For accessibility assistance with any of the following documents, please contact Sonoma LAFCO at (707) 565-2577 or email us at cynthia.olson@sonoma-county.org. SONOMA LOCAL AGENCY FORMATION COMMISSION 575 ADMINISTRATION DRIVE, ROOM 104A, SANTA ROSA, CA 95403 (707) 565-2577 FAX (707) 565-3778 www.sonomalafco.org Item 5.1 Staff Report Meeting Date: March 5, 2014 Agenda No. 5.1 Agenda Item Title: Proposal: Environmental Determination: Staff Contact: Request by the Sea Ranch Volunteer Fire Company to Review Conditions of Approval None Not a project under CEQA Richard Bottarini
ANALYSIS Background On November 11, 2013, LAFCO staff received a letter from the Sea Ranch Volunteer Fire Company stating the Company s interest in obtaining information about the Commission s action 20 years ago in relation to its current relevance. The letter is attached for Commissioners information. The purpose of this report is to provide the historical background, information about tax structures that have evolved, and the method for calculating funding for the specific area of Sea Ranch. History The Sea Ranch Volunteer Fire Company (Sea Ranch VFC) was incorporated in 1973 as an Organized Fire Company under state law and as a 501(c)(3) non-profit corporation. Later that year, the Sonoma County Board of Supervisors formed County Service Area No. 6 (CSA No. 6) with the primary function of fire protection (with sanitary sewer as a minor function). The boundaries of CSA No. 6 were established to match that of The Sea Ranch development and the operational territory of the Sea Ranch Volunteer Fire Company. As was allowed at that time - prior to the passage of Proposition 13, the Board of Supervisors set a special assessment for the parcels within CSA No 6 in the amount of $0.17 per hundred dollars of assessed valuation. This is significant because, at that time, few areas in the County were paying additional taxes for this enhanced service. The California Division of Forestry (CDF) personnel and equipment throughout the State are responsible for the protection of privately owned wild lands designated as State Responsibility Areas (SRAs), i.e., areas designated by the State Board of Forestry and Fire Protection in which the State bears the primary financial responsibility for fire prevention and suppression. There is a CDF station in Sea Ranch to respond to fires along the coast and in the Annapolis area. During the peak fire season, staff is provided to accomplish CDF s primary mission. With the additional property tax funding, the Board of Supervisors contracted with the CDF for professional staffing for CSA No. 6. The original staffing consisted of three fire captains who provided 24-hour, 7 days week coverage during the non-peak fire season. Volunteer fire companies, like the Sea Ranch VFC, were formed to serve many unincorporated areas of the County where fire protection services were not provided by independent special districts. The County Fire Services Department staff provided management oversight support to these companies as well as fire investigation and prevention. Funding for these services had historically been provided by what was Item No 5.1 2 March 5, 2014
called the fire services fund. In the early 1990s, the available funding had decreased, leading to a realization that provision of services could not continue throughout the County. As a result, the Board of Supervisors initiated a proposal to LAFCO to form County Service Area No. 40 to create a funding mechanism for structural fire protection in these unincorporated areas. The proposal would reorganize the existing CSAs that provided fire services into a single CSA with the previous CSAs becoming zones of benefit. LAFCO approved the proposal in May 1993, and CSA No. 40 was formed as of 1994. Among other aspects of the approval, CSA No 6 is treated as if it were a zone of benefit, although there is no special assessment. However, in actuality, Sea Ranch is not a formal zone of benefit. Inquiry of the Sea Ranch Volunteer Fire Company The Company s letter asks for understanding about two conditions in the Commission s resolution (the full resolution is attached): Condition d. Any and all monies of funds including cash on hand and monies due but uncollected, and any other obligations of County Service Area No. 6 (Sea Ranch) and County Service