HomeMy WebLinkAboutAnnexation of Sunset Beach - Local Agency Formation Commissi Recommended Action
A) Approve the City of Huntington Beach 2010-2015 Housing and Urban
Development (HUD) Consolidated Plan and,
B) Approve the 2010/11 HUD Action Plan for the Community Development
Block Grant (CDBG)/HOME Investment Partnership Program (HOME) and
C) Authorize the City Administrator to sign for federal assistance of$1,481 423
in CDBG and $822,743 in HOME Funds for the 2010/11 grant year and any
other necessary documents to receive the funds
City Clerk Joan L Flynn announced Late Communications (2)
No Speakers
Approved 7-0 as amended to reflect that any unspent funds of the 15% -
Public Service category would be offered to American Family Housing
18 Approve for introduction Ordinance No 3888 adding Municipal Code
Section 8 43 regarding costs of emergency response, and, Adopt
Resolution No 2010-57 establishing fees
Recommended Action
A) After the City Clerk reads by title approve for introduction Ordinance No
3888 "An Ordinance of the City of Huntington Beach Adding Chapter 8 43 of
the Municipal Code Relating to Costs of Emergency Response, and
B) After conducting a public hearing adopt Resolution No 2010 - 57 `A
Resolution of the City Council of the City of Huntington Beach Setting the Cost
of Emergency Response for Motor Vehicle Incident and Hazardous Materials,
Including Pipeline and Power Line Incidents, Rates to be Charged by the Fire
Department of the City of Huntington Beach
City Clerk Joan L Flynn announced Late Communications (1)
No Speakers
Approved 6-1 (Dwyer no)
ADMINISTRATIVE ITEMS
19 Authorize the preparation of all documents required for application to the
Orange County Local Agency Formation Commission (LAFCO) for
)annexation of the unincorporated County of Orange community of Sunset
Beach
Recommended Action
Direct staff to prepare all the necessary documents required for application to
the Orange County Local Agency Formation Commission for annexation of the
unincorporated County of Orange community of Sunset Beach
Approved 5-2 (Hardy, Green— No), as amended to give staff authorization
to provide proactive outreach to educate facts of the study, create a
subcommittee with 3 Council liaisons to begin a dialogue with Sunset
Beach leadership to address their concerns
8
Council/Agency Meeting Held _ a d
Deferred/Continued to
` A prav nditiona ly ro 0 Deni C le r Signa r
Council Meeting Date August 2 2010 Departmen ID Number AD 10-023
CITY OF HUNTINGTON BEACH
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO Honorable Mayor and City Council Members
SUBMITTED BY Fred A Wilson City Administrator
PREPARED BY Paul Emery Deputy City Administrator
SUBJECT Authorize the preparation of all documents required for application to
the Orange County Local Agency Formation Commission (LAFCO)for
annexation of the unincorporated County of Orange community of
Sunset Beach
Statement of Issue The Orange County Local Agency Formation Commission has placed
the unincorporated community of Sunset Beach into the City of Huntington Beach s sphere of
influence Council direction is required to proceed with annexation under the small islands
program
Financial Impact Funds are available within individual Departments budgets to prepare
all of the necessary documents for the annexation application
Recommended Action Motion to
Direct staff to prepare all the necessary documents required for application to the Orange
County Local Agency Formation Commission for annexation of the unincorporated County of
Orange community of Sunset Beach
Alternative Action(s) Do not authorize the preparation of documents and direct staff
accordingly
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1
REQUEST FOR COUNCIL ACTION
MEETING DATE 8/02/2010 DEPARTMENT ID NUMBER AD 10-023
Analyses At the June 7 2010 City Council study session the Council was presented the
results of the Sunset Beach Annexation Study (attachment 2) that was completed by the
consulting firm Ralph Andersen & Associates The annexation study evaluated the fiscal
and operational issues relative to annexation and outlined the procedural steps necessary for
annexation to occur The results of the study concluded that the annexation was fiscally
feasible and would result in a surplus of revenues estimated at $624 259 The study further
addressed thirteen points that were raised by the Sunset Beach Community Association
Issues raised by public speakers and the City Council were further addressed via
communication with the Association and the City Council
The City Council directed staff to return to the Council upon completion of peer reviews to be
administered by Orange County LAFCO of the Annexation Study as well as the Sunset
Beach Incorporation Preliminary Feasibility Analysis (attachment 3) commissioned by the
Sunset Beach Community Association
Orange County LAFCO retained the services of the consulting firm Economic & Planning
Systems Inc to perform a peer review (attachment 4) of the Sunset Beach Annexation Study
The peer review of the Annexation Study identified specific areas of underestimating and
overestimating revenues and expenditures The specific findings are clearly outlined on the
peer review attached to this report Based on the peer review the surplus of revenues
estimate would be revised to just over $440 000 The peer review validates the findings of
the Annexation Study and confirms the fiscal viability of annexation
The City has also been in discussions with the office of County Supervisor John Moorlach
regarding funding for marine safety services They have tentatively agreed that the County
would continue to fund these services for a two year period The County s continued funding
of these services would result in an additional $360 000 to $380 000 in surplus revenue
coming to the city for the two year period
The consulting firm Economic & Planning Systems Inc also performed a peer review
(attachment 5) of the Sunset Beach Incorporation Preliminary Feasibility Analysis This peer
review of the preliminary feasibility analysis resulted in findings that questioned the feasibility
of incorporation Specifically the peer review states
Scenarios 1 and 2 do not meet the minimum criteria for feasibility within the first
three years as required by Government Code Section 56720
The peer review further states
Scenario 3 which includes a 10 percent Utility Users Tax shows that revenues
exceed costs by more than 10 percent in year three and reserves exceed costs by more
than 30 percent However by the end of year five when the additional Motor Vehicle
License Fee revenues provided by the State end the city experiences annual shortfalls The
shortfalls continue to be negative by year 10 the shortfall is a negative 3 percent of costs
which should not be deemed feasible
Item 19 - Page 2 -448-
REQUEST FOR COUNCIL. ACTION
MEETING DATE 8/02/2010 DEPARTMENT ID NUMBER AD 10-023
Ralph Andersen and Associates also reviewed the impacts of the peer review findings on the
Sunset Beach incorporation Study (attachment 1) The application of findings from the peer
review result in the proposed Sunset Beach city budget being further out of balance by an
additional $348 700 in Scenarios 1 and 2, and eventually $398 700 for Scenario 3 Mr Goss
concludes based on all of these factors it appears that there will be a major if not
insurmountable challenge in demonstrating fiscal feasibility for this proposed city
Should the City Council direct staff to proceed with the application for annexation a number
of procedural steps will be required The preparation of CEQA environmental
documentation zoning a Local Coastal Plan Amendment and an Annexation Agreement
and Tax Sharing Agreement with the County of Orange would need to be processed
Milestone dates include a Planning Commission Hearing on September 28, 2010 a City
Council Hearing on October 18 2010 and submission of final application materials to
LAFCO on December 3 2010 Orange County LAFCO would then hold a public hearing on
December 8 2010 and a Certificate of Completion would be recorded with the County in
January 2011
Environmental Status n/a
Strategic Plan Goal Maintain financial viability and our reserves
Attachment(s)
1 Final Peer Review Findings on the Sunset Beach Incorporation Study
2 Sunset Beach Annexation Study
3 Sunset Beach Incorporation Preliminary Feasibility Analysis
4 Peer Review of Sunset Beach Annexation Study
5 Peer Review of Sunset Beach Incorporation Preliminary Feasibility
Analysis
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ATTACHMENT # 1
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Revenues 2
Expenditures 2
Further Financial Analyses a
Table 1 3
Summary 4
Financial Unknowns 4
Conclusions 4
Proposed McorporaUoon of Sunset Beach
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Appfooatoon of [Peer Rewoaw Report to the
pre omonary Faasoa000ty AnaOyso3
A Preliminary Feasibility Analysis (PFA) was prepared by Willdan Financial Services for the po-
tential incorporation of Sunset Beach an unincorporated island mostly surrounded by the City of
Huntington Beach and the Pacific Ocean That June 3 2010 report was subject to a peer re-
view by Economic & Planning Systems Inc (EPS) The peer review was issued on June 24
2010
The purpose of this brief report is to apply the EPS analysis to the PFA and point out the poten-
tial financial challenges of incorporating Sunset Beach Not all of the complexities of the peer
analysis and the PFA are analyzed The focus is only on the major financial challenges of incor-
poration suggested by the peer review
The PFA contains three different service delivery scenarios for the proposed city All three sce-
narios include adoption of a utility users tax ranging from 5 to 10% and the extension of the
transient occupancy tax to vacation rentals Scenario 3 adds metered parking as a revenue
source and assumes costs for beach maintenance and lifeguard services in the sixth year This
assumes that the County will pay for these services during the first five years of incorporation
Even with these additional revenues the key findings of the EPS review is that Scenario 1 (li-
mited services) and Scenario 2 (preferred services) do not meet the minimum criteria for feasi-
bility within the first three years as required by Government Code Section 56720 For Scenario
3 (maximum services) which requires a 10% Utility Users Tax the peer review concludes that
revenues will exceed costs by more than 10% in year three but that by the end of year
five the city experiences annual short falls The review concludes The shortfalls continue to
be negative by year 10 the shortfall is a negative 3% of costs which should not be deemed
feasible
The peer review at the PFA stage casts considerable doubt on the economic feasibility of Sun-
set Beach incorporation whether Scenarios 1 2 or 3 are pursued This could mean that a more
detailed financial analysis via the LAFCO incorporation review process would further verify the
financial infeasibility of the proposed incorporation of Sunset Beach
In addition to the peer reviews conclusions about the fiscal inadequacy of incorporation based
solely on the numbers of the PFA its review of the more detailed revenue and expenditure ac-
counts reveals that the financial feasibility of Sunset Beach incorporation becomes significantly
less viable Basically the review concludes that the levels of expenditures are understated and
the projected revenues are overstated
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Revenues
The peer review concludes that the projected property tax revenue is overstated by $100 000
The review concludes This loss has a significant adverse impact on city feasibility The re
view however also concludes that the PFA was conservative in projecting future property tax
growth and may have understated that growth
The bottom line in the PFA financing plan is that it will require new revenues including (1) A util-
ity users tax ranging from 5 to 10% (2) An extension of the County Transit Occupancy Tax to
vacation rentals and (3) Negotiations of a 5 percent franchise fee for gas electric and cable
The first two revenue sources would require a vote of the people and probably would be folded
into an incorporation election if incorporation were deemed financially feasible by LAFCO
EECpenCAIotures
Regarding expenditures EPS review concluded that the projected part-time City Manager and
part-time Treasurer are insufficient to support the proposed city It expects that the City Attor-
ney costs will be higher in the initial years as contracts are negotiated and city codes and or-
dinances are adopted The review expects additional engineering expense in addition to the
traffic engineering cost projected The PFA was also chided for not including expense for human
resources and information technology support Also it was felt that Animal Control costs were
understated
For non-departmental expense EPS concluded that the amount for needed office space and the
purchase of initial equipment was understated The review concluded that a 5% contingency
was inadequate for a very small city and it should be increased to 10% Finally there is no pro-
vision for future capital improvements
While three scenarios were presented in the PFA the peer review indicated that there should be
a base budget which would spell out basic revenues and expenditures for the proposed city
and then modify that budget with the additional revenues deferred expenditures and the other
elements which comprise the three scenarios In addition EPS commented that the PFA does
not calculate the impact or potential additional mitigation payments to the County that may be
required EPS raises the question of whether the proposed city would need to provide fiscal mi-
tigation ( revenue neutrality ) to the County upon incorporation This is another fiscal unknown
in the PFA analysis
In any event in applying the peer review comments to the PFA budget it appears that without
greenbelt beach maintenance and lifeguard expense (Scenario 1) or without beach mainten-
ance and lifeguard expense (Scenario 2) the incorporation budget is understated by $248 700
By adding costs for beach maintenance and lifeguards (Scenario 3) that understated expense
grows to $298 700 in year 6
The peer review offers specific cost increases to certain expenditure categories When these
specific increases are presented as a range of costs the lowest number of that range was uti-
lized to keep the projections as conservative as possible Also not all of the suggestions for
cost increases were included in this analysis as noted in Table I
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Other cost increases were developed in this report based on EPS suggestions such as the in-
crease of converting the city manager and treasurer positions from half-time to full-time It
should be noted that the authors of the PFA believe that this additional staffing is unnecessary
However applying the peer review language to the PFA would suggest the following results in
Table I
Table I
Function Cost Peer Comment Projected Projected
Additional Cost Reduced Revenue
Scenarios#1 and#2
City Manager(P/T) $81 900 Part time city manager insufficient $81 900
need full time city manager
City Attorney 45 000 Expect higher costs in initial years 25 000
City Treasurer(P/T) 44100 Part time treasurer insufficient need 44100
full time treasurer
Development Services 183 800 No estimate for planning/engineer 0
ing c
Animal Control 800 Costs should be$2 500 $5 500 1 700
Non Departmental 102 400 lNo funding for HR IT audit rent too 35 000
Contingency(5%) 61 000 Contingency should be 10%for a 61 000
small city
Additional expense for Scenarios 1 &2 $248 700
Scenario#3
Beach Maintenance(in Future sand replenishment should
year 6)(3) $55 600 increase by$16 000(2) $0
Lifeguards(3) 310 000 Current contract at$360 00 50 000
$380 000
Additional expense for Scenario 3 $50 000
TOTAL ADDITIONAL EXPENSE—SCENARIO#3 $298,700
PROPERTY TAX REVENUE UNDERSTATED $100 000
TOTAL ADJUSTMENT TO DETERMINE INCORPORATION FEASIBILITY
Scenarios 1 and 2 $348 700
Scenario 3 $398 700
Notes
(1)The peer review suggests that the PFA contains no cost estimate for planning/engineering staff An additional cost was
not added to this line item however since the PFA detail indicates costs are included for planning and engineering
(2)The peer review indicated that sand replenishment should increase by$16 000 While specifics are not included in the
PFA it is mentioned that sand replenishment was considered in developing the beach maintenance cost estimate
(3)The PFA assumes that the expense for beach maintenance and lifeguards will be assumed by the County for the first five
years of incorporation and that the new city would not assume these expenditures until year 6
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@9NNOINOR 2 CA
Summary
Based on the EPS peer review comments it would appear that the expense for Scenarios 1 and
2 should be increased by $248 700 It would also appear that $50 000 should be added to Sce-
nario 3 once the proposed city assumes the costs for beach maintenance and the lifeguards in
year six In that case the additional expense for running the new city would be $298 700 That
expenditure increase would be immediate however if the County is unwilling to maintain these
services for the first five years of incorporation
The EPS peer review of the PFA suggests that the incorporation of Sunset Beach is financially
infeasible By reducing a suggested $100 000 in property tax revenue added to the increased
expenditures just described the Sunset Beach city budget would be further out-of-balance by
an additional $348 700 for Scenarios 1 and 2 and eventually $398 700 for Scenario 3
This would mean that the net revenue for Scenarios 1 and 2 from years 2 — 10 would be a nega
tive rather than a positive Scenario 3 would also be in negative numbers during this same time
period particularly so in year 6 when the city assumes responsibility for beach maintenance and
lifeguards
FonancW Unknowns
As fiscally infeasible as the incorporation of Sunset Beach appears based on the peer review
there are three major unknowns that in the first two cases could further increase the proposed
city s expenditures and a third that will increase these expenditures These unknowns are
1 The PFA assumes that the lowest cost provider for services such as contracting for
law enforcement from Seal Beach will be available to the new city Whether or not
these services will materialize at these prices is unknown
2 Potential additional mitigation payments from the potential city to Orange County
might be required to achieve the required revenue neutrality The EPS review points
out County impacts and potential mitigation payments should be calculated in order
to disclose all potential costs that may face the new city The amounts of these po-
tential additional costs are unknown
3 The PFA acknowledges that there is no provision for funding capital improvement
costs in its study As an example the PFA assumes that the new city would buy the
existing fire station and annually pay the cost of financing the purchase plus utilities
However no funding is provided for bringing the building up to seismic or ADA stan-
dards This and other potential capital improvement costs are unknown and would
add to the proposed city s expenses
Condusoons
Based only on the PFA Scenarios 1 and 2 do not meet the minimum criteria for feasibility per
the peer review The review also concludes that the proposed city would experience annual
shortfalls beginning in year five under Scenario 3 Also there are additional expenditure and
revenue adjustments which make the financial feasibility of Sunset Beach incorporation even
more dubious with projected shortfalls in years 2 — 10 On top of all this there is the potential
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@9 Nffid -am L @ AA
that there will be further additional expenses either through mitigation payments to Orange
County and/or capital improvement expense on the part of the new city Based on all of these
factors it appears that there will be a major if not insurmountable challenge in demonstrating fis-
cal feasibility for this proposed city
Page 5
ATTACHMENT #2
-45J Itettt 19 - Page 13
Table of Contents
Page
Executive Summary 1
Fiscal Analysis 1
Revenues 1
Expenditures 1
Operation Impacts 2
Public Service-Impacts 2
Infrastructure Impacts 3
Other Issues 3
Annexation Process 4
Sunset Beach Annexation Study— Fiscal/Operational Analysis 5
Purpose 5
Background 5
Why Change the Status Quo? 6
Methodology 7
Fiscal Analysis 7
Revenues 8
General Fund Revenues 8
Property Taxes 8
Property Transfer Tax 9
Sales Tax 9
Property Tax In Lieu of Sales Tax 9
Motor Vehicle License Fees (MVLF) 9
Property Tax In Lieu of Motor Vehicle License Fees 9
Transient Occupancy Tax 9
Transient Occupancy Tax (Business Improvement District) 10
Franchise Fees 10
Utility Users Tax 10
Business License Tax 10
Animal License/Shelter Fees 11
Permit and Regulatory Fees 11
Item 19 - Page 14 -460-
i
Planning and Zoning Fees 11
Building Permit Fees 11
Code Enforcement Fees 11
Fines/Forfeitures 12
Total General Fund Revenues 12
Table I —Project Annual General Fund Revenue Sunset Beach Annexation 2009— 10 12
Other Municipal Revenues 13
Structural Fire Fund Property Tax 13
FireMed 13
Special Assessments 13
Water/Wastewater Fees __ 13
Library Property Tax 13
Recreation Programs 14
Parking Fees 14
Total Other Municipal Revenues 14
Table II — Projected Annual Other-Municipal Revenues Sunset Beach
Annexation 2009 — 10 14
Restricted Road Revenues 15
Gas Tax Funds 15
Measure M 15
Total Restricted Road Revenues 15
Table III — Projected Restricted Road Revenues 15
Revenue Summary 15
Table IV—Projected General Fund Other Municipal and Restricted Road Revenues
Sunset Beach 2009— 10 16
Expenditures 16
Per Capita Projection of General Fund Expenditures 16
Table V— Per Capita General Fund Expenditures with Sunset Beach Population 16
General Fund Expenditure Projections (Actual) 18
Fire 18
Police 18
Table VI —Sunset Beach Part I Crime Statistics—2007 & 2008 19
Animal Control 19
City Clerk 19
Community Services 19
Beach Maintenance 19
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o • • • a
Marine Safety 20
FireMed 20
Public Works 21
Park Maintenance 21
Projected Actual Operating Expense Summary 21
Table VI I —Annual Actual Operating Expense Project Summary Sunset Beach 2009— 10 21
One Time Capital/Other Expenses 21
Table VIII — Potential One-Time Planning Costs 23
Restricted Road Fund Expenditures 23
Summary of Fiscal Impact 23
Table-IX— Summary of Annual Revenues/Expenditures Sunset Beach
Annexation 2009— 10 24
Future Financial Impacts 24
Public Service and Infrastructure Impacts 25
Public Service Impacts 25
Administration City Attorney City Treasurer City Clerk Economic Development
Finance Human Resources Information Services 25
Building & Safety and Planning 25
Community Services 26
Library 26
Public Safety 26
Public Works 27
Water/Wastewater 27
Summary 27
Infrastructure Impacts 28
Broadway Bridge 28
Drainage 28
Fire Station 28
Park Facilities 28
Streets and Roads 28
Underground Utilities 29
Water 29
Wastewater 29
Summary 29
Other Issues 29
EMISM
Item 19 e Page 16 -462-
i i i i k
Annexation Process 32
Steps Toward Annexation 32
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Executive Summary
The focus of this report is to present fiscal operational and procedural information to the City of
Huntington Beach to assist its City Council in deciding whether or not to initiate the annexation
of the unincorporated community of Sunset Beach Physically this is a linear community con-
sisting of 84 acres and an estimated 1 227 residents It is an unincorporated island mostly sur-
rounded by Huntington Beach and the Pacific Ocean It was recently placed into the Huntington
Beach Sphere of Influence by the Orange County Local Agency Formation Commission (LAF-
CO) This means that this area can only be annexed into Huntington Beach if annexation oc-
curs at all This report addresses the fiscal and operational impacts of this potential annexation
in accordance with Objective LU 3 1 of the City s General Plan
Fiscal sl
Revenues
The study projected the identifiable General Fund revenues associated with this annexation
including income from the property tax property transfer tax sales tax property tax in lieu of
sales tax motor vehicle license fees property tax in lieu of motor vehicle license fees transient
occupancy tax franchise fees business license fees animal license/shelter fees and fines and
forfeitures Since this annexation would occur without a vote of the Sunset Beach electorate the
City s Utility Users Tax would not be levied in this community
