City Council Report 915 I Street, 1 st Floor Sacramento, CA

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1 City Council Report 915 I Street, 1 st Floor Sacramento, CA File ID: June 7, 2018 Consent Item 02 Title: Aspen 1 Annexation Tax Exchange Agreement Location: District 6 Recommendation: Pass a Resolution approving the Tax Exchange Agreement for the Aspen 1 Annexation (M / P09-038). Contact: Jason Hone, Senior Planner, (916) ; Cheryle Hodge, Principal Planner, (916) , Community Development Department Presenter: None Attachments: 1-Description/Analysis 2-Background 3-Resolution Adopting Tax Exchange Agreement 4-Resolution Exhibit A Tax-Exchange Agreement 5-Agreement Exhibit A.1 Map of Aspen 1 Annexation Area 6-Agreement Exhibit A.2 Legal Description of Aspen 1 Annexation Area 7-Previously Approved Aspen 1 PUD Schematic Plan (Resolution ) 8-Previously Approved Aspen 1 Tentative Subdivision Map (Resolution ) 9-Previously Approved Aspen 1 Rezone/Prezone (Ordinance ) Susana Alcala Wood, City Attorney Mindy Cuppy, City Clerk John Colville, City Treasurer Howard Chan, City Manager Page 1 of 23

2 File ID: Consent Item 02 Description/Analysis Issue Detail: The Aspen 1 project entitlements, including initiation of annexation proceedings, were approved by City Council on November 24, On that date, the City Council adopted Resolution initiating the annexation of ±29 acres located to the west of South Watt Avenue, south of Jackson Highway, and requested that proceedings be taken for the proposal pursuant to Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 (Government Code Section 56700, et al). The City and County must adopt a tax exchange agreement prior to the Sacramento Local Agency Formation Commission (LAFCo) public hearings on the annexation proposal. The proposed tax exchange agreement will enable the City to proceed with the annexation request to LAFCo. The tax exchange agreement specifies post-annexation sharing of municipal property tax revenue and, in certain circumstances, sales tax and transient occupancy tax (TOT) revenues within the annexation area. Policy Considerations: The Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 establishes procedures for local government boundary changes, including annexations to a city and detachment from affected special districts. LAFCo has adopted Local Standards, Policies and Procedures that also guide reorganization proceedings. In accordance with the prior direction from Council, staff will submit an annexation/detachment application to LAFCo consistent with the Cortese-Knox- Hertzberg Local Government Reorganization Act and with the LAFCo requirements. As noted above, the City and County (of Sacramento) must adopt a tax exchange agreement prior to LAFCo s hearings on the annexation proposal. Following City approval of the Tax Exchange Agreement, the County Board of Supervisors will act on the proposed agreement. Economic Impacts: Not applicable. Environmental Considerations: The Aspen 1 New Brighton Planned Unit Development (PUD) Environmental Impact Report (EIR) was certified by City Council on November 24, 2015 with Resolution No The current action (approval of a tax exchange agreement) is a component of the previously approved project. The City must determine whether a subsequent or supplemental EIR is required. The California Environmental Quality Act (CEQA) Guidelines Section requires an examination of whether, since the certification of the EIR and approval of the project, changes in the project or conditions have been made to such an extent that the proposal may result in substantial changes in physical conditions that are considered significant under CEQA. None of the circumstances set forth in CEQA Guidelines Section are present. No further environmental review is required. Sustainability: Not applicable. City of Sacramento June 7, 2018 powered by Legistar Page 2 of 23