Area No. 24 (Fitch Mountain) pertaining to structural fire protection service shall be transferred to County Service Area No. 40 (Sonoma County) and allocated to zones having boundaries coterminous with the existing boundaries of County Service Area No. 6 (Sea Ranch) and County Service Area No. 24 (Fitch Mountain) Condition h. The property tax revenue now received by County Service Area No. 6 (Sea Ranch) and County Service Area No. 24 (Fitch Mountain) for structural fire protection service shall be transferred to County Service Area No. 40 (Sonoma County) and allocated to zones having boundaries coterminous with the existing boundaries of County Service Area No. 6 (Sea Ranch) and County Service Area 24 (Fitch Mountain) The letter asserts that, based on the language in the Commission s resolution, property tax revenue was to remain within the boundaries of The Sea Ranch but was not so provided. The letter compares this situation with the 1996 detachment of territory from CSA No. 40 to the new Timber Cove Fire Protection District. In that case, the letter states, the Commission s resolution included specific language directing allocation to the new district of the full amount of property taxes designated for fire services. Staff concurs with the VFC reading of the resolution, except, there is not explanation or definition for the inclusion of the word now. Tax Structures When Proposition 13 was enacted in 1978, tax rates were adjusted to reflect the percentage of the set amount of property tax (one percent of assessed property value) to be received by each taxing government agency. The special assessment for CSA No. Item No 5.1 3 March 5, 2014
6 was superseded by a percentage of the Proposition 13 tax rate. Under the new formula, CSA No. 6 received 0.192235 percent of the total Proposition 13 tax rate. Essentially, the former assessment became a line-item allocation under the Proposition 13 distribution on the property tax bill, and Sea Ranch owners ceased paying a special assessment for fire services above the standard 1% property tax rate. Because of the requirements of Proposition 13, the rates within each tax rate area (TRA) had to be recalculated. The result was a difference in the rates paid to the various governmental agencies among the various TRAs. Therefore, unless voters have approved special assessments, adjacent TRAs have the same 1% tax rate, but the distribution of the taxes among government agencies varies widely. The table below compares the allocations for one of the three TRAs within the historic CSA No. 6 to the allocations for an adjacent TRA that is within CSA No. 40 but outside the historic CSA No. 6. Description Sea Ranch TRA 100-004 Non-Sea Ranch TRA 100-003 Percentage of Property Tax shifted to Sea Ranch CSA No.6 Difference County General 0.365903 0.434951-0.069048 County Library 0.024500 0.029123-0.004623 Gen #1 Sonoma County Water Agency 0.009864 0.011726-0.001862 Spring Lake Park SCWA 0.003182 0.003783-0.000601 Northern So Co Air Pollution Con 0.001425 0.001694-0.000269 Sotoyome Res Conservation 0.000122 0.000145-0.000023 CSA #40 Fire Services 0.192235 0.039804 0.152431 Horizon Elementary 0.082886 0.098527-0.015641 So Co Joint Junior College 0.069154 0.082204-0.01305 Pt Arena Awuf 0.095927 0.114029-0.018102 Pt Arena Hi Gen 0.146105 0.173676-0.027571 Mendo Co Sc Sv Ad 0.008697 0.010338-0.001641 1.000000 1.000000 The table shows that, properties within the historic CSA No. 6 TRA pay the same property tax rate as adjacent properties. Fewer of the CSA No. 6 tax dollars to the County, libraries and schools and more to fire service than properties adjacent to but outside the historic CSA No. 6. The table further shows that the largest differences in tax allocation are for the County and Point Arena schools. Percentages of tax allocations are one indicator of the contribution to CSA No. 40, however, as pointed out by the Volunteer Fire Company, Sea Ranch contributes more funding per capita than most areas due to the higher than normal property tax assessments. Item No 5.1 4 March 5, 2014