Also other municipal revenues were identified related to the structural fire fund property tax
FireMed special assessments water and wastewater fees library property tax and recreation
program income There are also restricted road revenues related to gas tax and Measure M
income General Fund estimated revenue is $795 510 By adding projected other municipal
revenue of $439 855 there will be $1 235 365 available for various City operating expenses By
adding restricted road revenues of $176 555 total revenue from this potential annexation is
estimated at $1 411 920
Expenditures
Two approaches were taken to project the estimated additional expenditures that would occur if
Huntington Beach annexed Sunset Beach One methodology is to project the City s General
Fund expenditures on a per capita basis A per capita expense is determined by dividing each
department s budget by the City s estimated population and projecting the increase in that de-
partment s budget by the increase in the population (1 227) that would be served Using this
methodology the City s added expense is projected to be $1 092 871
The other approach is to project the actual expected additional expense for each department
This recognizes that many city operations will not require additional staffing or budget increases
including for example police fire library and administrative and staff support offices In fact
this result emphasizes the efficiency of changing the way public services could be provided to
the Sunset Beach community because of the economy of scale provided by the City
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Item 19 - Page 18 -464-
b D i t 8
The functions which will require additional funding in order to provide service to Sunset Beach
include Animal Control City Clerk Community Services FireMed and Park Maintenance Using
this methodology the City s added expense is projected to be $664 140
Estimated street and road maintenance and improvement expense needed to maintain 3 98
centerline miles of streets in this community including street sweeping and 102 street lights is
$123 521 It is assumed that the five traffic signals along Pacific Coast Highway will be main-
tained in a cost sharing arrangement between Caltrans and the City
There are also one-time likely discretionary capital and equipment expenses which may be re-
quired in Sunset Beach One is a projected $800 000 in repairs to the Broadway Bridge with a
$96 000 local match which can come from gas tax funds There is also an estimated
$1 500 000 worth of drainage improvements being initiated by County Parks a portion of which
would be the responsibility of the City It is unknown what the additional cost would be to Hun-
tington Beach with or without the annexation but there would be an additional expense to the
City in either case Finally to address beach maintenance the City will need to purchase a trac-
tor ($148 000) and a rake ($32 000)
Other possible unknown one-time expenses associated with this potential annexation include
providing engineering support to a property owner initiated underground utility project along with
a Rule 20A undergrounding project being pursued by Southern California Edison Also planning
studies related to this potential annexation such as a General Plan Amendment Zoning Text
Amendment Local Coastal Plan review and environmental review that are not performed by
City staff could entail a one-time consultant cost estimated at $96 894
Based on the projected all-fund revenues and expenditures presented in more detail on Table
IX on page 23 it shows that the estimated fiscal impact of the Sunset Beach annexation on the
City of Huntington Beach could range from an annual surplus of$195 528 to $624 259 It should
be noted that these figures are only estimates based on the methodologies described in this
study and do not guarantee the exact future numbers in case the annexation occurs It should
also be noted that the comparison of actual projected revenues and expenditures underscores
the efficiency and cost effectiveness of the City serving this unincorporated area since the City
would be able to extend many of its services to this area without increasing the operating budg-
ets for these services
Regarding restricted road revenue there would be an estimated surplus of gas tax and Measure
M income accruing to the City for day-to day street maintenance expense This may be neces-
sary however since there may be one-time capital expenses that would be required from this
source
Operation Impacts
This portion of the report evaluates the public service and infrastructure impacts of this potential
annexation on the City of Huntington Beach
Public ervicc Impacts
In terms of public service impacts there would only be slight workload increases for administra-
tive and support services such as Administration City Attorney City Clerk Economic Develop-
ment Finance Human Services and Information Services Also there would be some but not
significant workload increases in regulatory services such as Building and Safety and Plan-
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6 6 6 6 8
ning While there will be some minor increase in the Police Department workload there should
be none in Fire since they are already serving this area through automatic aid and through a pa-
ramedic contract with the Orange County Fire Authority Also additional workload is not ex-
pected in the Library Department
The City s Water and Wastewater operations are not expected to be impacted Water is already
provided by the City to this area and the Sunset Beach Sanitary District will retain its indepen-
dence and continue to provide wastewater service to this community
There will be workload increases in the Community Services Department to provide lifeguard
and beach maintenance services to this area plus administering a Junior Lifeguard Program
which County Parks plans to extend for two-years It is assumed that the Sheriff s Harbor Patrol
would remain in place in Huntington Harbour and that County Parks would retain oversight of
the Sunset Aquatic Park
Parks Maintenance would pick up increased workload by assuming maintenance responsibilities
for a 13 acre linear park which includes a tot lot and five recently renovated restrooms
Infrastructure Impacts
There does not appear to be any major infrastructure problems or issues with this potential an-
nexation The only potential projects with one-time cost impacts are the repairing the Broadway
Bridge ($96 000 local match) and assisting in funding a County-initiated drainage project (City
share unknown)
There will be a need to discuss with the OCFA the future of Fire Station #3 since it is rarely used
now and this community will be easily served by the Huntington Beach Fire Department (In
fact it already serves this area ) The linear park would be added to the City s parks inventory
and appears to be in satisfactory condition The same could be said of the streets that the City
would be inheriting The City s Water and Wastewater infrastructure would not be impacted by
this potential annexation
tither Issues
The Sunset Beach Community Association has developed a 13-point list of issues to discuss
with Huntington Beach in the event the annexation materializes This does not mean that the
Association supports the annexation since they would prefer to remain independent
Some of the Associations issues have been addressed such as maintaining Sunset Beach Sa-
nitary as an independent District (LAFCO has already approved this) and obtaining assurance
that the Rule 20A underground project will be continued The City taking over maintenance of
the beach and linear park is a given
Other issues evolve around the community s desire to keep its identity recognition of the Asso-
ciation as liaison with the City Council land use issues discuss the future of Fire Station No 3
impose a business license fee to limit undesirable commercial uses and obtain contract details
of the County s Junior Lifeguard Program It would appear that most of these issues can be dis-
cussed with the Association s representatives and are capable of being resolved
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Annexation Process
After review with LAFCO staff this report outlines in detail the steps to be taken if the City
Council decides to proceed with this annexation State law Orange County and LAFCO en-
courage the elimination of unincorporated islands like Sunset Beach with the result that this
area was recently placed into Huntington Beach s Sphere of Influence by LAFCO
Now with this community in Huntington Beach s Sphere it can now be annexed by the City This
means that if the area is annexed it can only be annexed by the City
Since Sunset Beach has less than 150 acres it is an unincorporated island This means that
under the provisions of Government Code Section 56375 3 LAFCO must approve the annexa-
tion if initiated by the City without resident protest The only discretionary action that can be tak-
en by LAFCO is to apply terms and conditions or to make modifications with terms and condi-
tions to the annexation
Part of the application process requires the City to prezone the area prior to consideration of
the annexation This would mean that the City would need to initiate and complete a Zoning
Map Amendment to include Sunset Beach in its General Plan At some point the City would
need to also process a General Plan Amendment and a Local Coastal Program Amendment
thru the Coastal Commission Other related planning documents would need to be prepared in-
cluding a Zoning Text Amendment and an environmental review
There are certain application fees normally associated with an annexation application However
LAFCO may waive these fees Minor fees related to certification and recordation fees will need
to be paid before an annexation is finalized
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Annexation
Sunset Beach
m
Purpose
The purpose of this report is to present fiscal operational and procedural issues related to the
possible annexation to the City of Huntington Beach of the unincorporated-community of Sunset
Beach This is in concert with the City s General Plan and Objective LU 3 1 which states
Ensure that any proposed annexation Is consistent with the overall objectives and does
not adversely impact fiscal or environmental resources and public services and infra-
structure of the City of Huntington Beach
This report then will assess the fiscal impact of the possible annexation of Sunset Beach as
well as operational issues regarding public services and infrastructure of the City The goal of
this study is to provide the necessary data information and analysis to assist the Huntington
Beach City Council in determining if the Council desires to take action to annex Sunset Beach
The procedural steps to be followed if the City Council decides to pursue annexation will also be
presented
Background
Sunset Beach is a small unincorporated beachfront community adjacent to and northwest of
the City of Huntington Beach Fronting 48-acres of white sand beach Sunset Beach has an es-
timated 1 227 residents and 685 dwelling units Containing 85 acres it is surrounded by Hunting-
ton Beach on the south and east the City of Seal Beach on the north and the Pacific Ocean on
the west
The community is long (a little over one mile) and narrow with a combination of residential
commercial and public land uses Besides the beautiful white sand beach a predominant fea-
ture of this community is a long greenbelt or linear park which once served as the Pacific Elec-
tric Red Car right-of-way This 13-acre park appears to front most of the homes in this communi-
ty provides free parking for beach users contains five remodeled restrooms and a tot lot
This older beachfront community has maintained its old time charm with a quaint post office a
volunteer fire station (Orange County Fire Authority Station No 3) and a women s club They
have a number of community events including a Mile Long Garage Sale sponsored by the
Sunset Beach Community Association This Association is active meeting monthly and main-
taining its own website at sunsetbeachca org
Sunset Beach is also served by the Sunset Beach Sanitary District which was formed in 1930 to
provide sewage and trash collection to the Sunset Beach/Surfside Colony communities This
District has an elected Board of Directors representing the local electorate
Page 5
Item 19 - Page 22 -468-
• • • i • MEMEMMEM
Why Change the Status ?
Why change the status quo? Or put another way how did the City of Huntington Beach get to
the point of considering the annexation of the Sunset Beach community?
The process of cities annexing small unincorporated islands like Sunset Beach started several
years ago with a change in state annexation law Recently several local government actions
particularly by the Orange County Local Agency Formation Commission (LAFCO) have raised
this specific annexation issue These actions are described in this section
The Sunset Beach community is considered a small unincorporated island For some time the
State of California has recognized the inefficiency of large counties providing municipal services
to these small islands State law was changed to permit small unincorporated islands of 150
acres or less to be located in a City s sphere of influence allowing these areas to be annexed
without resident protest (Government Code Section 56375 3) Sunset Beach falls into this cate-
gory since it is an area of 85 acres and is substantially surrounded by the City of Huntington
Beach and the Pacific Ocean with only its short northern boundary bordering the City of Seal
Beach
In addition to this change in state law according to LAFCO about 15 years ago the County
started to focus more on the provision of regional countywide services and pulling back from
the provision of municipal type services With the more recent and ongoing fiscal problems
faced by governments at all levels it is clear that it is inefficient for counties to provide services
to such relatively small islands unconnected to other unincorporated areas
An example cited by LAFCO staff of one such inefficiency is in the area of fire and emergency
medical service OCFA Engine #3 (volunteer) located at the Sunset Beach fire station and
staffed by Reserve Fire Fighters received 51 calls in 2008 but was only able to respond with
qualified reserves in two of those cases The bulk of the fire and emergency medical responses
to this area come under an automatic aid agreement with OCFA from the City s Warner Avenue
Fire Station which is located only 800 feet from the City s boundary with this community Also
on July 1 2004 the OCFA began contracting with the City to provide paramedic emergency
medical services to this area since according to the contract such emergency services can
more promptly and more efficiently be provided to the SERVICE AREA (Sunset Beach) by the
CITY Further OCFA almost closed the Sunset Beach fire station but kept it open in response
to community support of this station So while Sunset Beach is formally served by the OCFA it
is more promptly and efficiently served by the City of Huntington Beach Fire Department
A Sphere of Influence (SOI) according to state law (Government Code Section 56425) must be
established by LAFCO for all cities and special districts This is a state mandated planning tool
designed to identify logical municipal server providers for unincorporated areas throughout the
County
Huntington Beach s Sphere of Influence was adopted in 1973 and updated in 1989 and 2006
During the 2006 update while LAFCO staff urged that Sunset Beach be included in the City s
SOI that recommended action was not taken by the LAFCO Commission However over three
years later during a subsequent SOI review on July 8 2009 the Commission placed Sunset
Beach in the City s Sphere This does not mean that Sunset Beach would automatically be an-
nexed by Huntington Beach but if it were annexed it could only be annexed by the City
Page 6
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maumm
A 0 RMEMEMEEMEEMBIM
On July 31 2009 the Huntington Beach City Council conducted a special meeting to review and
update the strategic goals of the City At this meeting the possible Sunset Beach annexation
was discussed by residents of Sunset Beach addressing the Council under public comments
No formal action by the City Council however was taken or reported
On August 10 2009 the Seal Beach City Council reviewed a staff report and heard from Sunset
Beach residents regarding possible annexation by that City of this unincorporated community
While those from Sunset Beach speaking at the meeting urged the Council to pursue annexa-
tion of their community no action was taken by the City Council to pursue such an annexation
It is clear that state law Orange County and LAFCO are encouraging the elimination of unincor-
porated islands that the City of Seal Beach is not interested in annexing Sunset Beach and
that this community has been placed into Huntington Beach s Sphere of Influence The question
now is whether or not the City is interested in annexing Sunset Beach and whether the City
should take steps to initiate this annexation If the City does pursue this annexation as an unin-
corporated island and assuming proper procedural steps are taken by the City including those
related to prezoning and environmental review the LAFCO Commission must approve the an-
nexation This approval would be subject to terms and conditions or with modifications subject
to terms and conditions which would be determined by the Commission This report will review
fiscal operational and procedural issues-to assist the City in answering the question of whether
or not the annexation of the Sunset Beach community should be pursued
Methodology
The methodology of this study included reviewing documents and data supplied by City and
LAFCO staff This included financial operational and procedural information Review of docu-
ments prepared by the Seal Beach staff as well as material written by the Sunset Beach Com-
munity Association was completed Pertinent sections of state law along with an Attorney Gen-
eral s Opinion were also read Also interviews and email inquiries were conducted with the staff
of the City LAFCO and the Orange County Parks Department
The estimated revenues and expenditures in this report are just that estimates They are calcu-
lated based on information supplied by either City staff or from the LAFCO Sphere of Influence
report prepared last summer These are not precise figures that guarantee actual revenues or
expenditures which will be received or expended should the potential annexation occur
It should be noted that in very limited portions of this report some general conclusions are of-
fered regarding the reading of the City Charter the General Plan and state law These conclu-
sions are based solely on the plain reading of these documents and should not be considered
a legal interpretation of this material Any legal opinions of these documents are the province of
the City Attorney and should be referred to that office for further comment if needed
Fiscal Analysis
This fiscal analysis presents the projected revenues that would accrue to the City of Huntington
Beach if the Sunset Beach community were annexed to the City as well as the estimated City
expenditures for serving this area The projected revenues are categorized in three categories
Income that would accrue to the City s General Fund
Page 7
Item 19 - Page 24 -470-
Other municipal revenue and
Restricted street and road revenue
These revenues not only include the reallocation of property taxes per the Master Property Tax
Agreement between the City and Orange County a shift of sales tax revenue to the City but
City fees and taxes that would be applied to this area as well
It should be noted that there are certain revenues that are not currently collected in Sunset
Beach by the County Taxes that are collected in the City but not in the County such as the
Utility Users Tax cannot be collected in Sunset Beach without a vote of that community s electo-
rate This report provides estimated General Fund revenue projections for the Utility Users Tax
for information purposes only
This report contains two different approaches in projecting expenditures One is an estimate us-
ing a per capita cost projection assuming that there will be an incremental increase in expense
as the City population increases both through annexation and normal population growth The
other is a projection of the actual expenditures expected to be spent to provide services to this
community In terms of methodology the first estimate is based on per capita cost projections
and the second is based on current actual estimated expenditures The latter estimate assumes
that per capita cost increases projected for certain City functions will not occur as will be ex-
plained in more detail in the expenditure section and that actual expenditures will more accu-
rately describe the real fiscal impact the proposed annexation will have on the City
Revenues
This section presents revenues which will be received by the City as a result of the possible an-
nexation of Sunset Beach As mentioned previously these revenues are presented in the fol-
lowing categories
• General Fund Revenues which is income which can be used for any municipal purpose
• Other Municipal Revenues which is income that normally can be used for general city
operations but limited to a specific city function such as the Structural Fire Fund Proper-
ty Tax which can only be used to support fire services and
• Restricted Road Revenues which can only be used for road maintenance and street
projects
General
Property Taxes
The Master Property Tax Agreement governing the sharing of property tax revenue between the
City and Orange County was approved by the City on October 28 1980 While adopted a num-
ber of years ago this resolution is current and provides by its terms that the tax split specified in
the Agreement shall be used for all annexations without regard to the year they take place
The Agreement provides that the general tax levy will be allocated as follows 56 percent
(rounded) to the City and 44 percent (rounded) to the County This division is net of the Coun-
EMENOM
Page
-471 a Item 19 a Page 25
ENE= e e HUM= e
ty s contribution to the Educational Revenue Augmentation Fund Also this revenue is separate
from the Structural Fire Fund Property Tax (OCFA) which is discussed later under the Other
Municipal Revenues section
The estimated property tax revenue for municipal services and redevelopment is estimated at
$145,306
Property Transfer Tax
When new property is sold or more likely in Sunset Beach when an existing property is resold a
property transfer tax of$1 10 per $1 000 of transferred value is levied on the sale of real proper-
ty The resulting revenue is then split between the City and Orange County with each obtaining
$ 55 of the transferred value While neither the County nor LAFCO could provide actual last fis-
cal year transfer tax revenue for this area and no revenue estimate was provided in the LAFCO
Sphere of Influence report prepared last summer it is estimated for the purposes of this report
that $4,268 would be produced based on the property transfer tax income realized in Huntington
Beach This estimate is calculated using the proportion of dwelling units in Sunset Beach com-
pared to the City (685 DUs/77 962 DUs = 88% x $485 000 = $4 268)
Sales Tax
While Sunset Beach is mostly residential it has commercial development along Pacific Coast
Highway Using actual sales tax from the accounts within the unincorporated island sales tax
revenue that would accrue to Huntington Beach is estimated at $186,857 (Source HDL compa-
nies)
Property Tax In Lieu of Sales Tax
It is estimated by LAFCO based on the accounts within Sunset Beach that property tax in lieu
of sales tax revenue amounts to $19,738 annually
Motor Vehicle License Fees (MVLF)
If the annexation occurs the City will receive MVLF subvention revenue in accordance with the
AB 1602 formula It is estimated that Huntington Beach would receive $61,350 from this reve-
nue source (1 227 x $50)
Property Tax In Lieu of Motor Vehicle License Fees
It is estimated by LAFCO that the property tax in lieu of motor vehicle license fees accruing to
Huntington Beach would be $184,521
Transient Occupancy Tax
The County charges a 10 percent Transient Occupancy Tax (bed tax) the same as the City of
Huntington Beach Last year the County rate produced $151 356 in revenue There may be a
potential land use and/or business license issue with weekly rentals occurring in Sunset Beach
which are not permitted by Huntington Beach However they apparently are not subject to the
Page 9
Item 19 - Page 26 -472-
f f f t !