3 File ID: Consent Item 02 Commission/Committee Action: None. Rationale for Recommendation: Adoption of a tax exchange agreement by the City and County is a necessary requirement for LAFCo s hearing of the proposed annexation of the ±29 acres as initiated by Council on November 24, Financial Considerations: The proposed Tax Exchange Agreement calls for an equal sharing by the City and County of the property tax revenue generated within the Aspen 1 annexation area. Additionally, the agreement specifies the limited distribution of the City s post-annexation property tax share to the Sacramento Metropolitan Fire District and the Cordova Recreation and Park District, as the annexation proceedings would include detachment from these two special districts. The proposed agreement also calls for an equal sharing by the City and County of sales tax revenue derived from: 1) Single-Purpose or Regional Tax-Generating Land Uses, defined as hotels, motels, auto dealers, and big box retail establishments; and 2) Excess Retail Uses, meaning the rezoning of property within the annexation area for retail uses in excess of the pre-zoned 4.2 commercial acres (pre-zoned as Shopping Center SC ). In addition, the agreement specifies sharing of Transient Occupancy Tax (TOT) from hotel/motel projects within the annexation area. The Aspen 1 project, as approved by Council in 2015, does not include any Single Purpose or Regional Tax-Generating Land Uses nor TOT generating uses. The tax-sharing agreement would commence on the annexation date and would continue into perpetuity. More detailed discussion of the agreement is included in the Background section of the staff report (Attachment 2). Local Business Enterprise (LBE): Not applicable. City of Sacramento June 7, 2018 powered by Legistar Page 3 of 23

4 Background Aspen 1 Project Entitlements (Previously Approved) On November 24, 2015 the City Council approved the Aspen 1-New Brighton Planned Unit Development (PUD). The Aspen 1 PUD site comprises approximately acres. The site is a former gravel mine and is vacant. The PUD site is envisioned as a mix of residential, commercial, and agricultural development including up to 1,365 residential units ranging from single-family detached homes to high density multi-family housing. The commercial component of the project includes a mixed-use village center referred to as the four corners, a traditional shopping center, and an urban farm of approximately 27 acres. Amenities such as parks, open space, landscaped medians, pedestrian/bicycle paths, a school site, and a community gathering center have been incorporated into the land use plan. The significant entitlements approved on November 24, 2015, included certification of the Aspen 1 EIR, a resolution initiating Annexation of approximately 29 acres, a General Plan amendment, a Rezone/Prezone, Adoption of the Aspen 1 Special Planning District (SPD), adoption of the Aspen 1-New Brighton PUD, Master and Tentative Parcel Maps, and a Development Agreement. For reference, the approved Aspen 1 - New Brighton PUD Land Use Schematic Plan is included in Attachment 7 with markup showing an approximation of the ±29 acre proposed annexation area. Annexation Proceedings A small portion of the Aspen 1 project area (±29 acres) is located outside City boundaries within the unincorporated County. The project area currently within City limits south of Jackson Highway was annexed into the City in November of In the late 1960 s South Watt Avenue was realigned in an easterly direction. This created the remnant area west of South Watt Avenue shown in Figure 1 below. To facilitate this development under one jurisdiction, the City Council approved Resolution in November of 2015 to initiate annexation proceedings. A legal description and map of the annexation area are included as exhibits to the tax exchange agreement (See Exhibits A.1 and A.2). The Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 (Act) establishes procedures for local government changes of organization, including annexations to a city and detachments from affected special districts. LAFCo has adopted Local Standards, Policies and Procedures that also guide reorganization proceedings. In accordance with the prior direction from Council, staff will submit an annexation/detachment application to LAFCo consistent with the Cortese-Knox- Hertzberg Local Government Reorganization Act and with the LAFCo requirements. This application will initiate proceedings with LAFCo. As noted above, the City and County must adopt a tax exchange agreement prior to LAFCo s hearings on the annexation proposal. Page 4 of 23

5 Figure 1: Aspen 1 Annexation Area Sharing of Tax Revenues The tax exchange agreement (Attachment 4) describes the post annexation sharing of property tax revenues between the City and County. The agreement also specifies when the City would share sales tax revenue and transient occupancy tax (TOT) revenue. Additionally, the agreement includes provisions considering special districts affected by the proposed annexation. Page 5 of 23

