60 and 65, with the exception of less than a mile in area 413 noted
on Attachment 2. In discussions regarding the condition of the streets, County staff has not
committed to improving the streets prior to annexation. Most recently, the County has indicated that
it does not have the funds to perform this service; however, the Town has not received any written
confirmation of the County's position on street improvements at this time.
The majority of streets in the islands can be brought up to a PCI of 90 to 100 with the application
of a chip seal at an estimated cost of $1.1 million. This work would need to be performed within
the next two to three years to ensure that the streets will not deteriorate to a point that would require
more extensive treatment measures. If the islands are annexed, staff would incorporate the streets
into the Town's ongoing maintenance program, which would add approximately 3.5 miles to the
Town's roadway system. A street in area #13 (less than one mile) would require an asphalt overlays
to raise the PCI to acceptable levels. The estimated cost for this treatment is $200,000.
PAGE 4
MAYOR AND TOWN COUNCIL
SUBJECT: ISLAND ANNEXATIONS
MARCH 31, 2005
The streets within the islands generally do not have curbs, sidewalks, and street lights. If these
islands are annexed into the Town, and if the property owners wish to have curbs, sidewalks and
street lights, and assessment district could be formed such that the property owners would pay for
the improvements. It has been staff's experience, however, that residents of County areas prefer
not to have these improvements because their absence contributes to the rural feel of the
neighborhood.
Process Costs
LAFCO recently adopted Island Annexation Policies which waive the fee ($670) for island
annexations that take advantage of the streamlined annexation process. At this time, it is staff's
understanding that additional costs associated with each island annexation process include the
following:
Preparation of annexation exhibits
Noticing for hearing (mailing, posting & publishing)
County Surveyor Review fee
County Assessor's Review fee
California State Board of Equalization fee
Preliminary estimated cost for each
Estimated cost for 15 annexations
$2,500 to 5,000 (estimate)
$ 750 (estimate)
$2,000 (estimate)
$ 300 (estimate)
$ 300 to 1,500 (by acreage)
$5,850 to $9,550
$82,250 to $143,250
The County Assessor's fee will vary based on the size of the annexation and number of lots to be
annexed. The cost for a licensed land surveyor to prepare each annexation description and map will
also vary, depending upon the size and complexity of the annexation.
Additional costs associated with the process are the costs of public outreach and staff time. Public
outreach efforts could include public meetings, information fliers or letters, and/or media, web site,
and KCAT communication. Staff time is required to process the annexation, and involves the
departments of Public Works, Community Development and Cleric, as well as the Town Manager's
Office and the Town Attorney. The streamlined annexation process available to the Town until
January 1, 2007 will require less staff hours than the standard process, however. In addition,
LAFCO is considering ways to further assist cities with the annexation process, which may reduce
the staff time and effort required.
Benefits of Island Annexations
Considerations for Island Residents, Property Owners and the Town
Attachment 5 presents information from LAFCO that discusses what LAFCO is doing to encourage
cities/towns to annex unincorporated islands and why they are taking a proactive role in these
efforts. Attachment 6 provides excerpts from a County Planning Office report benefits of annexation
to island residents and property owners and reasons for cities to annex unincorporated islands. These
PAGE 5
MAYOR AND TOWN COUNCIL
SUBJECT: ISLAND ANNEXATIONS
MARCH 31, 2005
documents present compelling reasons for considering the annexation of County islands in Los
Gatos.
Valuable benefits of annexation include:
• Efficiencies in planning for and delivering public services;
• Less confusion over service provider jurisdictions;
• Neighborhood compatibility due to the application of consistent development guidelines;
• Residents can participate in the public process, including voting in Town elections and
serving on Town commissions;
• Residents will not realize any increase in taxes, assessments or property-related fees;
• Residents using Town services (e.g., library, parks, streets, etc.) help pay for those services.
Fiscal Considerations
Although residential land use typically does not "pay for itself' in terms of revenues generated and
services delivered, these islands will generate some revenue for the Town. In addition, the residents
are already likely using Town services for which they do not pay. The measurable benefit of
annexing County islands to the Town is the addition of property taxes generated by the residences
in the area. Based on information provided by the County, staff has calculated the total net assessed
valuation for 2004 of the properties within the 15 islands at $178,793,524. The total annual Town
share of property taxes on this assessed value is estimated at $170,927. It appears that these
neighborhoods may have a significant number of long-tenured owners (approximately 52%)
benefitting from Proposition 13 given the total assessed valuation. As in other areas of Town, it is
expected that the assessed value will increase over time as these properties turn over.