County bed tax Based on the County charging the same rate as the City it is projected that the
City would receive $151,356 annually from the Transient Occupancy Tax
Transient Occupancy Tax (Business Improvement strict)
The City also has a Business Improvement District which is supported by an additional one per-
cent Transient Occupancy Tax Since this one percent TOT is 10 percent of the regular tax rate
the estimated revenue from this income source is $15,136 ($151 356 x 10%)'
Franchise Fees
It is estimated based on the amount received countywide in the unincorporated areas applying
the amount per capita from the Sunset Beach population that the franchise fees for electricity
natural gas and broadband/cable television/telecommunications would produce $10 660 These
are franchise-fees applied to each of these services and are separate from the Utility Users Tax
This would provide total franchise fee revenue of$10,660
Utility Users Tax
The Utility Users Tax is a five (5) percent tax imposed on the users of certain utilities in the City
including water telephone gas electric and cable television services Projecting an increase in
these revenues based the proportionate increase in dwelling units projected by this potential
annexation it is estimated that Utility Users Tax revenue would increase by $191,119
(685/77 962 = 88% x $21 726 000)
It should be noted however that in the view of LAFCO legal staff the Utility Users Tax could be
imposed only if the annexation were processed as a normal inhabited unincorporated area re-
quiring a vote of the Sunset Beach electorate Since it is being pursued as an island annexa-
tion not involving a vote of those being annexed Proposition 218 would bar the imposition of
this tax to this area according to LAFCO As a result this estimate is provided for information
only and is not included in the overall General Fund revenue projection
Business License Tax
In the City s license and permits revenue category the largest revenue source is the business
license fee LAFCO in preparing its revenue estimates as part of the SOI study did not include
any income from this source since apparently the County does not have a business license fee
Therefore there was no available data from which to produce a revenue estimate There ob-
viously are businesses located in Sunset Beach and with a minimum business license fee of
$75 per business some revenue should be produced from this source Since there was not an
available count of the number of businesses in Sunset Beach a per capita revenue projection
for Huntington Beach was developed ($2 200 000/202 480 = $10 87) and applied to this unin-
corporated island Using that formula projected business license revenue is $13,337 (1 227 x
$10 87)
' Technically this is not a General Fund revenue and normally would be placed in the Other Municipal
Revenue category However it is presented here since it is normally associated with the Transient Oc
cupancy Tax described above
Page 10
-473- Item 19 - Page 27
o e ® o aMMM
As a further note feedback has been received that some in Sunset Beach would look forward to
implementing a business license tax in their community Some view this as a way to discourage
undesirable businesses locating there Whether or not the tax charged for a business license
would have this effect is debatable The business license should not be considered by Sunset
Beach residents as a regulatory tool
;animal License/Shelter Fees
Based on actual fees collected from this unincorporated island the LAFCO study indicated es-
timated revenue from this source at $1,745
Permit and Regulatory Fees
Planning and Zoning Fees
Based on the per capita revenue received in Huntington Beach for planning and zoning fees as
applied to Sunset Beach it is estimated that the City will receive revenue in the amount of
$8,503 ($1 403 000/202 480 = $6 93 x 1 227) This estimate is provided for information purpos-
es and not included in the total General Fund revenue projections since these are fees which
basically cover staff expenses required to provide planning and zoning services to the Sunset
Beach community
Building Permit Fees
While Sunset Beach is basically built out remodeling often occurs requiring building plumb-
ing electrical mechanical and/or other permits Using a per capita projection it is estimated that
the City will receive $13,387 from this revenue source ($2 210 000/202 480 = $10 91 x 1 227)
Similar to the planning and zoning fees this estimate is provided for information purposes and is
not included in the overall General Fund revenue projections
Code Enforcement Fees
Again the LAFCO SOI study attributed zero revenue from Code Enforcement fees This is be-
cause no such fees were collected by the County However last July when City staff conducted
an informal windshield survey of the Sunset Beach area 129 violations were identified While
40% of the violations were related to trash debris and landscaping the remaining were struc-
tural such as faulty weather protection signs garage conversions and dilapidated roofs and ga-
rages This number of violations as a percentage of total housing units is 18 8 percent com-
pared to 13 0 percent in the rest of the City Using a per capita projection along with determining
the proportionate increase in violations (18 8% vs 13 0%) compared to the remainder of the
City (1 227/202 480 = 61% x $29 100 x 1 45) the revenue from this source is estimated to be
$257 Similar to the planning zoning and building permit fees this estimate is provided for in-
formation purposes only
It should be noted that since code enforcement will assume an additional service area there will
be an impact on the City in providing these services to the Sunset Beach area This impact is
reflected in whatever time is spent away from existing areas of responsibility by staff
In summary it appears that the Permit and Regulatory Fees from Planning and Zoning Building
Permit and Code Enforcement will generate $22,147 in revenue which will offset the expenses
Page 11
Item 19 - Page 28 -474-
ZMEM . . ZZENNEEMMM
in processing permits and enforcing the City s codes Because of this offset neither the reve-
nues nor expenditures for these functions are included in the revenue and expenditure projec-
tions of this report
Fines/Forfeitures
Fines and forfeitures reflect income generated by Motor Vehicle and Municipal Code fines and
other miscellaneous fines and forfeitures Based on the LAFCO SOI study using a projection
based on the unincorporated county area per capita revenue as applied to Sunset Beach the
estimated fines and forfeiture revenue which would accrue to Huntington Beach is $1,236
Total General Fund Revenues
Based on the individual revenues identified in the preceding paragraphs the total General Fund
revenue that this potential annexation could produce for the City of Huntington-Beach excluding
the Utility Users Tax is $795,510 This General Fund revenue data is summarized in Table I
entitled Projected Annual General Fund Revenue Sunset Beach Annexation 2009— 10
----------------
Table I
Protected Annual General Fund Revenue
Sunset Beach Annexation, 2009— 10
Property Tax $145 306 `
Property Transfer Tax I 4 268
Sales Tax 186 857
Property Tax in lieu of Sales Tax 19 738
Motor Vehicle License Fee � 61 350�
Motor Vehicle in lieu of Vehicle License Fee 184 521
Transient Occupancy Taxi 151 356
Transient Occupancy Tax Bus Improvement Dist _ 15 136
Franchise Fees 10 660
Business License Fee 13 337
Animal License/Shelter Fees R 1
Fines and Forfeitures _ _ 1 236 1
TOTAL GENERAL FUND REVENUE $795,510
(')Planning budding and code enforcement fees estimated at $22 147 are excluded from this estimate `
since these are basically revenues which are offset by expenditures therefore producing a wash in pro
1ecting the budget needed to serve the Sunset Beach community
Page 12
-475- Item 19 - Page 29
• • • i i
err Municipal Revenues
Structural Fire Fund Property Tax
Currently fire service is provided to Sunset Beach by the Orange County Fire Authority To
support that service OCFA benefits from a Structural Fire Fund Property Tax In the case of this
unincorporated island this tax produces $350 731 which would shift to Huntington Beach upon
annexation of this area
It should be noted however that currently OCFA contracts with the City for Advanced Life Sup-
port (Paramedic) service from the City Fire Department to the Sunset Beach community It is
presumed upon annexation that the contract in the amount of $8 000 would discontinue The
net revenue to the City fire service would be $342,731 ($350 731 - $8 000)
FireMed
FireMed is a voluntary membership program allowing residents to receive City paramedic and
ambulance services for no additional out-of-pocket expenses The cost to join the programs is
$60 per year per household With an estimated 33% participation rate per household based on
the city-wide membership average there would be an estimated participation of 405 households
from Sunset Beach that would join this program The estimated revenue from this membership
is $24,300 (405 x $60)
Special Assessments
According to the LAFCO SOI report there are special assessments totaling $3,946 which would
be passed on to Huntington Beach if this annexation occurred
ater astewater Fees
Based on actual revenues LAFCO estimates that there is $322 364 in water and wastewater
fees produced in Sunset Beach However this does not mean that this is additional revenue
that would accrue to Huntington Beach if this area were annexed First at the July 8 2009
LAFCO meeting the Commission decided that the Sunset Beach Sanitary District would main-
tain its independent status with its own sphere of influence Second the City already receives
payment for water service from this community Further there is a 10 percent surcharge on the
water bill that would evaporate upon annexation So instead of $322 364 accruing to the Hun-
tington Beach there would be a loss to the water fund of$23,151
Library Property Tax
Currently there is property tax revenue supporting the County Library System that would shift to
Huntington Beach upon annexation The LAFCO estimated revenue for City library service
which would shift to the City upon the annexation of Sunset Beach is estimated at $52,029
Page 13
Item 19 - Page 30 -476-
f f f i f
Recreation Programs
There has been a Junior Lifeguard Program conducted in Sunset Beach generating approx-
imately $40 000 in revenue to the County The current contract ended with the summer 2009
session However the County Parks Department intends to extend the contract through 2011 It
is expected that this contract extension would occur before Sunset Beach could be annexed into
Huntington Beach At some time in the future if the annexation occurs the City may want to
consider folding this program into their Junior Lifeguard program In the meantime the revenue
produced from this program is estimated at$40,000
Parking Fees
While Sunset Beach does not have any parking meters they apparently developed some form
of parking permit system The consultant was informed that since residents were being ticketed
along with visitors for parking in front of garages this system involved permits which allowed
residents to park in these spaces Neither the County nor LAFCO had any information on this
permitting system-the fee structure or the revenue that was produced The amount of revenue
likely would be minimal in any event As a result no additional revenue from parking fees is pro-
jected in this report
Total then Municipal Revenues
It is estimated that if Sunset Beach were annexed into Huntington Beach there would be Other
Municipal Revenues available to support City fire library and miscellaneous services in the
amount of $439,853 This data is summarized in Table II entitled Projected Annual Other Mu-
nicipal Revenues Sunset Beach Annexation 2009— 10
Table If I
Protected Annual Other Municipal Revenues
Sunset Beach Annexation, 200 — 10
Structural Fire Fund Property Tax $350 731 1 [
Loss of Emergency Medical Contract Revenue (8 000)
FireMed 24 300
Total Fire Department Revenue i $367 031 €
Special Assessments 3 946
Loss of Water Surcharge —� (23 151)
Library Property Tax , 52 029
Recreation Program (Jr Lifeguard contract) T� 40 000
TOTAL OTHER MUNICIPAL REVENUE $439 855 E
Page 94
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0 0 0 0 0
Restricted Road Revenues
Gas Tax Funds
If Sunset Beach were annexed by the City state gas tax funds now collected by the County for
this area would shift to the City According to the LAFCO SOI financial report and in applying
the countywide per capita factor for this island an additional $190 480 would be produced for
street maintenance and other road projects However this estimate included $127 462 in Sec-
tion 2104 gas tax funds which only accrues to the County and did not include an estimate of
Section 2107 gas tax funds which would be allocated only to the City By making these adjust-
ments it is estimated that the state gas tax funds that would be received by the City (from Sec-
tions 2105 2106 2107 and 2107 5 gas tax funds) if this annexation occurred is an estimated
$148,381 These revenues as well as those received through Measure M are restricted only to
the use of street maintenance and improvements
Measure
Measure M is an initiative passed by the voters in Orange County to finance transportation im-
provements using revenue produced from a countywide sales tax Based on the actual sales tax
revenue produced in Sunset Beach it is estimated that Huntington Beach would receive
$28,174 from this source if they annexed this island
Total Restricted Road Revenues
The estimated amount of restricted road revenues which would switch from the County to the
City if Sunset Beach were annexed is an estimated $176,555 This data is summarized in Table
III entitled Projected Restricted Road Revenues
Table III:
Projected Restricted Road Revenues
R
Gas Tax $148 381
Measure M 28 174
Total Restricted Road Revenues $176 555
Revenue Summary
The total General Fund other municipal revenues and restricted road revenues are summarized
in Table IV entitled Projected General Fund Other Municipal and Restricted Road Revenues
Page 15
Item 19 - Page 32 -478-
a aINGa a s
Table IV
Protected General Fund
Other Municipal and Restricted Road Revenues
Sunset Beach, 2009— 10
111111
General Fund $795 510
Other Municipal 439 855
Total Available for City Operations $1 235 365
Restricted Road Revenue 176 555
Total Revenue Produced from Sunset Beach $1 411 920
Expenditures
Per Capita r je tl n of General Fund Expenditures
As mentioned earlier there are two expenditure projections provided in this report One is based
upon a methodology of projecting the City s General Fund expenditures on a per capita basis A
per capita expense for each department is determined by dividing each departments budget by
the City s estimated population (202 480) and then projecting a number to reflect the additional
population that would be served (1 227) if Sunset Beach were annexed As presented in Table
V entitled Per Capita General Fund Expenditures with Sunset Beach Population this projec-
tion developed by City staff would mean an increase in City operating expenditures of
$1 092 871 Compared to the General Fund revenue projections presented in Table I this would
mean a deficit of$291 361 ($795 510 - $1 092 871) However by adding the General Fund and
Other Municipal Revenues together there would be a surplus of $142 494 ($795 510 +
$439 855 = $1 235 365 - $1 092 871)
Table V
Per Capita General Fund Expenditures with Sunset Beach Population
t ► .