6 Section 5 in the terms of the tax exchange agreement describes the circumstances in which the City would share sales tax and a portion of TOT revenues with the County. The City and County will share the sales tax or portion of TOT revenue from any Single Purpose or Regional Tax-Generating Land Use developed within the annexation area. This is defined to include hotels, motels, auto dealers, and big box retail establishments (store with building area > 75,000 square feet). Presently, no such use is proposed within the annexation area. Sharing of sales tax revenue would also be triggered by Excess Retail Uses. This occurs when property is rezoned for retail uses that exceeds the pre-zoned 4.2 commercial acres located within the Aspen 1 Annexation Area at the intersection of Jackson Highway and South Watt Avenue shown as commercial on the approved tentative subdivision map (Attachment 8) and Shopping Center (SC) zone in the approved Rezone/Prezone exhibit (Attachment 9). The language in the proposed tax exchange agreement was arrived at following negotiation with the County and special districts. Below in Figure 2 is a breakdown of the most recent property tax allocations ( ) within the annexation area. Figure 2: Annexation Area Percentage Breakdown of Property Tax Allocation PERCENT District NAME BEFORE ERAF ERAF Post ERAF Rate 1325 LOS RIOS COMM COLLEGE ELK GROVE UNIFIED COUNTY WIDE EQUALIZED SACRAMENTO COUNTY WATER [2] ( ) COUNTY LIBRARY COUNTY ROADS COUNTY GENERAL [1] ( ) SACRAMENTO METRO FIRE CORDOVA RECREATION & PARK [3] ( ) JUVENILE HALL REGIONAL OCCUP CENTER PHYS HANDICAPPED-UNIFIED INFANT DEV-PHYSICAL HANDICAPPED INFANT DEV-MENTALLY HANDICAPPED CHILDREN'S INST COUNTY SUPT-ADMIN SACTO-YOLO MOSQUITO DEV CENTER HANDICAPPED ERAF EDUCATIONAL REVENUE AUGMENTATION [1] shift % % [2] shift % % [3] shift % % Page 6 of 23

7 The post-eraf rate for the entities shown in yellow in Figure 2 is the property tax allocation subject to post-annexation sharing. This is represented in Section 3 of the tax exchange agreement (included below as Figure 3) and is to be shared equally by the City and County, with each receiving approximately 27% of post-annexation property tax revenue to be allocated to its general fund. Figure 3: Property Tax Shares Available Tax Increment Annexation NAME BEFORE ERAF ERAF Shares SACRAMENTO COUNTY WATER ( ) COUNTY LIBRARY COUNTY ROADS COUNTY GENERAL ( ) SACRAMENTO METRO FIRE CORDOVA RECREATION & PARK ( ) Net County Share (50%) City Share (50%) (a) CITY shall receive % of the Property Tax Revenue to be allocated to its General Fund. (b) COUNTY shall receive % of the Property Tax Revenue to be allocated to its General Fund. The property valuation of the current undeveloped annexation area was $131,267 resulting in overall property tax revenues of $1,313. The total post-eraf (educational revenue augmentation fund) percentage of property tax revenue subject to the tax exchange agreement is approximately 54%. Special Districts Considered in the Tax Exchange Agreement The ±29 acre annexation area is currently in the Cordova Recreation and Park District (Park District) service boundaries and the Sacramento Metropolitan Fire District (Fire District) service boundaries. The proposed tax exchange agreement includes negotiated provisions pertaining to the Fire District and Park District following the City s annexation and detachment of their service areas. The tax exchange agreement specifies that the Cordova Recreation and Park District shall receive from the City $145 a year for five years following annexation. The tax exchange agreement specifies that the City shall convey 100% of its share of property tax revenue within the annexation area to the Fire District until the first building Page 7 of 23

8 permit is issued. Following issuance of the first building permit within the annexation area, the Fire District shall receive 30% of the City s share of property tax revenue from the annexation area. The tax exchange agreement further specifies how the Fire District s portion of the City s property tax share shall be reapportioned if Station 9 is reopened. Page 8 of 23