Tax Allocation Refinement for Sea Ranch VFC The passage of Proposition 98 in 1988 required the State of California to fund education at certain levels. In 1992, the state faced a serious deficit position. To meet its obligations to fund education at the Prop. 98 specified levels, the state enacted legislation over a 2 year period that shifted partial financial responsibility for funding education to local government (cities, counties, county service areas and special districts). County auditors were instructed by the state to permanently shift a portion of the allocation of local property tax revenues from local governments to the educational revenue augmentation funds (ERAFs), requiring the Auditors to annually transfer city, county and other local agency property taxes ERAF to support schools. The amounts shifted are adjusted annually based on each agency s growth in property tax revenues. When the 1993 tax allocations were determined, CSA No. 40 had not yet been formed. Prior to CSA No. 40 formation, CSA No. 6 was required to transfer 47% (0.470903) of its property tax allocation to ERAF. In a rare occurrence, all other areas outside of CSA No. 6 received a combined positive amount from ERAF. The former County Fire Services received 14% (0.139861) from ERAF while minimal amounts were transferred to ERAF from former County Service Areas No. 24 (10%) and No. 25 (18 With the formation of CSA No. 40, the County Auditor recalculated the ERAF allocations to reflect an allocation for CSA No. 40 as a single entity, not for individual tax rate areas or special zones, in compliance with state requirements governing the calculations of jurisdictional ERAF contributions. The current allocation for CSA No. 40 going into the ERAF fund is 15% (0.150241) of its property tax allocation. The County Auditor, although not required by law, has continued to track Sea Ranch VFC net revenue using the pre-csa No. 40 figures for informational purposes only. These calculations were in response to requests by the Sea Ranch VFC to provide an estimate of their share of CSA No. 40 property tax revenues upon separation from CSA No. 40. Using the pre- CSA No. 40 ERAF shift factor for Sea Ranch provides an equitable estimate of what their net property taxes would be if they had not been included in the CSA No. 40 formation. Subsequently in 1994, the Board of Supervisors adopted a policy which required all zones of benefit to participate, as non-zone areas did, in financing the costs for CSA No. 40 administration and general operations. This means that of the approximately 19% of the 1 percent of property taxes that Sea Ranch VFC receives, 3% would be retained by County Fire. This amount is proportional to all the other parcels within CSA 40. What remained, less the ERAF shift, would be distributed to Sea Ranch VFC for fire services. Funding Provided to Sea Ranch The key issue with the Sea Ranch Volunteer Fire Company is the allocation of revenue back to the area. Item No 5.1 5 March 5, 2014
The County Fire staff with assistance from the County auditor s office in the 1990 s developed a methodology for determining the actual net property tax generated from the former CSA No. 6. This methodology has been used ever since. This report summaries the methodology and applies the methodology to one year. For the purpose of this report, the Fiscal Year 2012-13 budget estimates, as provided by the assessor s office, are being used. The total tax value of property in the Sea Ranch area was $1,013,338,749. Applying the tax rate of 0.192235; $1,947,991 of property tax was generated for fire services. First, the staff now determines who much the ERAF shift of 0.0470903 is of the 0.192235. They multiply 0.192235 by 0.0470903, leaving 0.090524. This number then is subtracted from 0.192235, leaving a factor of 0.101711. Then the $1,947,991 is multiplied by 0.10171, leaving a total of $1,030,677. Next, the.03 reduction is applied and by reducing the 0.10171 to 0.071711. Finally, the $1,030,677 is multiplied by 0.071711, leaving $726,675 to be allocated back to the Sea Ranch Area. The following steps outline the mathematics used by the County to achieve the net revenues attributable to the former CSA No. 6. Step 1 Prop 13 Tax Rate Factor for Sea Ranch VFC 0.192235 ERAF Factor for Sea Ranch VFC 0.470903 Tax Rate Factor for Sea Ranch VFC contribution to ERAF 0.090524 (0.192235 x 0.470903) Adjusted Property Tax Factor for Sea Ranch VFC after ERAF 0.101711 Deduction (0.192235-0.090524) Step 2 Adjusted Property Tax Factor after ERAF 0.101711 County CSA 40 Contribution 0.03 Remaining Property Tax Factor 0.071711 Step 3 Assessed Property Values in Sea Ranch VFC, 2012-13 $1,013,338,749 Property Tax Factor 0.071711 Total Property Tax Revenue (1% of Assessed Value x Factor) $726,675 There are some additional adjustments made for property tax administration fees, unsecured collections, unitary taxes, supplemental taxes and HOPTR Supplemental that bring the total to $738,761. Item No 5.1 6 March 5, 2014
