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Home My WebLink About21 - Annexation of Area 7 - West Santa Ana Heights-Santa Ana Country Club-South of Mesa)CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 21 February 25, 2003 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Dave Kiff, Assistant City Manager 949/644 -3002 or dkiff @city.newport- beach.ca.us SUBJECT: Annexation of Area 7 (West Santa Ana Heights, Santa Ana Country Club, and South of Mesa) -- Letter to OC LAFCO, Fiscal Impact and Related Analyses ISSUE: Should the City apply to annex West Santa Ana Heights, the Santa Ana Country Club, and neighboring territories? RECOMMENDATION: Select either Alternative #1 or Alternative #2: 1. (A) Direct the City Manager to proceed with City- County discussions associated with the transfer of redevelopment authority for Area 7 and East SAH and report back to the Council on progress with the County prior to making any application to OC LAFCO regarding any annexation of this area; and (B) Authorize the Mayor to send a letter to LAFCO stating the City's interest in filing a Resolution of Application to annex West Santa Ana Heights; the Santa Ana Country Club; and /or the unincorporated areas south of Mesa Drive assuming that the City can also assume redevelopment responsibilities for the area. • :I 2. Authorize the Mayor to send a letter to the Orange County Local Agency Formation Commission stating the City's intent not to pursue any annexations at this time. Annexation of Area 7 February 25, 2003 Page 2 DISCUSSION: Background: State law (the Cortese- Knox - Hertzberg Local Government Reorganiza- tion Act of 2000 [Government Code §56000 et seq.]) governs the way cities, counties, and special districts address boundary issues like incorporations, annexations, detachments, changes in "spheres of influence" ( "SOls "), mergers and consolidations, and combinations of these actions called "reorganizations." Readers can access the Act at www.leginfo.ca.gov. Boundaries for school districts are not set via this Act -- generally, county departments of education follow the California Education Code to set school district boundaries. The Act describes the membership and role of the Local Agency Formation Commission (LAFCO) in each county. Orange County LAFCO, a seven - member body that meets monthly in Santa Ana, addresses local government boundary changes for our region (www. oclafco. ca.gov). On September 26, 2000, the City Council adopted Resolution 2000 -81 directing City staff to process a large annexation application for the Newport Coast, East Santa Ana Heights (East SAH), and the Bay Knolls community. In 2002, the City Council added a small 9- parcel tract called "Emerson /Churchill" to its application. We filed our application to annex these territories on March 19, 2001. The Newport Coast portion of the City's annexation effort became effective January 1, 2002. Following the successful conclusion to the recent protest period (October 17 to December 2, 2002), the East Santa Ana Heights and Bay Knolls communities will be added to the City effective July 1, 2003. We have not processed Emerson /Churchill because we have not yet completed the required pre- zoning associated with Emerson /Churchill. The annexation of East SAH means that Newport Beach's SOI (known as the ultimate boundary for a city) is complete except for the Banning Ranch area of West Newport. Remaining Unincorporated Islands -- "Area 7" The Knox - Cortese - Hertzberg Act suggests that cities ultimately annex territories within their spheres of influence. The Act suggests that cities are generally more effective providers of municipal services (like libraries, public safety, recreation, and street sweeping) than counties or special districts. As such, the Act tells LAFCOs to adopt spheres of influence for all cities within each LAFCO's jurisdiction. The community of West Santa Ana Heights ( "West SAH "), the Santa Ana Country Club ( "SACC "), and several hundred parcels south of Mesa Drive ( "South of Mesa ") are all within the City of Costa Mesa's SOL Exhibit A shows a blue line (Costa Mesa's SOI) and a red line (Newport Beach's SOI) between these territories. Annexation of Area 7 February 25, 2003 Page 3 Exhibit A r i Sanh Ana f " -i '• CavntryClub Y� y,� i'•� .....t. Ana