9 RESOLUTION NO. Adopted by the Sacramento City Council APPROVING THE TAX EXCHANGE AGREEMENT FOR THE ASPEN 1 ANNEXATION (M / P09-038) BACKGROUND A. The City and Landowners have proposed to annex a twenty-nine-acre, unincorporated area ( Aspen 1 Annexation ) to the City. B. On November 24, 2015, the City Council adopted Resolution No initiating the Aspen 1 Annexation and requested that proceedings be taken for the proposal pursuant to Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 (Government Code Section 56700, et al). C. The annexation by the City of the Aspen 1 Annexation Area must be approved by the Sacramento Local Agency Formation Commission. Before the Commission may act on the proposed annexation, the City and County of Sacramento must adopt a tax exchange agreement. D. The County and City have negotiated a tax exchange agreement specifying how property tax, sales tax and a portion of the transient occupancy tax revenues will be allocated if the annexation is approved. This tax-exchange agreement was negotiated with respect only to the subject territory. BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS: Section 1. Section 2. The City Council hereby approves the Tax Exchange Agreement between the City of Sacramento and the County of Sacramento, attached to this Resolution as Exhibit A. The City Council also authorizes the City Manager to execute the Agreement and take whatever steps necessary to carry out the purpose of the Agreement. Exhibit A, and its exhibits, A.1 and A.2, are part of this Resolution. Table of Contents: Exhibit A Tax-Exchange Agreement Between the County of Sacramento and the City of Sacramento, Relating to the Aspen 1 Annexation Exhibit A.1 Map of Aspen 1 Annexation Area Exhibit A.2 Legal Description of Aspen 1 Annexation Area 1 Page 9 of 23

10 Adopted by the City of Sacramento City Council on June 7, 2018 by the following vote: Ayes: Noes: Abstain: Absent: Attest: Mindy Cuppy, City Clerk 2 Page 10 of 23

11 TAX-EXCHANGE AGREEMENT BETWEEN THE COUNTY OF SACRAMENTO AND THE CITY OF SACRAMENTO, RELATING TO THE ASPEN 1 ANNEXATION EXHIBIT A This TAX-EXCHANGE AGREEMENT ( Agreement ) is made and executed in duplicate this day of 2018 by and between the COUNTY OF SACRAMENTO, a political subdivision of the State of California ( COUNTY ), and the CITY OF SACRAMENTO, a charter city ( CITY ). RECITALS A. On June 6, 1978, Article XIIIA was added to the California Constitution. Article XIIIA limited the total amount of property taxes which could be levied on property, by local taxing agencies having such property within their territorial jurisdiction, to one percent (1%) of the property s full cash value. B. Subsequently, the California Legislature added Section 99 to the California Revenue and Taxation Code. Section 99 requires a city seeking to annex property to its incorporated territory, and a county affected by such annexation, to agree upon an exchange of property taxes which are derived from such property and available to the county and city following annexation of the property. C. CITY will file an application with the Sacramento Local Agency Formation Commission requesting its approval for the CITY s annexation of approximately 29 acres of real property ( the Aspen 1 Annexation Area ). D. COUNTY and CITY wish to work together to develop a fair and equitable approach to the sharing of real property ad valorem taxes imposed and collected, as authorized by the Revenue and Taxation Code, in order to encourage sound urban development and economic growth. E. Close cooperation between COUNTY and CITY is necessary to maintain and improve the quality of life, and deliver needed or desirable services in a timely and cost-efficient manner, to residents in the CITY and COUNTY. F. COUNTY recognizes the need for orderly growth within and adjacent to the CITY, and for supporting appropriate annexations by CITY. G. Section 99, of the California Revenue and Taxation Code, authorizes a city and county to execute a property tax transfer agreement for the exchange of property tax revenues in connection with the annexation of property located in the unincorporated territory of a county to the incorporated territory of a city. H. COUNTY and CITY after negotiations have reached an understanding as to a rate of exchange of property tax revenues to be made, pursuant to Section 99 of the California Revenue and Taxation Code, and herein also describe limited circumstances in which the COUNTY and CITY will share sales tax and certain transient occupancy tax revenues, in connection with the annexation of the Aspen 1 Annexation Area to the CITY. Page 11 of 23