Expenditures by CSA No. 40 On Behalf of Sea Ranch In the Sea Ranch VFC service area, Cal Fire, under contract with CSA No. 40, provides responses to all emergencies under what is called a Schedule A Agreement. This agreement provides for one staffed fire company with a minimum daily staffing of two full-time firefighters on duty 24 hours a day, seven days a week. In addition, Cal Fire provides automatic aid response to the Annapolis FSA to supplement the volunteer fire company response. A breakdown of costs associated with this Agreement is shown in the table below. The Sea Ranch VFC Schedule A Agreement Expenditures Fiscal Year 2012-13 Personnel 437,796 Overtime 195,586 Operating Expenses 51,580 Administrative Charge 78,793 Total 763,755 Supplemental Command and Control Services will be added in FY 13/14 and FY 14/15 to provide Cal Fire Battalion Chief support to the County Fire Duty Chief by the provision of command and control services on an as-needed basis not to exceed 15, 24-hour days per month In addition to the payment for the cost of the agreement with Cal Fire, CSA No. 40 reimburses the Sea Ranch VFC for calls and other services. In 2012, Sea Ranch received $13,000 for a total of 260 calls and $5,000 for other services. The total paid out by CSA No. 40 to the Sea Ranch VFC amounts to $781,755. In 2012, more funds were expended than collected and allocated based on the county formulas. Over the years, the Volunteer Company has built reserves, which covered the short fall in that year. LAFCO Role The overriding question is: What is the Commission s possible role in managing a special district after formation? Clearly, the Commission can prepare a Municipal Service Review, evaluate a district or county service area and make recommendations; however, the agency is not obligated to accept the recommendations or make any changes. That is the limitation to the Commission s authority. The second question is: What is the enforceability of a condition after approval? Item No 5.1 7 March 5, 2014
First, a well written condition should be written in plain English. The condition should have a specific description of what is to be done, when it should be done, who will do it and who will review and approve the compliance to the condition. If any of the criteria for a condition is missing, it is a statement which most likely could not be legally enforced. Conditions should be written where compliance is required prior to final approval. The referenced conditions are more statements than conditions. In defense of the conditions quoted in the letter by the Sea Ranch VFC, the conditions were the state of the art. Since then, many court cases have narrowed and defined how conditions are to be written and the required nexus to the record, ordinance or policy. In this case, the County believes it is providing the agreed-upon funding to the Sea Ranch VFC and the condition is being met, however, the Volunteer Fire Company disagrees. RECOMMENDATION Staff recommends that the Commission direct Sea Ranch Volunteer Fire Company meet with the County Board of Supervisors, the governing board of County Service Area No. 40, and obtain further clarification on the allocation process and the amount of funding provided to the Sea Ranch area. Following the meeting, if the Sea Ranch Volunteer Fire Company is still dissatisfied, they report that to the Commission and request formation of a Community Service District or independent fire district. ALTERNATIVES TO RECOMMENDATION The Commission may direct staff to prepare a Municipal Service Review of the operations and fund allocation of CSA No. 40. This would require extensive data collection and analysis. This alternative is not recommended as staff believes this to be an internal service area resource allocation issue, better handled by the Board of Supervisors. ATTACHMENTS 1. Letter from Sea Ranch Volunteer Fire Company Item No 5.1 8 March 5, 2014