HalghU SOLO /'•'1 �t� is l Of i Mesa Drrve Exhibit B shows the specific relationship of the Santa Ana Country Club to its neighboring unincorporated area (West SAH and South of Mesa). Exhibit B 5A'J7A QLkig ' f 7 x'� I\w I { t 5 if l� •J' As the City of Newport Beach processed its application to annex East SAH and Bay Knolls, Costa Mesa processed an application to annex about 288 acres in what it called "Area 7" -- West SAH, the SACC, and the area South of Mesa Drive. During the LAFCO process, OC LAFCO formally deleted West SAH because LAFCO staff believed that residents there would quickly generate enough protest (more than 50% of the area's registered voters) to stop an annexation application by Costa Mesa for that territory. Annexation of Area 7 February 25, 2003 Page 4 As it pulled West SAH from Costa Mesa's application in September 2002, LAFCO then suggested that the Newport Beach City Council consider adding West SAH to our city's SO[ in anticipation of our annexing West SAH. As noted, Newport Beach was successful in its annexation process for East SAH. But on December 2, 2002, more than 60% of registered voters within the remainder of Area 7 (South of Mesa and the SACC) protested Costa Mesa's annexation application, effectively stopping the annexation for at least a year. More about Area 7 With Area 7 protesting out of Costa Mesa's application, OC LAFCO asked Newport Beach on January 14, 2003 to consider annexing West SAH, the SACC, and the area South of Mesa Drive. As noted, each of these areas remains within the City of Costa Mesa's SOL Newport Beach has typically avoided attempting to annex lands in other cities' SOls, because such an action can be adversarial. The City of Costa Mesa has, in the past, indicated a strong resistance to allowing the SACC to leave Costa Mesa's SOL Annexing Area 7 would change Newport Beach in these ways, among others: Category Po ulation Acres Acres of Park Space Street Miles 77,000 1 1,4181 78,418 1 1,800 1 01 80,218 26,815 1 2491 27,064 1 160 1 laowpon Newport Beach Bay Knolls and East Newport Beach Area 7 6.0 1 2961 3.51 After Jvly 1, 2Today SAH July 1, 2003 (except SACC) SACC (B Area 7 +S IC annexed) 77,000 1 1,4181 78,418 1 1,800 1 01 80,218 26,815 1 2491 27,064 1 160 1 1-28T 27,352 1 478.21 of 478 1 0 __0T__ 478 1 289.51 6.0 1 2961 3.51 0 299 Assessed Valuation $ 22,074,712,813 1 $ 174423,678 1 $ 22,249,136,4911 $ 106,429,532 1 $ 6,092,567 1 $ 22,361,658,590 All numbers are estimates What About Redevelopment? Both West SAH and the SACC /South of Mesa areas are in redevelopment areas, meaning that a significant portion of the areas' property taxes (called the "tax increment ") are diverted to the Orange County Development Agency for infrastructure projects that address "blight" in the area. By State law, 20% of the tax increment must be used to increase the area's supply of low -and moderate - income housing. The West SAH region is part of the Santa Ana Heights "redevelopment project area" (RDA). The SACC /South of Mesa area is within the Back Bay RDA. See Exhibits C and D. Exhibit C Annexation of Area 7 February 25, 2003 Page 5 Exhibit D Because these areas are within redevelopment areas, the City may have less infrastructure costs (for street repair, sidewalks, etc.), but a significant amount of u ndercompen sated service costs (fire and police) if we are to annex the territory. Sales tax is unaffected by redevelopment -- Area 7 contains a small neighborhood shopping center (anchored by Irvine Ranch Market along Irvine Boulevard) and will generate sales taxes from the SACC pro shop and restaurant. Because of redevelopment, it is unlikely that revenues generated from the area will exceed our costs. However, in some cases we are providing public safety services (completely uncompensated) to this area already via mutual and automatic aid. Recent Actions. The City Council discussed annexing Area 7 at a Study Session on December 17, 2002. We went away from that meeting intending to further analyze the pros and cons of the annexation and to complete the data analysis required by Council Policy D -2. D -2 tells us to examine a variety of issues -- including conducting a Fiscal Impact Analysis -- before formally presenting a Resolution of Application to the City Council. Attachment A to this