12 I. COUNTY and CITY also desire to set out the parameters for exchange of sales tax and transient occupancy taxes collected within the Aspen 1 Annexation Area J. The provisions of Article XIII, Section 29(b) of the California Constitution authorize a city and county to enter into a contract to apportion between them the revenue derived from any sales or use tax imposed by them pursuant to the local sales and use tax law, provided that the ordinance or resolution approving the contract is approved by a two-thirds (2/3) vote of both the City Council and the Board of Supervisors. K. This Agreement memorializes the understanding between the COUNTY and CITY and constitutes an enforceable property tax transfer agreement, under Section 99 of the California Revenue and Taxation Code. In consideration of the exchange of tax revenue, as provided for in this Agreement, and for other good and valuable consideration, the sufficiency of which is acknowledged by the parties, the COUNTY and CITY agree as follows: TERMS Section 1. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below: (a) Aspen 1 Annexation Area shall mean a ±29-acre, former gravel mine area in the unincorporated area of COUNTY, south of the Jackson Highway, west of South Watt Avenue and north of Fruitridge Avenue, as depicted on Exhibit A.1 (annexation map), and A.2 (annexation legal description) to this Agreement. (b) Annexation Date shall mean the date specified by the Sacramento Local Agency Formation Commission consistent with the Cortese-Knox-Hertzberg Local Governmental Reorganization Act of 2000 (California Government Code et seq.) as the effective date of the Aspen 1 Annexation. (c) Annexation shall mean the approved and completed annexation of the Aspen 1 Annexation Area by the CITY, as delineated in Sacramento Local Agency Formation Commission Application Control Number 04-18, and as provided for in the Cortese-Knox-Hertzberg Local Governmental Reorganization Act of 2000 (California Government Code et seq.). (d) Auto Dealer shall mean a retailer who sells new or used cars or trucks who is also a dealer as defined by Vehicle Code Section 285. For purposes of this subsection, cars include vans that are sold primarily as passenger vehicles, and trucks include pickup trucks and cargo vans with a cargo capacity of one ton or less. (e) Big Box Retail Establishment shall mean a store of greater than 75,000 square feet of building area that will generate sales, transaction or use tax revenue. (f) Excess Retail Uses shall mean retail that exceeds the pre-zoned 4.2 commercial acres located within the Aspen 1 Annexation Area at the intersection of Jackson Highway and South Watt Avenue per the approved Tentative Subdivision Map (Council Resolution No ). (g) Property Tax Revenue shall mean revenue from ad valorem real property taxes on real property, as said term is used in Section 1 of Article XIIIA of the California Constitution and more particularly defined in subsection (c) of Section 95 of Page 12 of 23

13 the California Revenue and Taxation Code, that is collected from the Aspen 1 Annexation Area, is available for allocation to the CITY and the COUNTY, and is currently allocated to the COUNTY General Fund, COUNTY Library Fund, COUNTY Road Fund, COUNTY Water Fund, Sacramento Metropolitan Fire Protection District ( Fire District ), and Cordova Recreation and Park District ( Park District ). (h) Sales Tax Revenue shall mean the revenue from the sales, transaction, and use taxes levied and received by the CITY pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law, or any successor statutory provision, that is collected within the Aspen 1 Annexation Area. (i) Single-Purpose or Regional Tax-Generating Land Use shall mean hotels, motels, Auto Dealers, and Big Box Retail Establishments. (j) Transient Occupancy Tax Revenue shall mean the CITY general fund share of revenue from any transient occupancy tax levied and received by the CITY pursuant to Revenue and Taxation Code Section 7280, or any successor statutory provision, that is collected within the Aspen 1 Annexation Area. Section 2. General Purpose of Agreement. The general purpose of this Agreement is to devise an equitable exchange of Property Tax Revenue between CITY and COUNTY (with COUNTY acting on behalf of itself, the Fire District, and the Park District ), as required by Section 99 of the California Revenue and Taxation Code, for the Aspen 1 Annexation Area. Section 3. Exchange of Property Tax Revenues. On and after the Annexation Date, the COUNTY and CITY shall equally pool and share Property Tax Revenue for the Aspen 1 Annexation Area as set forth herein. Available Tax Increment Annexation NAME BEFORE ERAF ERAF Shares SACRAMENTO COUNTY WATER ( ) COUNTY LIBRARY COUNTY ROADS COUNTY GENERAL ( ) SACRAMENTO METRO FIRE CORDOVA RECREATION & PARK ( ) Net County Share (50%) City Share (50%) (a) CITY shall receive % of the Property Tax Revenue to be allocated to its General Fund. (b) COUNTY shall receive % of the Property Tax Revenue to be allocated to its General Fund. Section 4. Exchange by County Auditor. COUNTY and CITY further agree that all of the exchanges of Property Tax Revenue between the CITY and COUNTY required by this Page 13 of 23