City Administrator $1 773 821 202 480 $9 $9 1 227 $10 749
City Treasurer $1 492 949 202 480 $7 $7 1 227 $9 047
City Council $307 910 202480 $2 $2 1 227 $1 866
City Attorney $2 635 911 202 480 ' $13 $13 1 227 $15 973
City Clerk $956 065 202 480 $5 $5 1 227 $5 794
Building & Safety_ $3 696 183 202480 _ $18 $18 _ 1 227 _$22 398
Community Services $13 408 349 202 480 $66 _ $66 1 227 $81 253
Economic Development _ $1 583 820 _ 202 480_ _ $8 _ $8 1 227 $9 598
Human Resources $6 469 696 202 480 _ $32 $32 1 227 $39 205 `
SEEM Page 16
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o s o s s
Table V
Per Capita General Fund Expenditures with Sunset Beach Population
t .
1
Finance $10 857 094 202 480 j $54 $54 1 227 $65 792
Fire -$32 240 905 202480 $159 $159 1 227 $195 375 l
Information Services j $7 028 601 202 480 $35 _ $35 1 227 $42 592
Library Services $4 650 003 202 480 $23 $23 1 227 $28 178 ,
Planning - $3 334 001 202 480 f T $16 $16 1 227 �- $20 204
Police $60 015 155 202 480 1 $296 $296 1 227 $363 683
Public Works - $19 362 379 - 202 480 $96 $96 1 227 $117 333 I
Non Departmental _ $10 533 100 202 480 $52 - _ $52 1 227 $63 829
Total General Fund $180 345 942 $891 $891 _ $1 092 871 i
Expenditures , [
(1) Does not include capital expenses
(2) Population based on 2009 estimate provided by Economic Development
The problem with this analysis is that for many departments there likely would be no additional
budget costs For example there might be additional but likely minimal additional work gener-
ated by this annexation in City Administration There probably would not be enough additional
workload to generate an increase in this Departments budget This extra work would be ab-
sorbed and prioritized within Administrations normal workload
Even a direct service Department such as Fire will not have nor need a budget increase of
$195 375 shown in Table V now or over the next several years This is because Fire already
serves this community through an automatic aid agreement and provides paramedic service
through an ALS contract with OCFA It not only has the nearest career fire station but Sunset
Beach falls within the normal 1 '/2 mile radius of the Warner Avenue Fire Station which is the
desired response distance for a suburban fire station
It can be argued that with incremental growth such as this annexation increase in average fami-
ly size or new development over time there could be an eventual increase in city expense
when a certain critical mass of additional population to be served has been obtained Howev-
er over time with the possibility of an aging population average family size may actually de-
cline The only major additional costs are likely to be in the areas of lifeguard services beach
and park maintenance road traffic signal and street light maintenance Even a slight increase
in calls for law enforcement service likely will be absorbed within existing police staffing Also
City staff indicates that the potential impact on current code enforcement operations is believed
to be minor even though as described earlier a July windshield survey indicated approximately
129 code violations A large portion of those code violations however were for property main-
tenance issues
There probably will be some additional permit and entitlement processing in Building Public
Works and Planning but this work should be offset by fees and absorbed by existing staff given
the overall decline in building and development activity in Southern California As explained
Page 17
Item 19 - Page 34 -480-
MaEMMEW1102 a s
above additional potential income from planning and building fees from this potential annexa-
tion were not included in the projected revenues because of the expenditure offset
The next section provides an estimate of the real or expected actual additional expenses ex-
pected if Sunset Beach were annexed into Huntington Beach
General Fund Expenditure rojections (Actual)
This section presents the estimated potential real recurring cost impacts that would occur with
the possible annexation of Sunset Beach to Huntington Beach These costs are estimates and
have been prepared in conjunction with City staff The cost estimates are for operating ex-
penses for those Departments likely to have an increase in their budget in order to serve this
unincorporated island Included in this discussion will be some one-time costs and unknown
future capital obligations that would be assumed by the City if this annexation occurred Also
even though no additional expenses are expected in some major City departments such as Po-
lice and Fire they are briefly discussed in this section since they are a major part of the City s
budget
Fire
As indicated earlier no additional Fire Department expense is expected if Sunset Beach is an-
nexed since the Department is already serving this area With the Structural Fire Fund Property
Tax less the elimination of the ALS contract with the OCFA there will be a net reve-
nue/expenditure benefit to the City of $342 731 The Fire service is mentioned in this section
since it is a major cost center of the City and there is a significant revenue offset for this service
in the annexation scenario
Police
The LAFCO Sphere study estimated $1 237 023 in total County General Fund expenditures to
serve Sunset Beach Of that amount $1 198 524 was allocated for Sheriff services This esti-
mate was based on calls for service as a ratio to the total calls in the County s unincorporated
territory compared to Sunset Beach The Sheriffs Department reports that there are six depu-
ties assigned to this unincorporated area working three shifts providing 24 hours per day cov-
erage
In the power point presentation to the Seal Beach City Council that City s staff concluded that
this level of expenditure is overstated and not an accurate reflection of costs for the currently
provided level of services to the Sunset Beach Community The consultant would agree with
that conclusion
In its analysis of required service the Huntington Beach Police Department looked at the Part I
Crime Statistics for Sunset Beach While they found it was difficult to obtain exact numbers for
this area crime data was obtained from the Sheriff's Records Management System for 2007
and 2008 As shown in Table VI — Sunset Beach Part I Crime Statistics — 2007 & 2008 there
were 39 Part I or major crimes in 2007 and 44 in 2008 In addition there were 59 traffic colli-
sions in 2007 and 53 in 2008
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Table VI
Sunset Beach Park I Crime Statistics —2007 &2008
Homicides 0 0
Rape 0 1
Robbery 4 2
Felony Assault 5 5
Burglary 13 15
Larceny 12 15
Motor Vehicle Theft 5 6
Total Part I Crimes 39 44
After reviewing this data police staff concluded it appears the Police Department could provide
law enforcement services to Sunset Beach while maintaining current staffing levels As a result
no additional expenditures are added to this Departments budget in evaluating the fiscal impact
of the potential Sunset Beach annexation
Animal Control
Using a two year average for 2007 and 2008 there appears to be 309 annual calls for service
This average may be inflated since there were a reported 37 calls for service in 2007 but 545 in
2008 Since Orange County Animal Care charges approximately $100 per call using the 309
figure there would be added cost to the City for this annexation in the estimated amount of
$31,000 While this figure may be inflated it is used in this analysis due to the lack any other
available data
City Clerk
Sunset Beach has two precincts with 797 registered voters in November 2008 these two pre-
cincts were consolidated into one polling place with five election workers It is generously esti-
mated that the City Clerk s Office would experience additional election costs in the amount of
$2 500 every two years Averaging this expense on an annual basis it is estimated that there
would be additional expense in this office of$1,250
Community Services
Beach Maintenance
To maintain the same level of service in maintaining 48-acres of beach as currently being pro-
vided would cost an estimated $61,880 This includes according to the Community Services
Department
penod1c hand picking of litter contractually provided trash removal daily graffiti re-
moval ice plant trimming the raking and sanitizing of the sand four times per month
and the construction and removal of street end sand berms as needed seasonally
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However there will be an estimated additional expense for supervision and travel time This is
because this stretch of beach is not contiguous with other City beaches and because there will
be a need to operate a day-time beach cleaning crew since Sunset Beach is adjacent to a resi-
dential area Currently the City does not provide day-time crews It is estimated that $80 000
will be needed in the beach maintenance budget to cover the extra expense of supervision and
travel time to this beach This will mean an estimated beach maintenance budget of$141 880
Another issue with an undetermined cost is where to store maintenance equipment and the
need to obtain an additional tractor and rake Currently the County s equipment is used at sev-
eral locations Their equipment is either is stored at the Talbert Nature Preserve or the Upper
Newport Beach Nature Preserve The exception is a large sand sifter or sanitizer which is de-
voted exclusively to Sunset Beach and is stored at Sunset Marina If Huntington Beach could
obtain the sanitizer from-the County it would need to determine if it could continue to be stored
at the Marina There could be a rental expense associated with this storage Also there likely
would be the cost of purchasing a tractor
In addition Sunset Beach through the County participates with other beach cities in a Sand
Replenishment Program There are 12 stages of the program each stage four or five years
apart with payment based on the linear feet of coast line In 2001 the County s share for this
section of the beach was $46 356 and in 2008 it was $5 600 There is no explanation for this
difference in amounts Staff speculates that there may be an error in how the data was distri-
buted among the agencies In comparing the dollars charged Huntington Beach in 2001 and
2008 and given its much longer shoreline it would appear that the $5 600 is probably the more
accurate cost for this work along Sunset Beach Therefore it is estimated the next stage of this
Federal Erosion Control program would cost the City about$6,000 possibly as soon as 2013 In
order to annualize the cost of this work in order to assess the impact of this potential annexa-
tion it is recommended that $1,250 be included in the expenditure estimates ($6 000/5)
Marine Sfety
Staff indicates that the County currently contracts for Marine Safety Services (Lifeguard) in the
amount of $333 000 They recommend that if this annexation occurs this contract be main-
tained Also the City would need to negotiate the retention of the lifeguard towers and equip-
ment that currently serve beach activities The estimated cost of assuming marine safety for
Sunset Beach is $333,000
A question was raised regarding the City being responsible for ultimately replacing the lifeguard
towers which serve Sunset Beach However these lifeguard towers are owned by US Ocean
Safety which provides marine safety to the beach If the contract for this service is maintained
as proposed by staff then lifeguard tower replacement should not be an issue for the City As a
result this report does not project any expense for lifeguard tower replacement in the immediate
Tuture
It should be noted that there are no special events planned for this section of beach Therefore
no funds are protected to be added for this purpose
Fire e
This voluntary program allows members to receive paramedic and ambulance services without
+aut-of-pocket expense By applying the City s percentage participation in the program to Sunset
Beach it is estimated that people from 405 residences would belong (1 227 x 33%) With a
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0 0 0 f 9
yearly expense to the City of $51 26 per household it is estimated that this program would cost
$20,760 (405 x $51 26)to administer
Public Works
Park Maintenance
There is a 13-acre linear park or greenbelt maintained by a combination of contractual services
and County staff The janitorial contract costs $21 000 the landscape contract totals $76 000
and it is projected that City staff can complete the work performed by County personnel at a
cost of $38 000 This would mean an annual additional cost to this Department for park main-
tenance service of an estimated $135,000 if this annexation occurred
Projected Actual Operating Expense Summary
In reviewing the projected actual operating expense that would be incurred by Huntington Beach
if they annexed the Sunset Beach community it is estimated that this additional cost would be
$664 140 This estimate is summarized in Table VII entitled Annual Actual Operating Expense
Projection Summary Sunset Beach 2009 — 10
Table Vll [
Annual Actual Operating Expense Project Summary �
Sunset Beach, 2009 — 10
mom
Animal Control $31 000
City Clerk 1 250
Community Services
Beach Maintenance $141 880
Sand Replenishment 1 250 I
Marine Safety 333 000
476 130
FireMed 20 760 I
Public Works—Park Maintenance 135 000
Total Estimated Operating Expense ; $664,140 r
Based on this analysis comparing the estimated General Fund revenue projections to the esti-
mated actual expenditures the City would obtain an annual revenue surplus of $131 370
($795 510 - $664 140) if Sunset Beach were annexed by Huntington Beach This surplus would
grow to $571 225 ($1 235 365 - $664 140) in comparing both General Fund and Other Munici-
pal Revenues to the total estimated actual operating expense
One Time Capital/Other Expenses
These projected revenue surpluses for the potential annexation of the Sunset Beach community
may be needed since there are several one-time capital expenses on the horizon for Sunset
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Beach In terms of bridge maintenance the Broadway Bridge would be part of the annexation
Public Works has reviewed a Caltrans bridge report indicating that the cost for bridge repair is
an estimated $800 000 If grant funding from the Bridge Preventative Maintenance Program can
be obtained and the annexation occurred the City s one-time matching funds would be an es-
timated $96,000 The source of these funds would either be from City gas tax funds or Measure
M
The Orange County Parks Department has allocated $150 000 in 2009-10 to initiate planning for
Sunset Harbor dredging Since this annexation would not likely be completed this fiscal year
even if initiated by the City the Department will proceed with the initial planning for this project
The overall dredging work includes areas outside of Sunset Beach and will be paid for under a
cost sharing arrangement with all impacted agencies including the City of Huntington Beach
The City by the way would be a participant in this project with or without the annexation Hun-
tington Beach would have a larger financial responsibility for their share of the project however
if the annexation occurred
The total estimated cost of this shared-cost dredging work is $1 500 000 The City s share of
this cost with or without the annexation is not known at this time
While there is the prospect of the City inheriting the County Parks beach sanitizing machine it is
expected that the City would need to purchase two pieces of equipment for beach maintenance
One is a tractor ($148 000) and the other is rake ($32 000) This will be a one-time expense with
this equipment being folded into the City s equipment replacement program
According to the Public Works Department there are two undergrounding projects proposed
in the Sunset Beach area One is a Rule 20A project initiated by Southern California Edison for
which funding is available and permits are being issued Staff indicates that this project will be-
gin and subsequently completed regardless of any annexation issues
The other project is homeowner initiated and may or may not proceed depending upon whether
the proper percentage of property owner signatures representing property owners is obtained If
this project proceeds the County has agreed to provide an assessment engineer and provide
support for any coordination issues This commitment would probably become the responsibility
of the City should annexation be successful The estimated cost of this commitment could not
be determined
Other one-time costs would be the preparation of planning and related studies which may be
necessary to complete this annexation There will be a need for a Zoning Map Amendment
General Plan Amendment and Local Coastal Plan Amendment to include the Sunset Beach
area into the City s Zoning Map General Plan and Local Coastal Plan In addition there will
eventually be a need for a Zoning Text Amendment to formally adopt the existing 1990 Sunset
Beach Specific Plan The Coastal Commission staff may also request an update of this Specific
Plan because it is almost twenty years old Finally there will be a need for an environmental as-
sessment for this annexation If they are conducted by a consultant rather than in-house staff
estimates that there will be a one-time expense of approximately $96 894
The estimated costs of these planning studies are contained in Table VIII entitled Potential
One-Time Planning Costs To the extent there is a need for community meetings as part of this
process this estimate could be higher
IN
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Table Vill
Potential One-Time Planning Costs
General Plan Amendment _ $37 299 J
Feasibility Study(RAA) 14 950 !
LCP Amendment 11 212
Zoning Map Amendment 9 733
I Environmental Assessment 8 522
ZZoning Text Amendment 15 178
Total _ $96 894 j
Note These estimated costs assume use of a consultant rather than staff [
f
Restricted endit res
As mentioned earlier between gas tax funds and Measure M revenues the City of Huntington
Beach would receive $176 555 which is restricted for street maintenance and other transporta-
tion improvements This will be the funding source for maintaining 3 98 centerline road miles
and 102 street lights It is expected that the streetlights will likely be funded by the County even
the ones on Pacific Coast Highway Regarding the five traffic signals four of the traffic signals
would require the City to pay 25% of the annual maintenance cost and the remaining traffic sig-
nal would require a 50/50 split with Caltrans
Using the countywide per capita projections to Sunset Beach population it is estimated that the
County spends $118 501 on general right-of-way and street light maintenance for this communi-
ty It is assumed that City street maintenance expense will be similar to that spent by the County
with the exception of a small additional expense for street sweeping which is performed twice a
month throughout the City With 3 98 centerline miles (7 96 curb miles) the additional cost for
this service is estimated at $5 020 (7 96 x $26 28 x 24) This will increase street maintenance
expense to $123 521 This means that there would be an approximate surplus restricted road
revenue of $53 034 ($176 555 - $123 521) which can be used for other street maintenance
functions that might be provided to this area for one time capital road and bridge expenses for
this area or for other street maintenance costs throughout the City
Summary of Fiscal Impact
It would appear that the annexation of the Sunset Beach community into Huntington Beach
would have a generally beneficial financial impact on the City in terms of day-to-day operations
Except for a projected deficit in comparing only General Fund revenue to the estimated operat-
ing expenditures based upon per capita projections all other comparisons demonstrate an es
timated surplus of revenues over expenses This may be necessary since there are unknown
capital and one-time study expense that may be associated with this potential annexation
A summary of this information from the tables presented earlier in this section is summarized in
Table IX entitled Summary of Annual Revenues/Expenditures Sunset Beach Annexation
2009— 10
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f ! f ! !
Table I I
Summary of Annual Revenues/Expenditures [
Sunset Beach Annexation, 2009— 10
7GenFd
d Rev minus Per Capita Exp $795 510 $1 092 871 ($297 361)
ther Rev minus Per Capita Exp 1 235 365 1 092 871 142 494 !