report contains a report to the Council per Policy D -2. Environmental Review. The City Council's approval of this Agenda Item does not require environmental review. Should the Council later adopt a Resolution of Application to annex Area 7, pre - zoning will require at least a Negative Declaration under the California Environmental Quality Act (CEQA). Lip Because these areas are within redevelopment areas, the City may have less infrastructure costs (for street repair, sidewalks, etc.), but a significant amount of u ndercompen sated service costs (fire and police) if we are to annex the territory. Sales tax is unaffected by redevelopment -- Area 7 contains a small neighborhood shopping center (anchored by Irvine Ranch Market along Irvine Boulevard) and will generate sales taxes from the SACC pro shop and restaurant. Because of redevelopment, it is unlikely that revenues generated from the area will exceed our costs. However, in some cases we are providing public safety services (completely uncompensated) to this area already via mutual and automatic aid. Recent Actions. The City Council discussed annexing Area 7 at a Study Session on December 17, 2002. We went away from that meeting intending to further analyze the pros and cons of the annexation and to complete the data analysis required by Council Policy D -2. D -2 tells us to examine a variety of issues -- including conducting a Fiscal Impact Analysis -- before formally presenting a Resolution of Application to the City Council. Attachment A to this report contains a report to the Council per Policy D -2. Environmental Review. The City Council's approval of this Agenda Item does not require environmental review. Should the Council later adopt a Resolution of Application to annex Area 7, pre - zoning will require at least a Negative Declaration under the California Environmental Quality Act (CEQA). Annexation of Area 7 February 25, 2003 Page 6 Public Notice: This agenda item may be noticed according to the Ralph M. Brown Act (72 hours in advance of the public meeting at which the City Council considers the item). Submitted by: Dav K' Assistant City Manager Attachment A -- D -2 Report Annexation of Area 7 February 25, 2003 Page 7 COUNCIL POLICY D -2 ANNEXATION GUIDELINES The City of Newport Beach's Sphere of Influence shows both City territory and the unincorporated County territory that may be considered for annexation to the City. In evaluating a proposed annexation, City staff shall present a report to the City Council shall review several items which shall include the following information: A. Statistical Summary. All relevant data such as land area, population, dwelling units, street miles, park and open space acreage, and assessed valuation, to provide a summary of the area's characteristics. Exhibit E shows this information for Area 7 (West SAH, SACC, and South of Mesa): Category Po ual.on Acree Acreso� Park Soace Streef Miles Exhibit E 77.000 1 1.418 1 78,4181 1.800 1 01 80.218 Newpnl Bead Newport Beach Bay KMIIS aW East Ne. pot Beach Area 7 SACC Aflcr'luly t, 2004 To ay SAH July 1, 2003 (except SACC) 6.0 1 (H Area 7'. SACC 15 1 0 299 annexM) 77.000 1 1.418 1 78,4181 1.800 1 01 80.218 26,815 1 249 1 27,064 1 160 1 128 1 27.352 478.2 0 478 1 01 OT 478 289.51 6.0 1 296 1 15 1 0 299 Assessed Valuation $ 22.074,712.813 1 $ 174,423.678 1 $ 22,249.136.4911 $ 106,429.532 1 $ 6.092567 1 $ 22,361,658,590 All numbers are estimates B. Land Use and Planning. Boundaries, topography and natural features, existing land use, general plans, and zoning to provide a detailed overview of the existing and planned physical characteristics of the area and to provide a comparison to areas within the City. Area 7 is similar in land use, topography, and natural features to East Santa Ana Heights and to the Bay Knolls community. Most homes in the community were constructed between 1950 and 1969, with several new units in place. Zoning includes R -1 (single family residential), R -2 (multi- family residential), commercial, and agricultural. Much of the West Santa Ana Heights portion of Area 7 falls within the Santa Ana Heights Specific Plan. See Exhibit F & G for two detailed maps of the SAH Specific Plan's Land Use District map and its Community Profile. W :a x W �Z Ud W U Li. Z W Q N H Z H CL ce uj