14 Agreement shall be made by the County Auditor. The CITY will further distribute a share of its portion of Property Tax Revenue to the Fire District to the extent required by this agreement. Section 5. Exchange of Sales Tax and Transient Occupancy Tax Revenues. On and after the Annexation Date, CITY shall receive all Sales Tax Revenue and Transient Occupancy Tax Revenue for the Aspen 1 Annexation Area. The CITY shall distribute a share of its Sales Tax Revenue and Transient Occupancy Tax Revenue to the County under the following events: (i) Single Purpose or Regional Tax-Generating Land Use. In the event that the CITY allows a Single Purpose or Regional Tax-Generating Land Use, as defined in Section 1(i) of this Agreement, to conduct business in the Aspen 1 Annexation Area, then the COUNTY and CITY shall share equally in the Sales Tax Revenue and Transient Occupancy Tax Revenue generated by such Single Purpose or Regional Tax Generating Land Use. (ii) Excess Retail Uses. In the event that the CITY rezones the Aspen 1 Annexation Area increasing the amount of land zoned for retail use the CITY shall designate the retail area that is in excess of 4.2 acres and provide the COUNTY written notice of said rezone as required in Section 10. The COUNTY and CITY shall share equally in the Sales Tax Revenue and Transient Occupancy Tax Revenue in the rezoned area in excess of the original 4.2 acres. Section 6 Distribution of Sales and Transient Occupancy Tax Revenue. CITY shall distribute to the COUNTY the COUNTY S share of the Sales Tax Revenue and Transient Occupancy Tax Revenue as set forth in Section 5 within one hundred and twenty (120) calendar days of the end of the fiscal year. Section 7. Fire District. On and after the Annexation Date, the Fire District shall receive 100% of the CITY S portion of Property Tax Revenue each year until the issuance of the first building permit for construction in the Aspen 1 Annexation Area, and then, after issuance of the first building permit, the Fire District shall receive 30% of the CITY S Property Tax Revenue thereafter. Further, the CITY and Fire District shall reapportion the CITY S portion of Property Tax Revenue one year after the reopening of Station 9 based on CITY and Fire District review of response calls, over the prior year, to the Aspen 1 Annexation Area. The new percentage share of the Property Tax Revenue shall be determined by dividing the Fire District s number of responses by the total number of responses. In instances when both the CITY and the Fire District respond to the same call, it will count as half of the response. The resulting percentage of Fire District responses shall be applied to the amount of the Fire District s share of Property Tax Revenue at the time of reapportionment (100% of the CITY s share prior to issuance of a building permit or 30% after issuance of the first building permit for construction in the Aspen 1 Annexation Area). Upon receipt of Property Tax Revenue from the County Auditor, the CITY will be responsible to distribute the funds directly to the Fire District. (i) Illustrative example of reapportioned share following issuance of first building permit and one year after reopening Station 9: a responses by Fire District of 88 total responses equals 14.2%. 14.2% of 30% equals 4.26%. The Fire District s new percentage of the CITY s post annexation Property Tax Revenue would be 4.26%. Section 8. Park District. On or after the Annexation Date, the Park District shall receive $145 per year from the CITY for a period of 5 years. No revenue will be distributed to the Park District after the five-year period. The City will be responsible to distribute the funds Page 14 of 23