General Fund Rev minus Actual Expense 795 510 664 140 131 370
Gen Fd + Other Rev minus Actual Expense 1 235 365 664 140 571 225
I
Gen Fd +Other Rev + Road Rev minus Per 1 411 920 1 216 392 195 528
Capita Exp and Street Maint Exp
Gen Fd + Other Rev + Road Rev minus Ac fi 411 920 787 661 624 259
tual Expense and Street Main Exp
Future Financial Impacts
Normally in this type of report revenue and expenditure projections over a five seven or ten
year period would be provided This would assist the policy-makers in determining the mid-term
fiscal impact of the potential Sunset Beach annexation
In the annexation study for the Bolsa Chica Lowlands for example an annual inflation rate for
franchise and utility user fees of 3 1 percent was used It was also assumed that the assessed
value upon which the property tax is based would increase the minimum of two percent per
year Given the current and near term economic climate it would be difficult to apply these
standard inflationary factors to this study When reviewing the Property Transfer Tax revenue
for instance the projected income from that source declined several hundred thousand dollars
from one year to the next As a result this report presents to the City a snapshot of the Sunset
Beach fiscal impact not a mid or long-term forecast
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t t t i t
Public Service and
Infrastructure Impacts
To further meet the requirements of General Plan objective LU 3 1 this section addresses the
potential public service and infrastructure impacts the annexation of Sunset Beach may have on
the City of Huntington Beach First will be a discussion of the public service implications of this
potential annexation followed by its infrastructure impacts
Public Service Impacts
As implied in much of the fiscal analysis the impact of this potential annexation on the City s
ability to provide public services to Sunset Beach as well as the City as a whole appears very
limited In terms of major direct service departments and administrative management and sup-
port offices-the proposed annexation should have little impact on the ability of these depart-
ments and offices to provide adequate service to this small community while maintaining exist-
ing service levels to the remainder of the City These impacts are discussed in the following pa-
ragraphs
Administration, City Attorney, City Treasurer, City Clerk, Economic rel-
ent, Finance, Human Resources, Information Services
While there may be a slight increase in workload for each of these offices due to this potential
annexation these increases should be able to be absorbed in each office and not cause a need
for any staff or budget increases The only minor exception is the City Clerk s office where an
additional polling place will be required every other year at an estimated average annual cost of
$1 250 annually
Building & Safety and Planning
The ongoing operating expense for Building & Safety and Planning should be minimal with any
increases in workload covered by the fees charged by these departments For example it is ex-
pected that building permit applications for building modifications from the 685 dwelling units
businesses and other structures in this built-out community would pay for staff time spent re-
viewing and inspecting these applications Many of the Code Enforcement violations were prop-
erty maintenance issues based on a windshield survey conducted by staff in July Staff felt that
the potential impact on current code enforcement operations is believed to be minor
Planning and zoning permits also should require a minor amount of staff time with that time
covered by processing fees There will be however one-time expenses involved in bringing
Sunset Beach into the City in terms of studies required to update the City s General Plan Local
Coastal Program amend the City s Zoning Map for the existing County Specific Plan conduct
an environmental assessment of the annexation and prepare a Zoning Text Amendment
Based on staff input the cost of these one-time studies and projects if prepared by a consultant
and not staff is estimated at $96 894
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Item 19 m Page 42 -488-
a a a a s
Community Services
More of an impact on the provision of services will be on the Community Services Department
Among City Departments it will experience the largest cost increase This Department will be
responsible for maintaining and providing marine services to 48 acres of beach City staff sug-
gests that the $333 000 contract for marine safety service be continued as well as the contract
for the junior lifeguard program which County Parks plans to continue for another two years be-
fore any annexation process can be completed It is estimated that each maintenance will re-
quire daytime operations and will cost an estimated $141 880
Staff assumes that the Orange County Sheriff s Harbor Patrol would remain in place in Hunting-
ton Harbour and that County Parks would retain control and oversight of the Sunset Aquatic
Park
It is pointed out by staff that Sunset Beach participates with Huntington Beach and other beach
cities in a sand replenishment program There are 12 stages of the program four or five years
apart with the County paying the Sunset Beach share If annexation occurs the City would as-
sume this cost which is estimated at $1 250 annually as presented in the fiscal section of this
report
Library
Currently Sunset Beach is served by the County Library System the revenue for which
($52 029) would transfer to the City upon annexation of this community It is doubtful that the li-
brary habits of Sunset Beach residents would change upon annexation Their library use pat-
terns would probably remain the same such as using the County system the City s libraries or
other public libraries in the region Thus the service level impact on the City Library should be
minimal
Public Safety
Neither the Police nor Fire Departments expect that an increase in staffing will be required as a
result of this potential annexation It appears that the number of additional Part I Crimes which
would be added to the Police Departments workload are minor compared to its overall work-
load The Departments patrol beats can be adjusted to patrol this area The Department will
however need to conduct traffic accident investigations along Pacific Coast Highway a function
currently being performed by the California Highway Patrol
There will be some additional animal care and control activity generated by this annexation
Since this service is already provided under contract with the County there will not be any addi-
tional workload on City staff only an additional expense
The Fire Department already serves this area either through automatic aid for fire and non-
medical emergency calls or under contract with the Orange County Fire Authority for medical
emergency response (paramedics) This service is provided primarily from the Warner Avenue
Fire Station which is within 800 feet of the boundary with Sunset Beach All of Sunset Beach is
within the desired 1 '/2 mile response radius of that station
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• ! t i i
Public Works
There will be some impacts on services provided by the Public Works Department A 13-acre li-
near park will become the responsibility of the Department The maintenance of this park would
be addressed by retaining existing contracts for landscape and janitorial maintenance plus ad-
ditional staff cost of$38 000 annually Apparently County Parks has just completed the rehabili-
tation of five public restrooms in the park As an aside this community will exceed the City s
General Plan s parks standard of five acres per 1 000 population Sunset Beach has 10 6 parks
acres per 1 000 population (13 acres / 1 227)
There is 3 98 centerline road miles for which the Department would assume maintenance re-
sponsibility along with 102 street lights The cost of maintaining the five traffic signals along Pa-
cific Coast Highway will be shared between Caltrans and the City on either a 75/25% or a
50/50% split The additional annual maintenance expense should be covered by the additional
gas tax and Measure M funds which will be received by the City
There are other responsibilities which would be absorbed by the Department that will be dis-
cussed in the following infrastructure section These responsibilities involve a multi-agency
dredging project initiated by the County Parks Department which involves Sunset Beach and
surrounding areas including the City of Huntington Beach Other infrastructure projections in-
clude repair of the Broadway Bridge a Rule 20A undergrounding of utilities project and a prop-
erty owner initiated undergrounding project requiring an assessment engineer This latter project
likely will require the City to assume a commitment made by the County to pay for the engi-
neer s expense The amount of this one-time cost is unknown
WaterlWastewater
The City already provides water service to Sunset Beach and currently applies a ten percent
surcharge to the users in this community If the area is annexed then the water surcharge
would evaporate This would amount to a reduction in revenue to the Water Department of
$23 151
At the July LAFCO meeting the Commission decided that the Sunset Beach Sanitary District
would continue to have its own Sphere of Influence and would not be included in the City s
Sphere As a result direct wastewater service would still be provided by the District and not be-
come an obligation of the City
Summary
Except for one-time studies by Planning additional marine services provided by the Community
Services Department and maintenance services provided by that Department and Public Works
it would appear that there would be very little impact on services provided by the City s other
departments and offices In fact this conclusion points to the efficiency that would be created by
this potential annexation Service can be extended to this small community without adding staff
to major service components of the City particularly Police and Fire This result is aided by the
fact that Sunset Beach is immediately adjacent to Huntington Beach and can easily be served
by the City s two public safety departments
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ME=
e e e ; eEMENNIMEM
Infrastructure S
This section describes the impacts on infrastructure of the City or infrastructure that the City
would assume if Huntington Beach annexed Sunset Beach Generally there do not appear to
be any immediate major infrastructure problems or issues However there are certain potential
future unknown costs in replacing or repairing these facilities These infrastructure facilities are
discussed below
Broadway ridge
Caltrans prepared a report reviewed by Public Works indicating that it would cost $800 000 to
repair the Broadway Bridge in Sunset Beach It is intended that the bulk of this repair cost would
be through a grant from the State Bridge Preventative Maintenance Program (BPMP) with a re-
quired local government match of $96 000 If the annexation occurred this match would shift
from the County to the City The source of funds for the City s match would-either be from Gas
Tax or Measure M funds
Drainage
The Orange County Parks Department has budgeted $150 000 in 2009-10 to plan a dredging
project for the Sunset Harbor The dredging work includes not only the Sunset Beach area but
adjoining areas as well County Parks is taking the lead in this project that is initially estimated
to cost $1 500 000 It will be funded through a cost-sharing arrangement among the affected ju-
risdictions There will be an expense on the part of the City either with or without this annexa-
tion The amount of the City s share however could not be determined because the project is
only approaching the initial planning stages
Fire Station
Located in Sunset Beach Orange County Fire Station #3 is a volunteer station owned by the
Orange County Fire Authority Staffed by Reserve Fire Fighters Engine #3 received 51 calls in
2008 but only responded with qualified reserves twice during that year At one point OCFA al-
most closed the station
It has been suggested by the Community Association that the Fire Station be used either as a
police substation or for lifeguards However since the station is owned by OCFA discussions
with that agency as well as an assessment of its potential best use would be necessary to
gauge its future potential
Park Facilities
The 13-acre linear park has one tot-lot and five restrooms The tot-lot appears to be in suitable
repair and the restrooms have just been restored by the County Parks Department
Streets and Roads
There are 3 98 centerline miles of roads in Sunset Beach Most of the traffic is on PCH which is
the maintenance responsibility of Caltrans The remainder of the Sunset Beach road system is
VEM Page 28
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0 0 0 0 0
residential and appears to be in satisfactory condition It does not appear that-the City would be
inheriting any major street reconstruction projects if this annexation occurred
Underground Utilities
A Rule 20A underground utility project along PCH is being pursued by Southern California Edi-
son This project is funded and permits are being issued City staff expects that this project will
begin and will be finished regardless of any annexation issues
There is also a property owner initiated undergrounding project along Park Avenue and Bayview
which is in the process of collecting signatures so that the preliminary design phase can begin
As mentioned previously the County made a commitment to provide an assessment engineer
and staff support for the coordination of this project The City would undoubtedly assume this
responsibility if the annexation occurs
Ater
There is no known infrastructure issues related to the continued provision of water to this com-
munity or to the surrounding areas of the City if annexation were to occur
Wastewater
Wastewater service will continue to be provided by Sunset Beach Sanitary District
Summary
It appears that the annexation of Sunset Beach would have little impact on the City s basic in-
frastructure such as water wastewater and streets In many respects the City already provides
services to the area (water fire library)
OtherIssues
With the advent of the LAFCO Sphere of Influence study and LAFCO s subsequent action plac-
ing the community into Huntington Beach s Sphere the Sunset Beach Community Association
developed a 13 point program initially for discussion with the City of Seal Beach for the possible
annexation by that City These 13 points have now become talking points with the City of Hun-
tington Beach This does not mean that the Association supports this annexation To the con-
trary the Association seems to prefer retaining its unincorporated status or incorporating as a
city rather than annexing to Huntington Beach In any event the Association has retained a law
firm to make sure they would be treated fairly according to a letter sent to those living in Sun-
set Beach dated November 1 2009 The Association also has raised money to study the fiscal
impact of incorporation
Nonetheless if annexation took place the Association would likely ask the City to support their
list of 13 key transfer items which is viewed as a way to help Sunset Beach continue as a
semi-independent beach community A summary of these 13 key items include
1 Maintain Sunset Beach s separate identity including signage
Page 2
Item 19 - Page 46 -492-
t t t t t
2 Recognize the Sunset Beach Community Association as liaison with the City Coun-
cil
3 (a) Keep the Sunset Beach LCP with revisions to reflect the change from the County
to the City and (b) Submit new pertinent plans and information to the Sunset Beach
local advisory board for review and comment
4 Keep parking permits at the same price
5 (a) Continue all encroachment programs for beach and waterways permitted by the
LCP and (b) Transfer current files permits and computer records from the County to
the City
6 Support use of the Fire Station by local police
7 Maintain the Sunset Beach Sanitary District as an independent district
8 Support the current Sunset Beach postal delivery system
9 Have the City take over ownership and maintenance of the beach and greenbelt from
the County
10 Create a business license fee plan that would serve to limit the opening of future un-
desirable businesses such as medical marijuana dispensaries tattoo parlors etc
11 Confirm the County contract details for the contract Junior Lifeguard Program (in-
cluding class size limits)
12 Gain assurance that the Rule 20A undergrounding project will be continued and
completed in a timely manner and
13 Obtain funds from the County to repave the numbered streets between North and
South Pacific and to finish the five restrooms in the greenbelt
These items were discussed with the Mayor and City Manager at the September Association
meeting Obviously there are some of these issues like another public use of the OCFA fire sta-
tion that would require additional homework to determine the possible best use of this facility
The perspective of the OCFA regarding this property would need to be obtained Whether or not
a business license fee would limit undesirable firms desiring to open in Sunset Beach may be
more appropriately a land use issue than a business license fee issue
Some of the items on the list have already been completed such as the park restroom renova-
ioon and what appears to be the funding and permitting of the Rule 20A underground utility
project along PCH The Sunset Beach Sanitary District will remain as an independent district
based on last summers LAFCO action
Nevertheless unofficial discussions with the Association by the Mayor and executive staff have
indicated an interest in recognizing the Association as a liaison with the City Council Also there
�uas a willingness expressed to create a MOU with the Association to memorialize their 13
points or issues
'here may be a concern by the Association about losing community identity by becoming part of
the City However if this identity can be retained through an MOU there are many benefits
Page 30
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MEMEMOMM
MMOMUM2M
8 0 0 6
MEM
Huntington Beach can bring to the community These include well established municipal servic-
es such as police fire public works and community services with the government offices pro-
viding service located nearby The City may be able to provide what would be perceived by the
community as a more desirable regulatory environment when it comes to controlling undesirable
uses There would be some cost savings to the community as well since the ten percent water
surcharge would be eliminated if Sunset Beach annexed to the City
In any event the Association in their November 1st letter expressed the hope that the City
would wait until we complete our citizen-funded incorporation feasibility study before taking an
annexation vote Actually if the Association is able to promptly engage a firm to examine the
numbers in this report and in the LAFCO SOI financial analysis they should be able to assess
the prospects of incorporation in roughly the same time frame as the City s consideration of an-
nexing Sunset Beach
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e e ® o e
Annexation
The third feature of this report is to outline the procedures related to the possible annexation of
Sunset Beach to Huntington Beach Annexations detachments consolidations and other forms
of governmental reorganization are overseen by the Local Agency Formation Commission
(LAFCO) of each county Established in 1963 LAFCOs have the authority to approve annexa-
tions per Sections 560000 et seq of the California Government Code
As mentioned at the beginning of this report state law Orange County and the local LAFCO
encourage the elimination of unincorporated islands due to the inefficiency and cost of large
counties providing municipal services to these small areas Additionally pursuant to Govern-
ment Code Section 56425 LAFCO is required as a planning tool to identify logical municipal
service providers for areas throughout the County and to establish Spheres of Influence for all
cities and special districts As part of this mandate the LAFCO Commission recently included
the Sunset Beach community into Huntington Beach s Sphere of Influence (SOI) Because of
the size of the Sunset Beach community (under 150 acres) the area may be annexed into the
City of Huntington Beach under the streamlined process provided for small island annexations
Further because Sunset Beach is within the Huntington Beach SOI it may only be annexed to
the City of Huntington Beach not to any other city Alternative options for the area include in-
corporation or remaining incorporated although the feasibility of these options would need to be
explored further
Since Sunset Beach is an unincorporated island (less than 150 acres) its annexation can oc-