Other sources of increased revenue are cable franchise fees, PG&E franchise fees, and garbage
collection franchise fees, all of which will come to the Town rather than the County. Estimated
annual revenue from these franchise fees is $30,000.
General Plan Conformance
The following General Plan policy and implementing strategy support island annexation:
L.P.1.13 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
these improvements be imposed on annexed areas after annexation unless the
residents of the area request 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.
PAGE 6
MAYOR AND TOWN COUNCIL
SUBJECT: ISLAND ANNEXATIONS
MARCH 31, 2005
L.I.8.6 Hillside Development Standards: The Town shall continue to work with the County
in updating hillside development standards, and annexations shall be encouraged
within the Urban Service Boundary.
Areas Greater than 150 Acres
As previously mentioned, the streamlined annexation process applies to islands less than 150 acres,
and the Tc mn has one area within our boundaries that exceeds this maximum limit. At a recent
LAFCO Board Meeting, LAFCO Directors directed their representative to Ca1LAFCO (the State
level agency) to consider increasing the island size and also to delay the sunset date of the bill to
beyond December 31, 2006. The County has also expressed interest in raising the current maximum
acreage limit. If Council sees merit in pursuing this issue, staff could work with LAFCO, the
County, and other interested cities and agencies to seek support in the legislature for a narrow
amendment to AB 1555 which would expand the application of the streamlined process for islands
beyond 150 acres to some consensus maximum acreage.
CONCLUSION:
The Town has an opportunity to annex County islands through a streamlined process, which is also
supported by the County. Staff recommends Council's strong consideration of initiating this
annexation process for the 15 eligible islands within the Town, subject to a clear understanding of
the County's commitment to the process. If Council direction is for the Town to initiate and annex
County islands, staff will return with a report that includes detailed cost and time allocations to
annex the 15 County islands, a recommended prioritization of islands to be annexed, and any other
considerations related to the annexation process. With less than two years remaining for the
streamlined process, it is important to reach a decision regarding the annexations within the next few
months.
ENVIRONMENTAL ASSESSMENT:
Annexations are exempt for the California Environmental Quality Act guidelines, pursuant to
Section 15061(b)(3).
FISCAL IMPACT:
Processing costs are noted in the report. If the Council directs staff to proceed with the island
annexations, a more detailed cost per island and funding source will be presented to the Council with
a report on prioritization of annexations. It is expected that one-time sources are available to cover
the processing costs.
PAGE 7
MAYOR AND TOWN COUNCIL
SUBJECT: ISLAND ANNEXATIONS
MARCH 31, 2005
As noted in the report, annexation of these islands will contribute an estimated $170,000 annually
in property tax revenue accruing to the Town and an estimated $30,000 annually in franchise fees.
Specific costs of providing services to the annexed areas are difficult to estimate; however, it is
anticipated that the Town can absorb the delivery of services currently not provided given the
incremental demand they will generate. However, given the Town's limited resources, an impact
to service levels may occur. Public safety services and others will need to be monitored to identify
any impact. The most significant direct service cost will be the cost of the application of a chip seal
on the majority of the streets, and the cost of an asphalt overlay on a few streets. The costs of future
street maintenance can be managed as part of the Town's overall program.