15 directly to the Park District and may satisfy its obligation under this Section by payment of a one-time lump sum of $725. Section 9. Sacramento County Water Agency. The Water Agency may request authorization of detachment for the territories and related zones once the annexation is completed. Section 10. Notice of Rezone Required. If any property within the Aspen 1 Annexation Area is proposed to be rezoned, the CITY shall provide written notice of such proposed rezone to the COUNTY prior to the date the proposed rezone is to be heard by the CITY Planning Commission. Section 11. Non-Opposition to Annexation. In further consideration of this Agreement, COUNTY agrees not to oppose CITY s annexation of the Aspen 1 Annexation Area. Section 12. Dispute Resolution. In the event of any dispute arising out of or relating to this Agreement, the parties shall attempt, in good faith, to promptly resolve the dispute mutually between themselves. If the dispute cannot be resolved within 30 calendar days of initiating such negotiations or such other time period as may be mutually agreed to by the parties in writing, either party may pursue its available legal and equitable remedies, pursuant to the laws of the State of California. Section 13. Mutual Defense of Agreement. If the validity of this Agreement is challenged in any legal action by a party other than COUNTY or CITY, then COUNTY and CITY agree to defend jointly against the legal challenge and to share equally any award of costs, including attorney s fees, against COUNTY, CITY, or both. Section 14. Third Party Beneficiary. The Fire District is hereby designated as thirdparty beneficiary of this Agreement, but only for the purposes of enforcement of Section 7 of this Agreement. Otherwise, there are no third-party beneficiaries to this Agreement, and no third-party will have any right to enforce any provision of this Agreement. Section 15. Waiver of Retroactive Recovery. If the validity of this Agreement is challenged in any legal action brought by either CITY or any third party, CITY hereby waives any right to the retroactive recovery of any CITY Property Tax Revenues, COUNTY hereby waives any right to the retroactive recovery of any Sales Tax or Transient Occupancy Tax Revenues, exchanged pursuant to this Agreement prior to the date on which such legal action is filed in a court of competent jurisdiction. The remedy available in any such legal action shall be limited to a prospective invalidation of the Agreement. Section 16. Modification. The provision of this Agreement and all of the covenants and conditions set forth herein may be modified or amended only by a writing duly authorized and executed by both the COUNTY and CITY. Section 17. Reformation. COUNTY and CITY understand and agree that this Agreement is based upon existing law, and that such law may be substantially amended in the future. In the event of an amendment of state law which renders this Agreement invalid or inoperable or which denies any party thereto the full benefit of this Agreement as set forth herein, in whole or in part, then COUNTY and CITY agree to renegotiate the Agreement in good faith. Section 18. Effect of Tax Exchange Agreement. This Agreement shall be applicable solely to the Annexation and does not constitute either a master tax sharing agreement or an Page 15 of 23

16 agreement on property tax exchanges which may be required for any other annexation to the CITY. Section 19. Entire Agreement. With respect to the subject matter hereof only, this Agreement supersedes any and all previous negotiations, proposals, commitments, writings, and understandings of any nature whatsoever between COUNTY and CITY except as otherwise provided herein. Section 20. Notices. All notices, requests, certifications or other correspondence required to be provided by the parties to this Agreement shall be in writing and shall be personally delivered or delivered by first class mail to the respective parties at the following addresses: COUNTY CITY County Executive City Manager County of Sacramento City of Sacramento 700 H Street, Room "I" Street, 5th Floor Sacramento, CA Sacramento, CA Notice by personal delivery shall be effective immediately upon delivery. Notice by mail shall be effective upon receipt or three days after mailing, whichever is earlier. Section 21. Approval, Consent, and Agreement. Wherever this Agreement requires a party s approval, consent, or agreement, the party shall make its decision to give or withhold such approval, consent or agreement in good faith, and shall not withhold such approval, consent or agreement unreasonably or without good cause. Section 22. Construction of Captions. Captions of the sections of this Agreement are for convenience and reference only. The words in the captions in no way explain, modify, amplify, or interpret this Agreement. Section 23. Incorporation by Reference. Exhibits A.1 and A.2, attached hereto, are incorporated into this Agreement by this reference. Section 24. The Parties acknowledge that this Agreement shall not become effective unless the ordinance or resolution approving the contract is approved by a two-thirds (2/3) vote of both the City Council and the Board of Supervisors. IN WITNESS WHEREOF, the parties hereto have executed this Agreement in the County of Sacramento, State of California, on the date set forth above. COUNTY OF SACRAMENTO, a political Subdivision of the State of California (SEAL) By: County Executive ATTEST: Clerk of the Board of Supervisors Page 16 of 23

17 Approved as to form: County Counsel CITY OF SACRAMENTO, a municipal corporation (SEAL) ATTEST: City Clerk By: City Manager Approved as to form: City Attorney Page 17 of 23

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21 Resolution November 24, 2015 Page 21 of 23

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23 Rezone/Prezone Exhibit Prezone Area - Subject to Annexation Exhibit A - Rezone/Prezone Map Ordinance November 24, 2015 Page 3 of 7 Page 23 of 23