cur under the provisions of Government Code Section 56375 3 This means that LAFCO shall
approve the annexation if initiated by the City without resident protest
Within this context this section outlines the steps required for this annexation to occur along
with possible land use planning actions that the City may want to pursue
Steps Toward Annexation
If the City of Huntington Beach determines that it would be advantageous to annex Sunset
Beach the steps summarized in the following paragraphs would need to be followed
1 The City of Huntington Beach would submit an application to the Orange County
LAFCO which should contain the following information and related materials
• LAFCO processing fees (may be waived for island annexations)
• Justification of Proposal Questionnaire
• A Plan for Services
• CEQA documents (this may involve a Negative Declaration or less)
Page 32
-495- Item 19 - Page 49
W 9 W i s
® Resolutions by the affected agencies agreeing to a transfer/split of the ad
valorem property tax revenues generated in the subject territory2
Prezoning3 and
® Indemnification agreement signed by the applicant
2 Within 30 days of the application LAFCO sends a status letter notifying the City that
the application is either complete or incomplete
3 Approximately 30 days after the submission of the application
® LAFCO notices the County Assessor of the proposal
The Assessor determines which Tax Rate Areas (TRA) are involved and
calculates the total assessed valuation (AV) of the affected territory
The Assessor issues a report of the TRAs and AV to the County Auditor
The Auditor determines the total property tax revenues for the area proposed
for annexation and issues a report to the City and the County of the total
revenues involved and
® The City and County are notified that they have 60 days to reach an
agreement on the transfer of property tax revenue from the County to the
City although the Master Property Tax Agreement can be used for this
purpose
4 Upon determination by the LAFCO Executive Officer that the application is complete
the Executive Officer issues a Certificate of Filing and sets a hearing date for the
proposal
5 LAFCO notices and holds a public hearing on the proposed annexation and its
Commission takes one of the following actions
0 Approves the application subject to terms and conditions or
2 This is already addressed in the Master Property Tax Agreement between the City and the County al
though both agencies could negotiate a different property tax exchange for this area if this were their in
tent
3 A resolution is required that specifies the planned land use for this area prior to a hearing on this annex
ation by the LAFCO Commission While the existing zoning and Specific Plan could be used for this re
quirement the City would need to first modify its Zoning Map as part of this Prezonmg requirement
4 These revenues have already been estimated as part of the LAFCO Sphere of Influence report and are
used in this fiscal analysis The Auditor Controller however will still complete the precise and official final
amount as part of the formal annexation process
Page 33
Item 19 - Page 50 -496-
e e e s a
Approves the application with modifications and subject to terms and
conditions'
6 Within 35 days of the hearing LAFCO adopts a resolution making determinations
and approving the application and sends a copy of the resolution to the applicant
7 Normally at this point if the application is approved LAFCO sets a protest hearing
for the annexation However for small island annexations state law requires that the
LAFCO Commission approve the annexation and waive the protest proceedings
8 If the annexation is ordered LAFCO sends a Certificate of Completion to the County
Recorders Office following a 30-day reconsideration period and upon satisfaction of
all terms and conditions in the resolution ordering the annexation
9 Upon recordation LAFCO sends documents and fees which are paid by the appli-
cant to the State Board of Equalization for the purpose of alternating-their TRAs to
reflect the change of organization
One requirement of the initial LAFCO application is to prezone the area prior to consideration
of the annexation application by the LAFCO Commission Probably the most expeditious me-
thod to accomplish a prezoning is to use the existing County zoning Possibly useful to this
process is an already adopted County Specific Plan for Sunset Beach Still the City Zoning Map
would need to be revised to be extended to the Sunset Beach community as part of the prezon-
ing process before this possible annexation could be considered by the LAFCO Commission It
should be noted that state law requires that zoning designated during the prezoning process
remain in place for two years
The area also has a Local Coastal Plan (LCP) albeit one that was adopted some years ago
While the annexation is proceeding and subsequently after the annexation is accomplished var-
ious studies can be completed to accomplish if needed a more conforming zoning pattern for
the area
From the City s perspective the only requirement for this annexation prior to any action by the
City Council is an annexation feasibility study required by the City s General Plan including a
fiscal and operational analysis This requirement of the General Plan is met by this study and
report
Although not required prior to annexation there are other planning entitlements that should be
considered These include
1 General Plan Amendment to establish land use
2 A Local Coastal Program Amendment which was adopted in 1990 The City would
need to amend its LCP to include this new area which will then become the City s
zoning for Sunset Beach Also a Zoning Text Amendment to formally adopt the Spe-
cific Plan would be required
5 The LAFCO Commission does not have the discretion to deny an application for an island annexation
initiated by the City
Page 34
-497- Item 19 - Page 51
8 HZE=MMZMMHMMMi i
Coastal staff informed the City that other than normal coastal resource issues one recurring
issue (in Sunset Beach) has been requests from property owners to convert visitor serving
commercial sites to residential according to City staff notes Apparently neither Coastal nor
County staff have supported these requests
One of the concerns of the Sunset Beach Community Association is what they view as undesir-
able land uses such as medical marijuana dispensaries tattoo parlors etc While their concerns
have been expressed in the context of desiring regulation through the business license tax
such uses can be controlled through land use regulations Addressing these and other land use
issues plus the apparent desire of the Association to otherwise maintain their LCP and Specific
Plans is an important dialogue that should occur with residents of the Sunset Beach community
This would suggest conducting community meetings possibly with a facilitator in reviewing the
community s plans and planning for the future of the City if the annexation is pursued
Page 3
Item 19 - Page 52 -498-
-499- Item 19 - Page 53
SUNSET BEACH INCORPORATION
PRELIMINARY FEASIBILITY ANALYSIS
(PFA)
FINAL ®RAFT
MAY 14 ) 2010
W1 LLDAN
Financial Services
Oakland Office Corporate Office Sacramento Office
1700 Broadway 27368 Via Industna 2150 River Plaza Dr
6t" Floor Suite 110 Suite 300
Oakland CA 94612 Temecula CA 92590 Sacramento CA 95833
Tel (510)832 0899 Tel (800) 755 MUNI (6864) Tel (916) 563 1635
Fax (510)832 0898 Fax (909)587 3510 Fax (916) 924 3644
www willdan com
Item 19 - Page 54 -500-
TABLE OF CONTENTS
EXECUTIVE SUMMARY 4
Purpose of Study 4
Key Assumptions 4
Base Year 4
Boundary 4
Service Levels 4
Organization of the New City Three Service Scenarios 6
Revenue Neutrality 7
Key Findings 7
1 INTRODUCTION 13
Background 13
Assumptions 13
Incorporation Scenarios 13
Cost and Revenue Assumptions 14
Revenue Neutrality 14
2 POPULATION AND EMPLOYMENT 16
Existing Development 16
Development and Projected Service Population 16
3 SERVICE PLAN & METHODOLOGY 17
Municipal Services Analysis and Plan 17
Current Service Providers 17
Projected Future Service Providers 17
Revenue and Cost Estimating Methodologies 20
Per Capita Method 20
Case Study Method 21
4 COST ANALYSIS 22
Service Levels 22
Proposed Staffing Plan 22
Other (Non-Personnel) Costs 26
City Council 26
Police Services 26
Animal Control 26
Non Departmental Costs 26
Greenbelt Restrooms and Parking Lot Costs 27
Beach Maintenance 27
Lifeguards 27
Road Traffic Signal and Streetlight Maintenance Costs 27
Total Costs 28
5 REVENUE ANALYSIS 31
Property Tax 31
Land Use 31
VV WILLDAN
F)anc i5rary a,es 1 Z
-501- Item 19 - Page 55
Final Draft Sunset Beach Preliminary Feasibility Analysis
Assessed Value 31
Property Tax Allocation 34
County General Fund Property Tax Allocation 34
County Library and OCFA 35
Tax Allocation Factor 35
Property Tax Revenue Projections 36
Other Taxes 36
Sales Tax 36
Property Transfer Tax 36
Transient Occupancy Tax 39
Utility Users Tax 41
Gas Tax 43
Vehicle License Fees 43
Prior Law 43
Assembly Bill 1602 44
Senate Bill 301 44
Other Revenues 44
Franchise Fees 44
Fines Forfeitures and Penalties 45
Charges for Services 45
Parking Meters—Warner Lot 45
Junior Lifeguards 45
Use of Money and Property 45
Business License Tax 45
Other Tax and Revenue Projections 46
6 RESULTS 48
Feasibility 48
Conclusion 48
APPENDIX A A-1
ABOUT WILLDAN B-1
WILLDAN
Financial Swvtces ZZ
Item 19 - Page 56 -502-
LIST OF TABLES AND FIGURES
FIGURE E 1 PROPOSED SUNSET BEACH BOUNDARY 5
TABLE E 1 INCORPORATION SCENARIO PROFILES 6
TABLE E 2 NET REVENUE SUMMARY-SCENARIOS COMPARED 8
TABLE E 3 NET REVENUE DETAIL-SCENARIO 1 10
TABLE E 4 NET REVENUE DETAIL-SCENARIO 2 11
TABLE E 5 NET REVENUE DETAIL-SCENARIO 3 12
TABLE 2 1 CURRENT SERVICE POPULATION 16
TABLE 3 1 CURRENT&PROJECTED FUTURE SERVICE PROVIDERS 19
TABLE 4 1 PROPOSED STAFFING BY DEPARTMENT 23
TABLE 4 2 ANNUAL SALARY&CONTRACT EMPLOYEE EXPENSE 23
TABLE 4 3 PERSONNEL&CONTRACT EMPLOYEE COSTS 25
TABLE 4 4 NON-PERSONNEL COSTS 29
TABLE 4 5 COST SUMMARY 30
TABLE 5 1 ASSESSED PROPERTY VALUE 33
TABLE 5 2 NET COUNTY COST 35
TABLE 5 3 PROPERTY TAX TRANSFER TAX ALLOCATION FACTOR 36
TABLE 5 4 PROPERTY TAX REVENUE 37
TABLE 5 5 SALES TAX REVENUE 37
TABLE 5 6 PROPERTY TRANSFER TAX REVENUE 37
TABLE 5 7 TRANSIENT OCCUPANCY TAX-VACATION RENTALS 39
TABLE 5 8 TRANSIENT OCCUPANCY TAX REVENUE 40
TABLE 5 9 SUNSET BEACH UTILITY USERS TAX REVENUE 42
TABLE 5 10 ANNUAL UTILITY USERS TAX REVENUE 42
TABLE 5 11 PER CAPITA&OTHER REVENUE 47
TABLE 6 1 NET REVENUE DETAIL-SCENARIO 1 49
TABLE 6 2 NET REVENUE DETAIL-SCENARIO 2 50
TABLE 6 3 NET REVENUE DETAIL-SCENARIO 3 51
TABLE A 1 GENERAL GOVERNMENT NET COUNTY COST A-1
TABLE A 2 SHERIFF SERVICES NET COUNTY COST A-1
TABLE A 3 PER CAITA REVENUE A-2
TABLE A 4 AUDITOR S RATIO A-3
TABLE A 5 SUNSET BEACH GREENBELT MAINTENANCE COSTS A 3
TABLE A 6 UTILIITES USERS TAX COMPARISON A-4
.,CA/W I LLDAN
F nane al Servrces 111
-503- Item 19 - Page 57
Executive Summary
Purpose of Study
This report presents a Preliminary Feasibility Analysis (PFA) of the incorporation of the
community of Sunset Beach in Orange County California The purpose of this initial fiscal
review is to determine if incorporation of the community of Sunset Beach is feasible in
terms of the proposed new city s service costs and revenues
The analysis presented here is not intended to be a comprehensive fiscal analysis (CFA) as
required by the Orange County (County) Local Agency Formation Commission (LAFCo)
when cityhood proponents make a formal application for incorporation The intent of the
PFA is to provide a preliminary fiscal analysis that assists the proponents of cityhood in
determining whether to proceed with an application for incorporation As would be the case
for a CFA LAFCo guidelines were referenced in the design of the PFA s assumptions
methods and scope of analysis
Key Assumptions
This analysis evaluates the feasibility of a new city government and shows forecasted
revenues and expenditures of the proposed new city for the first ten years of operation The
period analyzed begins in fiscal year (FY) 2011 12 (transition year) and ends in FY 2020 21
The analysis assumes the effective date of incorporation will be July 1 2011
Base Year
This PFA is based on County revenue and cost data from the most recent fiscal year for
which data is available, FY 2008 09 or the Base Year
Boundary
This PFA analyzed fiscal feasibility for a single boundary scenario The boundaries of the
proposed incorporation are shown in Figure E 1
Service Levels
Service levels for the newly incorporated city are assumed to remain constant at the levels
funded by current service providers in FY 2008 09
WILLDAN I 4
Franc I Services
Item 19 - Page 58 -504-
Jra Sur et Brach Prelim nary �easzbt analysts
Figure E 1
Sunset Beach
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WILLDAN S
M nanc at Senv ces
�71
Final Draft Sunset Beach Preliminary Feasibility Analysis
Organization of the New City Three Service Scenarios
This analysis examines three different service delivery options for feasibility of the proposed
city Scenario 1 or the `Limited Services scenario Scenario 2 or the Preferred Services'
scenario and Scenario 3 or the "Maximum Services scenario The three scenarios are
evaluated in order to test a range of incorporation alternatives for cityhood proponents
In all three scenarios, the new city is assumed to accept direct responsibility for general
government services including creation of a city council and other legislative and
administrative functions, and accept contract responsibility for police public works
(including road maintenance) animal control and development services
Contracts for these services may occur between the new city and the County, a neighboring
city or a private firm This arrangement is consistent with other recent incorporations in the
County of Orange and elsewhere in Southern California It is also assumed that the County
will retain some services
This analysis looks at two funds that the new city will establish the general fund and the
road fund Costs and revenues are examined for each fund
Table E 1 summarizes three scenarios analyzed in this study It shows which services are
funded by each scenario, which revenue sources are utilized and highlights the different
utility user tax rates needed to fund the services provided Each higher number scenario adds
service responsibilities to the new city
Table E 1 Incorporation Scenario Profiles
Scenario 1 Scenario 2 Scenario 3
Limited Services Preferred Services Maximum Services
New City Hires Full and Part Time Yes Yes Yes
Staff
Police Protection Seal Beach' Seal Beach' Seal Beach'
Fire Protection OCFA2(No Change) OCFA2(No Change) OCFA2(No Change)
Ownership and Maintenance of County(No Change)3 City City
Pacific Avenue Greenbelt and
Restrooms
Ownership and Maintenance of County(No Change) County(No Change) City Starting in Year Six
Beachfront and Lifeguard Program
Metered(Visitor)and Permit No No Yes
(Resident)Parking
Utility User Tax Rate 5 00% 7 50% 10 00°/
Notes
'Contract service with Seal Beach would require approval of the Seal Beach City Council
2OCFA is Orange County Fire Authority
'The Sunset Beach Sanitary District is an alternate provider of the maintenance
Source Willdan Financial Services
WILLDAN I 6
F n�c I Sery ces
Item 19 - Page 60 -506-
Final Draft Sunset Beach Preliminary Feasibility Analysis
Common to all scenarios expanded utility user taxes (UUT) are enacted to fund City
expenditures on services to residents and businesses The major difference between Scenario
1 and Scenario 2 is that in Scenario 2 the new city takes responsibility for the maintenance of
the greenbelt and restrooms along North and South Pacific Avenue The UUT rate is higher
in Scenario 2 compared to Scenario 1 In the "Maximum Services scenario responsibility
for the beach is added to the services provided by the new city
The major difference between Scenario 3 and the first two scenarios is the new city's
assumption of costs in Scenario 3 for beach maintenance and the lifeguard program starting
in the sixth year of cityhood Prior to the sixth year of cityhood the County provides these
sexy ices Metered parking is installed so that visitors pay a share of added City costs and
residents are issued parking permits at minimal cost for on-street parking Scenario 3 also
has higher utility user taxes than Scenarios 1 and 2 to pay for these services but the tax
rates are lower than those in the City of Seal Beach
In each scenario where the new city funds services which are now a County responsibility
the City would define the service level and manage the service delivery Full and part time
professional staff would carry out these duties and be given direction by the new city
council
Revenue Neutrality
Under the revenue neutrality law enacted in 1992 ILAFCo cannot approve a proposed
incorporation unless it finds that the county and affected special districts are not adversely
impacted by the transfer of costs and revenues to the new city Statutory requirements
determine the revenues transferred to a new city such as property tax
If the analysis anticipates negative impacts then negotiation with the County would be
required for the new city to mitigate these impacts All revenue sources may be included in
the negotiations Estimated revenue neutrality payments are not included in this anah sis
Key Findings
Feasibility
The fiscal feasibility of the proposed city is evaluated based on net revenue (revenues minus
costs) as a percent of total costs and trends in the City s fund balances As a guide a new
city is considered to be feasible of net revenue is within plus or minus 10 percent of total
costs in a given year (or total revenue is more than 110 percent of costs) and the city s fund
balances in a given year are greater than 10 percent of the annual revenue
The minimum legal requirement for making a finding of fiscal feasibility as stated in
Government Code Section 56720 (e) requires the proposed city to receive revenues
sufficient to provide public services and facilities and a reasonable reserve during the three
fiscal years following incorporation This studv includes analysis over a ten year period to
have a more complete picture of the fiscal balance of the city given that certain state
subventions are reduced after five years pursuant to statute The analysis also includes a five
percent contingency which is assumed to be expended each year
The summary results of the analysis are presented in Table E 2
)VWILLDAN vicI 7
F want W 3a es
-507- Steen 19 = Page 61
Final Draft Sunset Beach Preliminary Feasibility Analysis
Table E 2 Net Revenue Summary -- Scenarios Compared
General Fund In FY Scenario 1 - Scenario 2 Scenario 3 -
2020 21 (Year 10) Limped ServlceS2 Preferred Servlces3 Maximum Services4
Costs $1 190 900 $1 290 500 $1 534 000
Revenues $1 040 200 $1 182 800 $1 579 700
Net Revenues $150 700 $107 700 ($45 700)
Net Revenues % Costs 14% 9% 3%
Reserve Fund Balance $1 346 700 $979 600 $1 058 500
Reserves % Revenues 129% 83% 67%
Feaslble75 Yes Yes Yes
'Road Fund detail Is shown in Tables E 3 through E 5
2 in the limited services scenario the new city assumes responsibility for general government public works and police
services UUT Is charged at 5%for applicable utilities The County or the Sanitary District will assume responsibility
for maintaining the greenbelt and beach
3 In the preferred services scenario the new city assumes responsibility for general government public works police
services and maintenance of the greenbelt UUT Is changed at 7 5 A for applicable utilities The County keeps
responsibility for beach maintenance
4 In the maximum services scenario the new city assumes responsibility for general government public works police
services maintenance of the greenbelt and beach maintenance UUT Is charged at 10%for applicable utilities
Metered parking Is installed In the Warner parking lot to offset beach maintenance costs
5 Feasibility is determined by fund reserves greater than 10 percent of annual revenues and net revenues within+/
10 percent of costs(or total revenues more than 110 percent of total costs)
Source Wllldan Financial Services
Conclusion
Each scenario in this analysis shows net revenue that is within plus or minus 10 percent of
total costs or total revenue that is more than 110 percent of costs Additionally each
scenario maintains a fund balance in excess of 10 percent of operating revenue annually
Given both findings the analysis indicates that each scenario meets the criteria for a feasible
incorporation
It is important to note that while the initial years of the analysis for Scenarios 1 and 2 show
negative net revenue and negative fund balances the incorporation is still deemed feasible
In actual practice the new city would not assume responsibility for providing all services
during the transition year (the period of time between the effective date of incorporation and
July 1 following the effective date)
WILLDAN J
F nanc al Services 8
Item 19 - Page 62 -508-
Final Draft Sunset,beach Preliminary Feasibility Analysts