Attachments:
1. Memo from Neelima Palacherla regarding AB 1555 Provisions (Morga)
2. List of County Islands within the' Town
3. Maps of County Islands within the Town
4. Flow chart of island annexation process
5. LAFCO's Island Annexation Project
6. Excerpts form County Planning Office reports regarding annexation
Distribution:
Ann Ravel, County Counsel, Santa Clara County Counsel's Office, 70 West Hedding Street,
East Wing, 9th Floor, San Jose, CA 95110-1770
Ben Lopes, Fire Chief, Santa Clara County Fire Department, 14700 Winchester Boulevard,
Los Gatos, CA 95030-95110
Pete Kutras, County Executive, Santa Clara County, 70 West Hedding Street, 1 I' Floor,
San Jose, CA 95110
Carol Gruetzner, 16192 Oleander Avene, Los Gatos, CA 95032
Larry Gerston, 16191 Lilac Lane, Los Gatos, CA 95032
Woody Nedom, 16280 Azalea Way, Los Gatos, CA 95032
Forrest Firth, 15905 Orange Blossom, Los Gatos, CA 95032
Ken Waldvogel, Assistant Fire Chief, Santa Clara County Fire Department, 14700 Winchester
Boulevard, Los Gatos, CA 95030
Dunia Noel and Neelima Palacherla - Local Agency Formation Commission, Santa Clara County
- 1 1th Floor, East Wing, 70 West Hedding Street, San Jose, CA 95110
November 9, 2004
TO: City Council Members
Santa Clara County Board of Supervisors
City Managers and County Executive
City and County Planning Directors
FROM: Neelima Palacherla, LAFCO Executive Officer
SUBJECT: City Annexations of Unincorporated Islands
Streamlined Process in State Law
I am writing on behalf of the Local Agency Formation Commission of Santa
Clara County (LAFCO), to inform you about the changes in state law regarding
city annexations of urban unincorporated islands.
New Law Increases Eligible Island Size from 75 acres to 150 acres
Currently, state law allows cities to annex urban unincorporated islands that are
75 acres or less and that meet certain criteria without requiring protest
proceedings or elections. Recent legislation (SB 1266) signed by the Governor,
will change the 75-acre requirement to 150 acres. This change will become
effective on January 1, 2005 making it possible for more islands to qualify for this,
streamlined annexation process.
Background
Generally, the annexation law allows residents and/or landowners within the
annexation area to protest the annexation. If there is less than 25 % protest, the
annexation passes. A protest level of 50% or more terminates the annexation. If
the protest level is between 25 and 50%, an election must be held. A majority vote
is then required for the annexation to be successful.
In 2000, the state legislature, recognizing the inherent inefficiencies of urban
.unincorporated islands, and in an effort to enc6urage their annexation, allowed
for a simplified annexation process for the islands. AB 1555 allowed annexations
of urban unincorporated islands that are 75 acres or less and that meet certain
Page 1 of 2
Attachment 1
criteria to be approved without protest or election. The 75-acre requirement will
be changed to 150 acres on January 1, 2005, when SB 1266 becomes effective.
Criteria for Streamlined Island. Annexation Process
As per Government Code Section 56375.3, island annexations may be approved
without protest or elections if all of the following criteria are met:
• Annexation is proposed by resolution of the annexing city.
• The island is 150 acres or less.
• The island is surrounded or substantially surrounded by the annexing city
or by the annexing city and adjacent cities.
• The island is not a gated community where services are currently
provided by a community service s district.
• The island is substantially developed or developing based on the
availability of public utility services, presence of public improvements or
the presence of physical improvements on the parcels within the area.
• The island is not prime agricultural land as defined in §56064.
• The island is receiving bonefits from the annexing city or will benefit from
the city.
• The island was not created after January 1, 2000.
Limited Time Period for Using Streamlined Annexation Process
This streamlined process without protest and election requirements is available
only for a limited time period between January 1, 2000 and January 1, 2007.
However, after January 1, 2007, not all provisions under this section expire. After
January 1, 2007, protest proceedings will be required for these annexations but
elections will not be needed. That is, if a majority protest is not received to defeat
the annexation proposal, the annexation is approved without an election.
(§57080(b))
For More Information
if you have any further questions regarding this process or if you would like to
discuss potential island annexations within your city, please do not hesitate to
contact me at (408) 299-5127 or Dunia Noel, LAFCO Analyst at (408) 299-5148.
Page 2 of 2
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ATTACHMENT 3
Recommended ISLAND ANNEXATION PROCESS (Section 56375.3)
For Islands 150 acres or less, that meet certain criteria
Without Protest Proceedings or Elections
Prepare to Initiate Island Annexation
Community Outreach
Optional but Recommended when appropriate
Public Hearing with Noticing
City Council Adopt Resolution to Initiate Annexation pursuant to
Government Code Section 56375.3
Set date for Second Public Hearing
Public Hearing with Notice
Adopt Resolution to Approve Annexation
Forward Certified Resolution to I.AFCO
January 2005
Island AnnexationFlowChart.doc
ATTACHMENT 4
LAFCO'S ISLAND ANNEXATION PROJECT
What is LAFCO Doing to Encourage Cities to Annex the Remaining
Unincorporated Islands?