F< V H 0 0 Z a J r ti r t jyz o0 gll g.E0 S 0 0$ y a� rc rc rc _4 a z k � < m' E E 2 e mill ,IPIIIIIII� OR N d, 1.V r ti r t jyz o0 gll g.E0 S 0 0$ y a� rc rc rc _4 a z k � < m' E E 2 e q 0 6 0 V u E E O ry c c < yy� E 0 N G2 R N yny � E � 5 :•' = E RUN S r jyz o0 a� rc rc rc z 2 _ C 0 Z m H m W The most significant differences between West SAH and the area to be annexed to the City on July 1, 2003 are: The presence of up to seven dog- boarding facilities or kennels on Riverside Drive in West SAH. A kennel overlay within the Specific Plan allows such uses. When we moved to annex East SAH, we adopted the Specific Plan as our zoning and planning for East SAH -- the kennel operators will expect us to do the same for West SAH. The deteriorated state of Old Kline Drive (also in West SAH), an unpaved road in need of drainage improvements, realignment, and paving. The apparent lack of County of Orange code enforcement in portions of West SAH (relating to refuse, cars on lawns). C. A Plan of Services. Administration and facilities for public services such as police, fire, sewers, water, and schools, that exist today or are planned for the future. The Plan should also show the level of services to be provided compared to levels provided within the City. If Newport Beach were to annex this territory, the Service Plan would be as shown in Exhibit FI: Exhibit H Proposed Plan Area 7 (West SAH, South 00 of Service of Mesa, SACC) Service Current Provider ProposeclProvider Public Safety Police Protection OC Sheriff NBPD Fire Protection OCFA/NB FD NBFD Emergency Medical OCFA/NB FD NBFD Animal Control County of Orange NBPD Utilities Wastewater CM Sanitary District CM Sanitary District - Collection CM Sanitary District CM Sanitary District - Disposal CM Sanitary District CM Sanitary District - Treatment OC Sanitation District OC Sanitation District - Reclamation None None Water IRWD IRWD Solid Waste - Disposal Waste Management Inc Waste Management Inc - Recycling Waste Management Inc Waste Management Inc Public Works Lighting and Landscaping OCDA City RDA Flood Control OCDA/OCFCD OCFCD /City RDA Street Maintenance County of Orange NB General Services Community Development Planning County PDSD NB Planning Dept Building County PDSD NB Building Dept Redevelopment OCDA City RDA Community Services Library Costa Mesa /Newport NB Library Parks N/A N/A Recreation Costa Mesa /Newport NB Rec & Sr Svcs Senior Services Costa Mesa /Newport NB Rec & Sr Svcs Annexation of Area 7 February 25, 2003 Page 11 D. Traffic and Circulation. Roadways and traffic volumes within the area and their relation to those within the City. Major roadways in Area 7 include: Irvine Avenue Mesa Drive Newport Boulevard Smaller residential streets in Area 7 include: South of Mesa: Cutter Way Granada Way La Canada Way Mira Loma Place Redlands Drive Riverside Drive Santo Tomas Street (East of Santa Ana) Seawind Drive Willo Lane Santa Ana Avenue University Drive West Santa Ana Heights: August Lane Bruinbark Lane Indus Street Lange Drive Kline Drive Orchard Drive Pegasus Street Redlands Drive Riverside Drive We have not done any traffic volume analysis on these streets given that traffic on these streets will impact Newport Beach without regard to our annexation of Area 7. E. A Fiscal Impact Analysis. The Analysis shall include initial "start-up" costs, other one -time costs, and continuing annual expenses to the City by each Department to serve the area. It shall also include one -time and continuing additional revenues by each budget account to be received by the City as a result of annexation. The Analysis shall show the costs and benefits associated with the proposed annexation. Completing a fiscal impact analysis of Area 7's impacts on city government should the City choose to annex it is a challenge because of: • Uncertainty with the status of the vehicle license fee backfill; • Uncertainty over the percentage of redevelopment revenue that may be diverted to schools as a result of the State's budget crisis; • Discussions between the City and the County over who might administer the redevelopment project area should the City annex West SAH. • Existing mutual aid and automatic aid agreements mean that our PD and the Fire Department often are first responders on calls in Area 7 already. That said, if