AFTER THE CITY OF UKIAH last week announced it had paused plans to annex nearby unincorporated areas of Mendocino County, the county Board of Supervisors postponed a decision on whether to cancel a master tax sharing agreement that coordinates tax revenue with Ukiah and other cities until the annexation is resolved.
At its June 24 meeting, there was a consensus among the Board of Supervisors that there isn’t enough detailed information available for them to understand how Ukiah’s annexation would financially impact the county. The proposed areas to be absorbed would be Willow south of Ukiah and a portion of Millview just north of the city.
A meeting of the Ukiah Planning Commission that had been scheduled for last Wednesday to discuss the annexation was canceled. In a news release, Ukiah Deputy City Manager Shannon Riley noted, “The city is taking this step to ensure that there is adequate time to continue engaging with the community.”
The annexation proposal has sparked months of heated debate among community members who are either for or against annexation.
In the city’s proposal to annex unincorporated land, it would take over several residential areas surrounding Ukiah, which means the city will start receiving revenue from property, sales, and transient occupancy taxes there.
The master tax sharing agreement, or MTSA, signed by the county and the city last year outlines how that transition will occur in a way that reduces financial disruption to the county. This means that the county will not lose its revenue all at once, but in increments over the next several years.
Despite efforts by the county and the city to lessen the financial impact of annexation, the county is concerned that the MTSA’s guidelines will essentially make the county’s finances unsalvageable, and they will have to fire employees, according to the supervisors.
Canceling the MTSA would mean renegotiating
According to the tax sharing agreement, after an annexation occurs and land is transferred from county jurisdiction to the city, the city begins receiving a portion of the property tax revenue that previously went to the county. This is called a tax increment. Over time, the city would receive up to 15% of the total property tax revenue collected in the annexed area.
Under California law, the city of Ukiah would send 100% of sales tax revenue from the annexed area to the county in the first year. Over the next 15 years, that amount would decrease by one-fifteenth annually until the city retains all of the revenue.
For transient occupancy taxes, which are local lodging taxes on stays of 30 days or less, 100% of that revenue from the annexed areas would be transferred to the county after annexation. Over the next five years, that share would decrease by one-fifth each year, until the city of Ukiah receives the full amount.
A few of the supervisors are opposed to canceling the MTSA.
Supervisor Madeline Cline said at the June 24 meeting she worries that pulling out of the MTSA would undermine public confidence in the supervisors’ decision-making process.
“I have some concerns about withdrawing from the tax agreement, not based on the premise of what’s in the agreement, but our worth is our word,” Cline said.
She noted that breaking the MTSA, which is a formal contract, could influence distrust between the city and the county.
“I’ve seen this board waiver on its decision making, and sometimes people will support something and in the next meeting it flips. That is a problem and that is not sound leadership,” Cline said.
She also explained how canceling the agreement could dampen the relationship between the county and its cities, which besides Ukiah include Fort Bragg, Willits and Point Arena.
“It looked like it was a bad deal for the county. I do hate to go back on an agreement, but we need to look at the viability of the finances.” Supervisor John Haschak
“I think it’s damaging our relationship with our four cities,” she said. “That being said, I am here to listen.”
Supervisor John Haschak, who is the chair of the board, voted against the tax-sharing agreement last year because it seemed like it could negatively impact the county.
“It looked like it was a bad deal for the county. I do hate to go back on an agreement, but we need to look at the viability of the finances,” said Haschak.
If supervisors decide to cancel the MTSA, the cancellation wouldn’t be implemented for five years, making it unclear whether the city of Ukiah and the Mendocino Local Agency Formation Commission (LAFCO) would still move forward with the annexation proposal.
Local agency formation commissions operate in every California county as a state-mandated agency that regulates city and special district boundaries. They are responsible for reviewing annexation proposals and approving them.
Considering the options
County Counsel Charlotte Scott outlined several options for Mendocino County in addressing the MTSA and the annexation process. She said the county could cancel the tax-sharing agreement and negotiate a new contract.
Under the county’s tax code, if renegotiation fails, the city and county may share in the cost of a financial impact study. If no formal agreement is made after the study, they must either share the cost of mediation or hire an arbitrator, which is a neutral party who resolves disputes through a formal arbitration process.
Supervisor Bernie Norvell, who opposes the annexation proposal, said that the city’s plan is far too ambitious to work effectively in collaboration with the county.
“I am against the proposal,” Norvell said. “I think it hurts us, and the city got way out ahead of themselves.”
Supervisor Ted Williams said he does not believe the county will get enough information about the annexation to make a fully informed decision. Williams explained that neither the county nor the city has sufficient employees to study the fiscal impact of the proposed annexation.
“This staff has said that they don’t have the workforce to develop those answers. This county does not have the systems or funds so all of the information that is available is what you have today,” Williams said.
Norvell noted that the board needs to express its concerns to the city and try to reach a new agreement.
“I think we should share our concerns with the city and see if they are willing to scale down and make it more palatable,” Norvell explained.
Community members share their opinions
During the public comment portion of the discussion, one community member, a local farmer named Julie Golden, said she believes the county should eliminate the MTSA to reclaim its negotiating power.
“I agree with Supervisor Haschak, that if we cancel the tax sharing agreement, it will send a message to LAFCO,” Golden exclaimed. “It will state that we are adamantly against it.”
Lee Howard, owner of local company Lee Howard Construction, said he opposes the city of Ukiah controlling or imposing limitations on his business, which is located in an area proposed for annexation.
“I don’t want more government, I want less government,” Howard stated. “The simple fact is they can’t take care of the city. How can you say that they can take care of someone else when they can’t even take care of themselves?”
Sage Sangiacomo, Ukiah’s city manager, also made an appearance at the meeting and spoke about the importance of public engagement throughout the process.
“The Ukiah City Council has not yet authorized a plan or a map that we are going with,” Sangiacomo emphasized. “There is a draft proposal that started this discussion.”
Sangiacomo said the county is still in the phase of soliciting public feedback on the proposal — although many residents already assume the annexation is underway. He explained that the city has not submitted an application yet to LAFCO.
“At this point we do not have a proposal to withdraw,” Sangiacomo added. “I think community input and engagement is an important aspect of this. We are trying to reach a proposal that benefits all parties.”
The next Ukiah Planning Commission meeting is scheduled for July 9; however, it is unknown if annexation will be on the agenda. The commission meets at 6 p.m. at the Civic Center Council Chambers on the second and fourth Wednesdays of the month.
This story originally appeared in The Mendocino Voice.