During the transition period the County is obligated to provide certain services to the new
city while the new city establishes itself and accrues the necessary revenues to fund its
services The County continues to receive certain revenues including property tax and half
of sales tax revenues among others during the transition year The new city as result has
ample revenues and significant reduced first year costs
This document does not examine transition period cash flow, rather it seeks to deternune
overall fiscal viability through the ten-year timeframe Should the Community ultimately
decide to seek cityhood the Comprehensive Fiscal Analysis (CFA) required will examine
transition period issues in greater depth
In Tables E 3, E 4, and E 5 detailed information about all revenues and costs is presented
The tables draw from the cost assumptions presented in Chapter 4 and the revenue
assumptions presented in Chapter 5 Results are separated for the new city's general fund
and road fund and shown for both funds combined
=509- Itel's'i 19 - Page 63
Final Draft Sunset Beach Preliminary Feasibility Analysis
° Table E 3 Net Revenue Detail Scenario 1 Limited Services Scenario
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
FY Ending 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Fund
Revenues
Property Taxes $ 176 000 $ 175 000 $ 174 000 $ 173 000 $ 173 000 $ 172 000 $ 171 000 $ 171 000 $ 170 000 $ 170 000
Sales Tax 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000
Property Transfer Tax 19 100 19 800 20 500 21 300 22 000 22 800 23 700 24 500 25 400 26 300
Transient Occupancy Tax 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100
Utilities Users Tax 197 200 197 200 197 200 197 200 197 200 197 200 197 200 197 200 197 200 197 200
Licenses and Permits 2200 2200 2200 2200 2200 2200 2200 2200 2200 2200
Franchise Fees 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300
Fines and Penalties 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800
Charges for Services 147 000 149 000 150 000 151 000 153 000 155 000 155 000 157 000 160 000 160 000
Vehicle License Fees 65 000 98 000 91 000 85 000 78 000 72 000 72 000 72 000 72 000 65 000
Use of Money&Property 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Total $ 1 176 700 $ 1 211 400 $ 1 205 100 $ 1 199 900 $ 1 195 600 $ 1 191 400 $ 1 191 300 $ 1 194 100 $ 1 197 000 $ 1 190 900
Costs
City Council $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500
City Manager 81 900 83 000 83 000 84 000 85 100 85 100 86 100 87 200 88 200 89 300
City Attorney 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000
City Clerk 71 000 75 000 74 000 78 000 77 000 80 000 78 000 81 000 80 000 83 000
City Treasurer 44 100 45 200 46 200 46 200 47 300 48 300 48 300 49 400 49 400 50 400
Development Services 183 800 185 900 186 900 189 000 191 100 193 200 194 300 196 400 199 500 200 600
General Plan 167 000 167 000 166 000
Police 444 500 378 200 382 000 385 800 389 700 393 600 397 500 401 500 405 500 409 600
° Animal Control 800 800 800 800 800 800 800 800 800 800
Non Departmental 102 400 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000
® Contingency @ 5 percent 61,000 57,000 58,000 49,000 50,000 50,000 51,000 51,000 51,000 52,000
° Total $ 1 219 000 $ 1 146 600 $ 1 151 400 $ 987 300 $ 995 500 $ 1 005 500 $ 1 010 500 $ 1 021 800 $ 1 028 900 $ 1 040 200
Net Revenue $ (42 300) $ 64 800 $ 53 700 $ 212 600 $ 200 100 $ 185 900 $ 180 800 $ 172 300 $ 168 100 $ 150 700
Net Revenue/Costs (3/) 6/ 5/ 22/ 20/ 18/ 18/ 17/ 16/ 14/
General Fund Operating Reserve $ (42 300) $ 22 500 $ 76 200 $ 288 800 $ 488 900 $ 674 800 $ 855 600 $ 1 027 900 $ 1 196 000 $ 1 346 700
Road Maintenance Fund
Revenues
Gas Tax $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 56,800 $ 56,800 $ 56,800
Total $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 56 800 $ 56 800 $ 56 800
Costs
Road Maintenance $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500
Net Revenue $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (61 700) $ (61 700) $ (61 700)
Net Revenue/Costs (50/) (50/) (50 A) (50/) (50/) (50/o) (50/) (52/) (52/) (52/)
Net Revenue All Funds $ (101 000) $ 6 100 $ (5 000) $ 153 900 $ 141 400 $ 127 200 $ 122 100 $ 110 600 $ 106 400 $ 89 000
Net Revenue/Costs (8/) 0/ (0/) 14/ 13/ 11/ 11/ 10/ 9/0 8/0
Operating Reserve All Funds (101 000) (36 200) 17 500 230 100 430 200 616 100 796 900 966 200 1 134 300 1 285 000
Reserve/of Revenues (8/) (3/) 1/ 18/ 34/ 49/ 64/ 77/ 90/ 103/
Sources Wtlidan Financial Services
VVI LLDAN 10
F ra is al Services
h Draft Sunset Beach Preliminary Feastbtltty Al,alysis
Table E 4 Net Revenue Detail Scenario 2 Preferred Services Scenario
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
FY Ending 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Fund
Revenues
Property Taxes $ 176 000 $ 175 000 $ 174 000 $ 173 000 $ 173 000 $ 172 000 $ 171 000 $ 171 000 $ 170 000 $ 170 000
Sales Tax 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000
Property Transfer Tax 19 100 19 800 20 500 21 300 22 000 22 800 23 700 24 500 25 400 26 300
Transient Occupancy Tax 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100
Utilities Users Tax 295 800 295 800 295 800 295 800 295 800 295 800 295 800 295 800 295 800 295 800
Licenses and Permits 2200 2200 2200 2200 2200 2200 2200 2200 2200 2200
Franchise Fees 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300
Fines and Penalties 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800
Charges for Services 147 000 149 000 150 000 151 000 153 000 155 000 155 000 157 000 160 000 160 000
Vehicle License Fees 65 000 98 000 91 000 85 000 78 000 72 000 72 000 72 000 72 000 65 000
Use of Money&Property 13 000 13 000 13 000 13 000 13 000 13 000 13 000 13 000 13 000 13 000
Total $ 1 276 300 $ 1 311 000 $ 1 304 700 $ 1 299 500 $ 1 295 200 $ 1 291 000 $ 1 290 900 $ 1 293 700 $ 1 296 600 $ 1 290 500
Costs
City Council $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500
City Manager 81 900 83 000 83 000 84 000 85 100 85 100 86 100 87 200 88 200 89 300
City Attorney 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000
City Clerk 71 000 75 000 74 000 78 000 77 000 80 000 78 000 81 000 80 000 83 000
City Treasurer 44 100 45 200 46 200 46 200 47 300 48 300 48 300 49 400 49 400 50 400
Development Services 183 800 185 900 186 900 189 000 191 100 193 200 194 300 196 400 199 500 200 600
General Plan 167 000 167 000 166 000
Police 444 500 378 200 382 000 385 800 389 700 393 600 397 500 401 500 405 500 409 600
Animal Control 800 800 800 800 800 800 800 800 800 800
e Non Departmental 102 400 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000
Greenbelt 123 600 124 900 126 200 127 500 128 800 130 100 131 400 132 800 134 200 135 600
Contingency @ 5 percent 67,000 64,000 64,000 56,000 57,000 57,000 57,000 58,000 59,000 59,000
Total $ 1 348 600 $ 1 278 500 $ 1 283 600 $ 1 121 800 $ 1 131 300 $ 1 142 600 $ 1 147 900 $ 1 161 600 $ 1 171 100 $ 1 182 800
Net Revenue $ (72 300) $ 32 500 $ 21 100 $ 177 700 $ 163 900 $ 148 400 $ 143 000 $ 132 100 $ 125 500 $ 107 700
Net Revenue/Costs (5/) 3/ 2/ 16/ 14/ 13/ 12/ 11/ 11/ 9/
General Fund Operating Reserve $ (72 300) $ (39 800) $ (18 700) $ 159 000 $ 322 900 $ 471 300 $ 614 300 $ 746 400 $ 871 900 $ 979 600
Road Maintenance Fund
Revenues
Gas Tax $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 56,800 $ 56,800 $ 56,800
Total $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 56 800 $ 56 800 $ 56 800
Costs
Road Maintenance $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500
Net Revenue $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (61 700) $ (61 700) $ (61 700)
ins+ Net Revenue/Costs (50/) (50/) (50/) (50/) (50/) (50/) (50/) (52/) (52/) (52/)
Net Revenue All Funds $ (131 000) $ (26 200) $ (37 600) $ 119 000 $ 105 200 $ 89 700 $ 84 300 $ 70 400 $ 63 800 $ 46 000
Net Revenue/Costs (9/) (2/) (3/) 10/ 6/ 7/ 7/ 5/ 5/ 4/
Operating Reserve All Funds (131 000) (98 500) (77 400) 100 300 264 200 412 600 555 600 684 700 810 200 917 900
Reserve/of Revenues (10/) (7/) (6/) 7/ 19/ 311 411 511 60/ 68/
u
T Source Willdan Financial Ser ces
WILLDAN 11
Final Draft Sunset Beach Prelzmznary Feaszbzlzty Analysis
e Table E 5 Net Revenue Detail Scenario 3 Maximum Services Scenario
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
FY Ending 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Fund
Revenues
Property Taxes $ 176 000 $ 175 000 $ 174 000 $ 173 000 $ 173 000 $ 172 000 $ 171 000 $ 171 000 $ 170 000 $ 170 000
Sales Tax 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000
Property Transfer Tax 19 100 19 800 20 500 21 300 22 000 22 800 23 700 24 500 25 400 26 300
Transient Occupancy Tax 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100
Utilities Users Tax 394 300 394 300 394 300 394 300 394 300 394 300 394 300 394 300 394 300 394 300
Licenses and Permits 2200 2200 2200 2200 2200 2200 2200 2200 2200 2200
Franchise Fees 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300
Fines and Penalties 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800
Charges for Services 147 000 149 000 150 000 151 000 153 000 155 000 155 000 157 000 160 000 160 000
Vehicle License Fees 65 000 98 000 91 000 85 000 78 000 72 000 72 000 72 000 72 000 65 000
Parking Meters 103 000 103 000 103 000 103 000 103 000 103 000 103 000 103 000 103 000 103 000
Junior Lifeguards 40 000 40 000 40 000 40 000 40 000
Use of Money&Property 15 000 15 000 15 000 15 000 15 000 15 000 15 000 15 000 15 000 15 000
Total $ 1 479 800 $ 1 514 500 $ 1 508 200 $ 1 503 000 $ 1 498 700 $ 1 534 500 $ 1 534 400 $ 1 537 200 $ 1 540 100 $ 1 534 000
Costs
City Council $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500
City Manager 81 900 83 000 83 000 84 000 85 100 85 100 86 100 87 200 88 200 89 300
City Attorney 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000
City Clerk 71 000 75 000 74 000 78 000 77 000 80 000 78 000 81 000 80 000 83 000
City Treasurer 44 100 45 200 46 200 46 200 47 300 48 300 48 300 49 400 49 400 50 400
Development Services 183 800 185 900 186 900 189 000 191 100 193 200 194 300 196 400 199 500 200 600
General Plan 167 000 167 000 166 000
Police 444 500 378 200 382 000 385 800 389 700 393 600 397 500 401 500 405 500 409 600
Animal Control 800 800 800 800 800 800 800 800 800 800
e Non Departmental 102 400 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000
Greenbelt 123 600 124 900 126 200 127 500 128 800 130 100 131 400 132 800 134 200 135 600
Beach Maintenance 113 000 55 600 56 200 56 800 57 400
Lifeguards 449 000 310 100 313 200 316 300 319 500
Contingency @ 5 percent 67,000 64,000 64,000 56,000 57,000 87,000 77,000 78,000 78,000 79,000
Total $ 1 348 600 $ 1 278 500 $ 1 283 600 $ 1 121 800 $ 1 131 300 $ 1 734 600 $ 1 533 600 $ 1 551 000 $ 1 563 200 $ 1 579 700
Net Revenue $ 131 200 $ 236 000 $ 224 600 $ 381 200 $ 367 400 $ (200 100) $ 800 $ (13 800) $ (23 100) $ (45 700)
Net Revenue/Costs 10/ 18/ 17/ 34/ 32/ (12/) 0/ (1/) (1/) (3/)
General Fund Operating Reserve $ 131 200 $ 367 200 $ 591 800 $ 973 000 $ 1 340 400 $ 1 140 300 $ 1 141 100 $ 1 127 300 $ 1 104 200 $ 1 058 500
Road Maintenance Fund
Revenues
Gas Tax $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 56,800 $ 56,800 $ WHO
Total $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 56 800 $ 56 800 $ 56 800
Costs
Road Maintenance $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500
Net Revenue $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (61 700) $ (61 700) $ (61 700)
Net Revenue/Costs (50/) (50/) (50/) (50/) (50/) (50/) (50/) (52/) (52/) (52/)
Net Revenue All Funds $ 72 500 $ 177 300 $ 165 900 $ 322 500 $ 308 700 $ (258 800) $ (57 900) $ (75 500) $ (84 800) $ (107 400)
Net Revenue/Costs 5/ 13/ 12/ 26/ 25/ (14/) (4/) (5/) (5/) (6/)
Operating Reserve All Funds $ 72 500 $ 308 500 $ 533 100 $ 914 300 $ 1 281 700 $ 1 081 600 $ 1 082 400 $ 1 065 600 $ 1 042 500 $ 996 800
Reserve/of Revenues 5/ 20/ 34/ 59/ 82/ 68/ 68/ 67/ 65/ 63/
S c Wild F Ise,
WI LLDAN 12
Financial Se"ces
1 . Introduction
This chapter provides background on the community of Sunset Beach and explains the
reasons for and objectives of this study The analysis presented here is not intended to be a
comprehensive fiscal analysis (CFA) as would be required by the Local Agency Formation
Commission (LAFCo) for an actual incorporation application Rather, the intent of this
study is to provide an initial fiscal analysis in order to determine of proceeding with an
incorporation application is advisable
LAFCo guidelines for an incorporation application were referenced and generally used as the
basis for the initial analysis For example per the LAFCo guidelines analysis was based on
the latest available Orange County budget actuals (fiscal year 2008-09 at the time the analysis
was conducted) Some simphfying assumptions were made regarding County revenues and
cost of services
Background
Sunset Beach is a small beach community in Orange County The community has
approximately 1 300 residents and 340 Jobs today It is located just south of the City of Seal
Beach and west of the City of Huntington Beach The community is primarily residential
though local serving retail land uses can be found along Pacific Coast Highway The
community is largely built-out but occasionally older properties are renovated or demolished
and replaced with newer structures
This report will evaluate whether the incorporation of this community is fiscally feasible
The benefits of incorporation include
® Local control of property and local sales taxes
• Local control over land use policy
• Local control over public facilities and infrastructure
® Local control over services such as public safety and
® Maintenance of community identity without risk of annexation by neighboring
cities
Assumptions
This analysis evaluates the feasibility of a new city government The assumed effective date
of incorporation is July 1 2011 The results presented in this report show forecasted
revenues and expenditures of the proposed new city for the first ten years of operation FY
2011 12 (transition vear) through FY 2020-21
Incorporation Scenarios
This PFA includes three service delivery scenarios The boundaries analyzed remain
consistent among each service debvery scenario
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Final Draft Sunset Beach Preliminary Feasibility Analysis
Cost and Revenue Assumptions
This study focuses on ongoing (operating and maintenance) costs to provide service to the
community of Sunset Beach Ongoing costs are typically the focus of fiscal analysis because
of the need for public agencies to generate a balanced budget on an annual basis A
suggested staffing plan is presented based on Willdan's experience with other cities Other
service costs are presented based on an analysis of the County budget
Real(Constant 2009)Dollars
All model results are calculated in real (2009 constant) dollars, because inflation is assumed
to equally affect both revenues and costs going forward
Revenues for the new city are based on the most current understanding of rates tax bases
and yields of each revenue type Because no development is projected to occur in the study
area and population remains unchanged during the planning horizon most revenues are
static in real dollar terms
There are two exceptions to this rule Vehicle license fee revenues are set by statutory
formula for newly incorporated cities And property tax is adjusted according to the
combined factors of real estate appreciation a steady rate of turnover of property and limits
on assessed valuation defined by Proposition 13
Some cost factors including salary rates and contract costs include a one-percent annual real
increase or one percent greater than inflation For personnel costs this increase reflects
standard public agency compensation policies that provide increases for length of service
(often called step increases) These increases can average five percent annually in addition
to cost of living increases (inflation) but when a new employee is lured the salary drops
back to the first step Assuming a one percent real increase in personnel and contract costs
(before inflation) is reasonable based on analysis of these costs from other cities
Capital Improvement Costs
This analysis evaluates the fiscal feasibility of ongoing operations under the new city s
General Fund and Road Fund It does not evaluate the need for or financing of capital
improvements
The transfer of potential impact fee revenues is subject to negotiations between the new city
and the County
Revenue Neutrality
As indicated in California Government Code section 56845 the incorporation of a new city
should not generate a negative fiscal impact on the affected county Fiscal impact is
determined by comparing the revenues and service delivery costs transferred from the
County to the new city If the revenues transferred by Orange County to the new city are
greater than the current cost of services transferred the incorporation would generate a
negative fiscal impact on the County In that case the new city may be obligated by LAFCO
to make revenue neutrality payments to the County
This initial fiscal review does not analyze the fiscal impacts of the incorporation on Orange
Countv to determine the effect of this revenue neutrality provision of State law In particular
to the extent that the new city would be fiscally positive with estimated revenues greater
than estimated costs it is likely that the fiscal impact on the County would be negative This
WILLDAN
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Final Draft Sunset Beach Preliminary Feasibility Analysis
case would necessitate fiscal neutrality payments by the new city to the County and reduce
the positive fiscal outlook for the new city Thus the findings of this analysis could be
significantly affected to the extent that 1 AFCO requires the new city to make revenue
neutrality payments to the County
,/WILLDAN I 15
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Population and Employment
This chapter describes the existing and projected population and employment in Sunset
Beach
Existing Development
Table 2 1 shows the estimates of 2009 resident population employees and service
population in four areas countywide for the unincorporated area only and for the two
incorporation scenarios The existing-resident population estimate of 1,319 is based on the
estimate used by Orange County LAFCo in the most recent Municipal Service Review
(MSR) study completed in 2005 The estimates of employees working within the boundaries
of the plan were provided by the State of California Employment Development Department
(EDD) wage and salary survey data (First Quarter 2009)
Service population is comprised of the individuals utilizing a particular county or city service
Different services have different service populations Some services serve residents only
Others also serve commercial and industrial development and emploN ees are used as a
proxy In order to estimate the impact of commercial development on services that are
assumed to benefit commercial as well as residential uses employees are weighted at a factor
of 0 31 This number is calculated based on the average number of work hours in a week
over the total number of non-work hours in a week (40 / 128 = 0 31)
Table 2 1 Current Service Population (2009)
County New City
Unincorp Countywide
Residents (A) 119 480 3 139 017 1 319
Employees (B)' 46 900 1 231 046 343
Weighted Employees @ 0 31 (C = B x 0 31) 14,500 381,600 106
Total (D=A+C) 134 000 3 520 600 1 425
Unincorporated employees estimated based on Countywide ratio of residents to employees
Sources California Department of Finance E 5 City/County Population and Housing Estimates 2009 California
Employment Development Department Willdan Financial Services
Development and Projected Service Population
This studv does not assume that any new development will occur in Sunset Beach in the ten
year timeframe of the analysis As such the service population for Sunset Beach as shown in
Table 2 1 is expected to remain constant throughout the ten vear timeframe of the analysis
,O/WILLDAN
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3 Service Plan & Methodology
a
The purpose of this chapter is to describe key budget assumptions and estimating methods
used in the PFA
Municipal Services Analysis and Plan
Analysis of the new city s revenues and costs requires identifying current municipal service
providers within the incorporation area boundaries and likely providers under incorporation
Those services that will be transferred to the new city form the basis for the cost of services
analysis presented in the following chapter (Chapter 4) and affect calculation of the property
tax transferred from the County (see Chapter 5) Three different service delivery plans are
examined in this analysis
Current Service Providers
The County currently provides general government animal control, public safety and public
works (including road maintenance) services The City of Huntington Beach provides water