we make the assumption that city fire and police are already in effect serving this area, there are few additional expenses associated with annexing it. This is an easier assumption for fire and emergency medical services, because we have an existing station at Zenith Avenue in Santa Ana Heights. The following Fiscal Impact Analysis (Exhibit 1) is an estimate of the revenues and expenses associated with annexing Area 7. Annexation of Area 7 February 25, 2003 Page 12 Exhibit 1 Property Taxes $ 56,000 $ 57,680 $ 59,410 $ 61,193 $ 63,028 Sales Taxes $ 120,353 $ 123,964 $ 127,683 $ 131,513 $ 135,459 Transient Occupancy Taxes $ - $ - $ - $ - $ - Franchise Fees $ 32,400 $ 33,372 $ 34,373 $ 35,404 $ 36,466 Business License Taxes $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 Property Transfer Taxes $ 2,464 $ 2,538 $ 2,614 $ 2,692 $ 2,773 VLF $ 22,572 $ 23,249 $ 23,947 $ 24,665 $ 25,405 Redevelopment Proceeds $ 1,500,000 $ 1,537,500 $ 1,575,938 $ 1,615,336 $ 1,655,719 State Gas Tax $ 34,200 $ 35,226 $ 36,283 $ 37,371 $ 38,492 Other Misc Revenue $ 25,200 $ 25,956 $ 26,735 $ 27,537 $ 28,363 Revenue Subtotal (no RDA) $ 296,189 $ 304,985 $ 314,045 $ 323,376 $ 332,987 Revenue Subtotal (with RDA) $ 1,796,189 $ 1,842,485 $ 1,889,982 $ 1,938,712 $ 1,988,706 Police $ 103,450 $ 107,588 $ 111,892 $ 116,367 $ 121,022 Fire & Emergency Medical $ 36,000 $ 37,440 $ 38,938 $ 40,495 $ 42,115 General Administration $ - $ - $ - $ - $ - General Services $ 11,954 $ 12,432 $ 12,929 $ 13,447 $ 13,984 Planning $ 5,111 $ 5,315 $ 5,528 $ 5,749 $ 5,979 Building $ - $ - $ - $ - $ - Rec &Senior Services $ 27,000 $ 28,080 $ 29,203 $ 30,371 $ 31,586 Library $ - $ - $ - $ - $ - CIP (Redevelopment Plan) $ 1,500,000 $ 1,537,500 $ 1,575,938 $ 1,615,336 $ 1,655,719 Additions to Reserves $ 22,022 $ 22,903 $ 23,819 $ 24,772 $ 25,762 Expense Subtotal (w /RDA) $ 1,705,537 $ 1,751,258 $ 1,798,246 $ 1,846,537 $ 1,896,168 Rev - Expenses (w /RDA) $ 90,652 $ 91,227 $ 91,736 $ 92,175 $ 92,538 all numbers estimates This FIA considers the impact of the City taking on the redevelopment project area in West SAH (which includes East SAH). The remainder of Area 7 is also within an RDA project area, which also could be taken over by the City if the County consents to our doing so. While this FIA shows a small net gain associated with administering Area 7, the extent to which the City serves the unincorporated area now without any compensation must be considered. Further, there is a significant likelihood that the County of Orange will continue to be forced to reduce service to its unincorporated islands as the County focuses its mission and resources on regional services Annexation of Area 7 February 25, 2003 Page 13 rather than municipal services -- doing so would only increase our uncompensated expenses in this region, again due to mutual aid and automatic aid agreements. F. Demographics. A quantitative description of the population as may be found in census and other similar data. Generally, the data shown below indicate that Area 7 is similar to East Santa Ana Heights except for the fact that West SAH has a greater number of multi - family units. Population 1,800 Ethnicity White/Non- Hispanic 84% Hispanic Origin 11% African American 0% Native American 1 % Asian /Pacific Islander 4% Other 0% Age Under 18 14% 18 to 65 77% 66 and over 9% Med House Income $ 45,000 % Below Poverty 6% Home Ownership Owner Occupied 27% Renter Occupied 68% Vacant 5% G. Boundaries. Opportunity to realign boundaries that more closely approximate logical man -made or natural physical barriers. Annexing Area 7 does not align city boundaries with "logical man -made natural physical barriers." The most logical boundaries from this standpoint would be to align the city's boundaries along Irvine Avenue, Tustin Avenue, Santa Ana Avenue, or Newport Boulevard. Annexation of Area 7 February 25, 2003 Page 14 H. Safety. Ability to better control fire, police, public health and safety oriented problems that cross municipal boundaries. Given the County of Orange's budget concerns and its stated intent to "get out of the municipal services business," annexing Area 7 would allow the City to better control fire, police, public health, code enforcement, and safety- oriented problems in Area 7's neighborhoods and for those problems