In February 2005, LAFCO adopted a set of policies (i.e. Island Annexation Policies)
specifically targeted at encouraging cities to annex the remaining unincorporated islands
within their Urban Service Area boundaries, particularly those unincorporated islands
that meet the criteria for the new streamlined annexation process. In addition to adopting
Island Annexation Policies, LAFCO will:
• Provide a two-year LAFCO fee waiver for annexations that result in the
elimination of entire unincorporated islands. The fee waiver will expire on
January 1, 2007.
• Work with the County, the cities and other interested parties/agencies to -find
ways to further reduce or share the cost of processing island annexations.
• Hold workshops and provide information on the streamlined island annexation
process to city staff. At these workshops, LAFCO staff will provide city staff with
annexation process flow charts, checklists, sample public hearing notices, and
sample resolutions for cities to use. LAFCO staff recently held one such
workshop on January 24, 2005.
Additionally, LAFCO is considering ways to further assist cities in their efforts to annex
unincorporated islands during the 2-year window. Potential forms of assistance under
consideration include, providing staff resources to assist cities in developing amnexation
plans, gathering technical information, developing or participating in a community
outreach programs, and assisting in annexation process / project management.
Why is LAFCO Taking a Proactive Role in Encouraging Cities to Annex the
Remaining Unincorporated Islands?
LAFCO is encouraging cities to annex the remaining unincorporated islands in order to:
• Fulfill the intent of the state legislature,
Implement the Joint Urban Development Policies of the cities, County and
LAFCO that were adopted in the early 1970s, and
Encourage the efficient provision of services and orderly growth and
development.
In 2004, the State Legislature, in recognition of the inherent inefficiencies of
unincorporated islands, passed legislation aimed at assisting cities in their efforts to
annex unincorporated islands throughout the state. The legislation provides a two-year
window (January 1, 2005 through December 31, 2006) of opportunity for cities to annex
urban unincorporated islands through a streamlined process that does not require protest
proceedings or elections, provided the island meets specific criteria and is 150 acres or
less. This legislation provides a unique opportunity for cities, the County and LAFCO to
Page 1 of 2
3/28/2005
ATTACHMENT 5
work together to fulfill the joint urban growth management policies that form the
foundation of land use policy in this County.
The joint policies of the cities, County and LAFCO were adopted in the early 1970s to
provide a cooperative framework for urban growth management in Santa Clara County.
The policies include the following fundamental policy agreements and obligations:
• The cities, not the County, are responsible for managing and accommodating
urban population growth and development;
• Urban forms and densities of development may occur only within cities' Urban
Service Areas (USAs);
• Outside of USAs, the County will prohibit urban forms, densities, and intensities
of development;
• Inside USAs, development occurring on unincorporated lands will be according to
the city's general plan, regarding type of use and density of development allowed;
• Inside of USAs, islands or pockets of unincorporated lands shall be annexed to the
applicable city. '
Two primary objectives of LAFCOs are to encourage the. efficient provision of urban
services and to encourage orderly growth and development. From a practical perspective,
the existence of scattered unincorporated pockets in the midst of cities is inherently
inefficient for both the city and the County. Some of the inefficiencies arise in
conjunction with the delivery of basic urban services, where there are often two different
departments - one city, one County- providing the same kinds of services to different
portions of the same neighborhood, and crisscrossing each other's territory on their way
to provide the services.
Other inefficiencies result from the cumulative daily effort required just to determine
whether customers calling in to a city or County department seeking assistance in an area
where pockets exists actually lives in the city or the County. These inefficiencies can
sometimes have potentially life threatening consequences particularly when they involve
confusion over emergency service provision. The existence of pockets in cities also
means that city and County staffs need to spend considerable time in coordination
activities (e.g. administering inter jurisdictional referral processes related to land
development proposals within urban pockets) that would be unnecessary if the pockets
were annexed to the city.
Annexation of unincorporated islands would also result in the more efficient provision of
land use planning and development services within a community. County development
standards and other regulations are often less rigorous than those of the cities. These
differences often result in local land use conflicts. Annexation is the best way for cities to
assure that development within the unincorporated islands in the midst of their
neighborhoods is consistent with basic city policies and standards.
Page 2 of 2
CADocuments and SettingApjacobALccal SettingslTEW\LAFCOsIslandAnnexProject.doc
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