that may be transmitted to neighborhoods within the city today. I. Service. Ability to eliminate awkward and irregular boundaries causing difficulty and inefficiencies in supplying utilities and City services. As noted in Section G, Annexing Area 7 does not align city boundaries with "logical man -made natural physical barriers." The most logical boundaries from this standpoint would be to align the city's boundaries along Irvine Avenue, Tustin Avenue, Santa Ana Avenue, or Newport Boulevard. Annexation of Area 7 therefore does not give us an ability to eliminate awkward and irregular boundaries causing difficulty and inefficiencies in supplying City services to this community. J. Control. Ability to protect City taxpayers against future costs incurred to correct prior improper land development. The City Attorney has determined, based on a preliminary analysis, that annexation of Area 7 in general or the runway protection zone (RPZ) in particular would not increase the City's ability to control or prevent some future physical expansion of John Wayne Airport. Area 7 is not within, or even close to, the 65 CNEL contour for the current or proposed level of operations at JWA so land use control is not important from the standpoint of (a) protecting residential uses; (b) or the requirement that an airport proprietor seeking to acquire property for airport purposes obtain the consent of the relevant jurisdiction. The Airport Director has disavowed any intention to even consider an extension of the main air carrier runway to the south and any such extension would require the County to acquire property in Newport Beach to expand the RPZ — an acquisition the City would not support unless convinced that its constituents would benefit. K. Public Facilities. Ability to provide space for specialized public uses, which are inappropriate in central locations. The Santa Ana Heights Specific Plan does not envision any sites within Area 7 for public facilities. L. Blight Elimination. Ability to eliminate existing or potential land uses and improvements considered a blighting or deteriorating influence. The SAH Specific Plan and the Redevelopment Plans for Area 7 (which include the Back Bay project area and the SAH project area) both provide that blighted areas within Area 7 will to eliminated via the public improvements. The City has been concerned in recent months that the County's implementation of the Plans has been too slow to effectively eliminate blight that exists. While annexing Area 7 does not directly address blight in the neighborhood, we could do so if the City were able to take over administration of the redevelopment project area AND if we could expedite improvements in the project area. Annexation of Area 7 February 25, 2003 Page 15 M. Incorporation. Likelihood of County areas to incorporate to the detriment of existing cities. It is highly unlikely that Area 7 could or would want to self- incorporate given today's laws. N. Image. Ability to increase City stature by annexation of land and /or improvements with exceptional characteristics. While the community of West Santa Ana Heights and the area South of Mesa have characteristics consistent with parts of Newport Beach (and with parts that will be annexed July 1, 2003), the characteristics are not exceptional. Some may argue that the community presence and history of the Santa Ana Country Club are exceptional and therefore "increase City stature." UM CITY OF NEWPORT BEACH MEMORANDUM TO: Members of the City Council Homer Bludau, City Manager FROM: Dave Kiff, Assistant City Manager DATE: February 21, 2003 RE: Agenda Item #21 -- Extra Map Council Member Webb asked for an extra map that shows Area 7 and surrounding lands. Please add this to your Agenda Packet (Item 21). City Hall • 3300 Newport Boulevard • Post Office Box 1768 • Newport Beach, California 92659 -1768 WY NEIMRT `%, . '�J ��'..:•. g.l �y 1 LVU srcvaic At xv COMM /M 17f r r'' fy�`k Ax EVE rrl Li „ .. m 2 2600 W iE AY fAIRMAY �CLUB io to e -/: WESTMINSTER AV t r � OL I MLEY AV _> — $ � "' S 7s 3001 ylFy PL yy 1 ws+Nso psr RlvsamE Q� N ° r n RIVERSIDE °& oB V,;:xssX gdso:� IRVKLtasE DII - I si <y F / \ qy r Mf1 ACACIA Sr 2 2U00 w 3d :: CAMPUS Ns- !I BIRCH .�`' g��• �, x 20000 n. 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