services The Sunset Beach Sanitary District (SBSD) provides sewer solid waste and refuse
services (via contract with Rainbow Disposal) Various private utility companies provide
electric gas and telecommunication services The Orange County Fire Authority (OCFA)
provides fire protection services Orange County Harbors Beaches and Parks provides
beach maintenance lifeguard and other beach related maintenance services
Table 3 1 shows the current and future service providers examined in this analysis
Projected Future Service Providers
As shown in Table 3 1 many of the current service providers are projected to remain
unchanged These include utility service providers (e g, electric gas and
telecommunications) and some public agencies (e g OCFA libraries) This study examines
three different scenarios for the provision of municipal services Scenario 1 Scenario 2 and
Scenario 3 Each successive scenario analyzed adds different services to the responsibility of
the new city
® Scenario 1 (Limited Services Scenario) the new city assumes responsibility for
general government services including the creation of a city council for
governance and other administrative functions, and contracts for police and
public works services The Sunset Beach Sanitary District is assumed to
administer a contract with the County to maintain the greenbelt parking areas
and restroom maintenance
® Scenario 2 (Preferred Services Scenario) the new city adds maintenance of the
greenbelt and restrooms along North and South Pacific Avenue to the services it
provides Under this scenario the County would realize costs savings as it would
no longer be responsible for maintaining the greenbelt and restrooms
® Scenario 3 (Maximum Services Scenario) the new adds responsibility for beach
maintenance including lifeguard beginning in year 6 of cityhood The delay in
the transfer of this service will allow the new city five years to accrue fund
WILI.DAN ( 17
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Final Draft Sunset Beach Preliminary Feasibility Analysis
balances to fund the initial costs of the additional services The new city would
assume ownership of the beach and greenbelt It is understood that the County
would complete the improvements to the Warner parking lot necessary to collect
parking fees Additionally, the County would transfer its beach cleaning
equipment specific to Sunset Beach to the new city
This analysis assumes that the city will contract with the County or a private entity for a
number of services including animal control and road maintenance It is common for newly
incorporated cities in Orange County to contract for these services with the County to
maintain the service levels to which residents and business are accustomed
WILLDAN
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P, , Draj t Sunset Beach Preliminary Feasibility AItalyszs
Table 3 1 Current and Projected Future Service Providers
Scenario 1 Scenario 2 Scenario 3
Service Current Provider Limited Services Preferred Services Maximum Services
Electric and Gas Private utility companies No change No change No change
Fire Orange County Fire Authority No change No change No change
(Administrator) City of Huntington
Beach(Responder)
General Government County General Fund City City City
Library County Library(in Seal Beach) No change No change No change
Beach Ownership/Insurance County Harbors Beaches and No change No change City(beginning in year 6)
Parks
Beach Maintenance County Harbors Beaches and No change No change City(contract with Seal Beach
Parks beginning in year 6)2
Parking Medians and Restroom County Harbors Beaches and No change City City'
Ownership Parks
Parking Medians and Restroom County Harbors Beaches and No change City City
Maintenance Parks
Lifeguard Services County Harbors Beaches and No change No change City(contract with Seal Beach
Parks contract beginning in year 6)2
g Police County General Fund City(contract with Seal Beach)2 City(contract with Seal Beach)2 City(contract with Seal Beach)2
Public Works County General Fund City(contract with County) City(contract with County) City(contract with County)
Sewer and Refuse Sunset Beach Sanitary District No change No change No change
Telecommunications Private telecom companies No change No change No change
Water City of Huntington Beach No change No change No change
County to install parkinq equipment
2 To contract with the City of Seal Beach for these services would require approval by the Seal Beach City Council
Sources Sunset Beach Community Association Willdan Financial Services
0
AA/
W ILLDAN 1 19
F nanc al Servxe s
W
Final Draft Sunset Beach Preliminary Feasibility Analysis
Revenue and Cost Estimating Methodologies
The two methodologies used to estimate revenues and costs for the new city are the per
capita methodologv and the case study methodology More significant base year cost and
revenue components were developed based on case study analysis provided by the service
provider
Per Capita Method
The per capita modeling method represents current average countywide (or unincorporated
area) cost of service or revenue This approach is used for services and revenues that likely
would not vary substantially from current county average costs when transferred to the new
city This approach is also used to estimate costs and revenues when data specific to the area
being studied is not available
Per capita factors are calculated by dividing net cost (or revenue) by the service population
receiving the service (or generating the revenue) Per capita factors are based on
® The most recent Orange Countv budget actuals for FY 2008-09 and
® Current countywide service population (for countywide services and revenues) or
unincorporated area service population (for services and revenues only pertaining
to the unincorporated area)
Service population includes current residents and when applicable emplovment Employees
are weighted according to the service demand or revenue generation from nonresidential
development compared to residential development on a per capita basis Long-range
planning studies typically use a common weighting applied to all services and revenues
analyzed on a per capita basis that have both a residential and nonresidential component
Gathering and analyzing data on service demand and revenue generation is a time-intensive
and costly effort
Prior analysis of service demand and revenue generation data has not suggested any
common factors that seem to apply consistently across multiple jurisdictions Furthermore
the weighting factor does not affect results significantly because (1) costs and revenues
receive similar weights so net fiscal impacts change little if weighting factors change and (2)
costs and revenues that could have a significant impact are analyzed individuallv using a case
study anahsis (see below)
For the purposes of this study we use a weighting factor of 0 31 employees per resident The
weighting factor is applied consistently across all costs and revenues that have both a
resident and employment component The factor is based on the number of work hours per
week (40) divided by the number of non-work hours in a week (128) to reflect the demand
placed by businesses on municipal services relative to residents The factor assumes that
businesses primarily demand public services during business hours while demand by
residents is more constant throughout a 24 hour period
For the purposes of this study the per capita method is used for all revenue estimates except
charges for service property tax sales tax property transfer tax utihty users tax and
transient occupancv tax Those revenue sources are analyzed with the case studv method (see
below) Property tax estimates do relv on the per capita method to estimate current net
county costs to the incorporation area a component of the property tax analysis Charges for
W I LLDAN
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Final Draft Sunset Beach Preliminary Feasibility Analysts
services revenues are based on the assumed recovery of 80 percent of development services
costs through fees charged for those particular services
Case Study Method
For service costs and revenues that could vary substantially from current average per capita
levels a case study method is used The case study method uses data associated with the
specific geographic area being studied rather than current countywide or unincorporated area
averages In some cases this analysis relies on estimated contract costs provided by potential
future service providers The method used may vary depending on the specific cost or
revenue
For the purposes of this study the case study method is used for all cost estimates and as
mentioned above the property sales transient occupancy and property transfer tax analyses
WILLDAN I
Financ at Se rce 21
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Analysis
4
g Cost
This chapter describes the methodologies used to estimate the cost of services to the new
city It discusses levels of service presents a proposed municipal staffing plan and associated
personnel costs identifies non personnel costs pertaining to services and summarizes total
estimated costs
This study focuses on ongoing (operating and maintenance) costs to provide service to the
proposed City of Sunset Beach Ongoing costs are typically the focus of fiscal analysis
because of the requirement for public agencies to generate a balanced budget on an annual
basis A suggested staffing plan is presented Other service costs are presented based on an
analysis of the County budget Onetime costs due to the incorporation where applicable are
identified
Service Levels
For the purposes of this analysis service levels are assumed to remain consistent with current
levels provided by the County to the community of Sunset Beach Service levels and costs
are based on the County s most recently available actual expenditure data for FY 2008-09
If the municipal services plan anticipates that the new city will contract back with the County
for a particular service then the analysis estimates contract costs to maintain the existing
level of service If the County currently provides limited services to the unincorporated
areas to be consistent this analysis assumes that the cost of these services to the new city
will reflect the current limited level of sen,ice
To the extent that this analysis indicates that the new city may have an operating surplus, the
new city council could designate the surplus towards increasing existing levels of service
and/or adding the responsibility of providing other services
Proposed Staffing Plan
The proposed staffing plan shown below in Table 4 1 was developed by Willdan based on
its experience with contract cities including many recently incorporated cities throughout
the state I^or all of the following tables the start vear ( Year 1 ) is envisioned to be FY
2011 12 Salaries shown are in constant (2009) dollars Future year salaries assume a real
annual inflation rate of one percent FTEs per 1 000 resident population are also shown at
the bottom of Table 4 1
,�WILLDAN
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F Drart Sunset Beach Prehrninary Feaszbihty h ysts
Table 4 1 Proposed Staffing by Full Time Equivalent(FTE)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
FY Ending 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
City Manager(Half Time)
City Manager 05 05 05 05 05 05 05 05 05 05
Assistant City Manger/City Clerk
Assistant City Manger//City Clerk 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0
City Treasurer(Half Time)
City Treasurer 05 05 05 05 05 05 05 05 05 05
Development Services(Contract One day per week)
Senior Planner(contract) 02 02 02 02 02 02 02 02 02 02
City Engineer/Traffic Engineer(contract) 02 02 02 02 02 02 02 02 02 02
Building Inspector/Code Enforcement(contract) 02 02 02 02 02 02 02 02 02 02
Subtotal 06 06 06 06 06 06 06 06 06 06
TOTAL 26 26 26 26 26 26 26 26 26 26
FTE per 1 000 resident population 20 20 20 20 20 20 20 20 20 20
Notes All positions are directly employed by City unless noted as contract
A staffing level of 0 5 FTE indicates a half time position and a staffing level of 0 2 FTE indicates a contract employee working one day per week
Sources Willdan Financial Services
Table 4 2 Annual Salary&Contract Employee Expense (Per FTE)
Contract
Rate/Hr 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
City Manager 6f full time)
City Manager $ 120 000 $ 121 000 $ 122 000 $ 123 000 $ 124 000 $ 125 200 $ 126 500 $ 127 800 $ 129 100 $ 130 400
Assistant City Manger/City Clerk 6f full time)
Assistant City Manger//City Clerk $ 52 000 $ 53 000 $ 54 000 $ 55 000 $ 56 000 $ 56 600 $ 57 200 $ 57 800 $ 58 400 $ 59 000
City Treasurer(if full time)
City Treasurer $ 65 000 $ 66 000 $ 67 000 $ 68 000 $ 69 000 $ 70 000 $ 71 000 $ 72 000 $ 73 000 $ 74 000
Development Services'
Senior Planner(contract) $ 130
City Engineer/Traffic Engineer(contract) 180
Building Inspector/Code Enforcement(contract) 110
Annual real salary&contract cost increase 1 00/0
p Hours/year for contract salary 2080
3 It is envisioned that the city will only employ three staff members permanently a half time city manager a full time assistant c ty manager/city clerk and a halftime city treasurer The city s other staff needs will be filled as contract positions
S urce C ty of Villa Park Wiildan F nano al Services
1
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WII LDAN 23
Final Draft Sunset Beach Preliminary Feasibility Analysis
Table 4 2 shows the estimated salaries for these positions or the hourly wage for contract
employees It is envisioned that the city will only employ three staff members permanently a
half time city manager, a full time assistant city manager/city clerk and a half time city
treasurer The city s other staff needs will be filled as contract positions
It is envisioned that development services positions will only be needed on a limited basis
because no major development except for demolition and renovation is expected in the
community As such it is assumed that these positions will be filled with contract staff
Contract rates are based on Willdan Engineering s 2008 2009 contract rate schedule Note
that contract employees will not receive city salaried position benefits and therefore the
hourly cost shown is relatively high to compensate for the lack of a benefits package and no
salary estimate is needed
Real cost increases (cost increases above inflation) are assumed at one percent per year for
both salary and contract cost increases The city benefits rate is estimated to add 30 percent
to the annual cost of salaried positions based on an analysis of comparable cities
Total estimated personnel costs including contract personnel costs and benefits for city
employees are shown in Table 4 3
Ak/WILLDAN
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I D, L Sunset Beach Prehmtnary Feasibility, ysts
Table 4 3 Estimated Personnel &Contract Employee Costs
Benefits
Department Rate' 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
C{tv Manager
City Manager 30 00/ $ 78 000 $ 79 000 $ 79 000 $ 80 000 $ 81 000 $ 81 000 $ 82 000 $ 83 000 $ 84 000 $ 85 000
Assistant City Manger/City Clerk
Assistant City Manger/City Clerk 30 000/ $ 68 000 $ 69 000 $ 70 000 $ 72 000 $ 73 000 $ 74 000 $ 74 000 $ 75 000 $ 76 000 $ 77 000
Clty Treasurer
City Treasurer 30 00/o $ 42 000 $ 43 000 $ 44 000 $ 44 000 $ 45 000 $ 46 000 $ 46 000 $ 47 000 $ 47 000 $ 48 000
Development Services
City Planner(contract) 0 00/ $ 54 000 $ 55 000 $ 55 000 $ 56 000 $ 56 000 $ 57 000 $ 57 000 $ 58 000 $ 59 000 $ 59 000
City Traffic Engineer(contract) 0 00/ 75 000 76 000 76 000 77 000 78 000 79 000 79 000 80 000 81 000 82 000
Building Inspector(contract) 0 00/0 46 000 46 000 47 000 47 000 48 000 48 000 49 000 49 000 50 000 50 000
Subtotal $ 175 000 $ 177 000 $ 178 000 $ 180 000 $ 182 000 $ 184 000 $ 185 000 $ 187 000 $ 190 000 $ 191 000
TOTAL $ 363 000 $ 368 000 $ 371 000 $ 376 000 $ 381 000 $ 385 000 $ 387 000 $ 392 000 $ 397 000 $ 401 000
i Percent of salary
o Sources Tables 4 1 and 4 2 Willdan Financial Services
t�
WILLDAN 25
F nanciat Starv€cis
Final Draft Sunset Beach Preliminary Feasibility Analysts
Other (Non-Personnel) Costs
Other non personnel cost assumptions are described below and displayed in Table 4 5
City Council
The new city will be responsible for electing a City Council The costs associated with the
City Council include travel training and other miscellaneous expenses The annual cost for
the City Council is estimated to be $17 500 and is comparable to other similar cities in the
state
Police Services
It is common for a newly incorporated city to contract for police services Several
neighboring cities and the Orange County Sheriff Department provided estimates of service
costs for police services (including patrol and investigation) to maintain the existing level of
service in the community of Sunset Beach The Sheriff estimated that six sworn officers
would be required to serve Sunset Beach but also provided a cost estimate for providing
four officers at a lower level of service It is unclear how much of the six officer's time will
be spent specifically in Sunset Beach because those officers will also respond to calls in
other unincorporated communities also served by the sheriff
The City of Seal Beach provided two planning level cost estimates for providing police
services to Sunset Beach one at two officers and the other at three officers and a detective
The cost estimates are not intended to be finalized contract cost estimates and the Seal
Beach City Council would need to approve any police service contract offered to Sunset
Beach
The costs included in this analysis are based on the cost for providing two officers to Sunset
Beach in the August 10 2009 staff report Council Consideration — Sunset Beach
Annexation The level of service provided by three officers and one detective by Seal Beach
is higher than the level of service currently provided in Sunset Beach The level of service
provided by two officers may be roughly comparable to the existing service level provided
by the Sheriff however because of the ambiguity of the sheriff's data with regards to
officers assigned to Sunset Beach responding to calls outside of the area the actual existing
level of service cannot be estimated
,Animal Control
Animal control costs are estimated for Sunset Beach based on the OC Animal Service
budget The costs are translated into a cost per capita contract cost The cost per capita is
applied to the Sunset Beach service population to determine an annual cost for animal
services
Non-Departmental Casts
Significant non departmental costs include the cost to prepare a General Plan the cost of
services that are assumed will be contracted back to Orange County) the cost of leased
office space and of special and regular elections It is assumed the new city will purchase the
existing fire station from OCFA to use as a city hall and hold council meetings In lieu of
leasing office space for city hall the cost of financing the purchase of the fire station and
utilities for city hall is included in the analysis There may be some additional costs incurred
WI LLDAN I 26
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Final Draft Sunset Beach Preliminary Feasibility Analysts
to bring the facility up to local seismic and American Disability Act (ADA) standards The
determination of such costs is beyond the scope of this study
{greenbelt, Restrooms and Parking Lot Celts
Scenarios 1 and 3 include cost of maintaining the greenbelt restrooms and parking lots as
part of the new city's responsibilities The cost for maintaining the restrooms was estimated
based on data provided by OC Parks Greenbelt landscaping and sprinkler costs are
estimated based on the existing contract costs between the County and a private service
provider Costs include trash pickup The cost of utilities to serve the greenbelt and
restrooms was provided by OC Parks
Beach Maintenance
The cost of maintaining the beach were compiled from several sources The transfer of
these costs is only included in Scenario 3 The cost of beach cleaning was provided by Seal
Beach The cost of sand replenishment was provided by OC Harbors, Beaches and Parks
based on costs incurred in October 2009 Replenishment occurs every five to seven years
For the purposes of this analysis it is assumed that beach maintenance services will remain
the responsibility of the County through the fifth year of cityhood at which point those
services will be transferred to the Citti of Sunset Beach
Lifeguards
The cost of providing life guard services were provided by the City of Seal Beach The
transfer of these costs is only included in Scenario 3 It is assumed that the City of Sunset
Beach would contract with the City of Seal Beach for this service For the purposes of this
analysis it is assumed that lifeguard service provision will remain with the County through
the fifth year of cityhood at which point the responsibility for the provision of lifeguard
services will be transferred to the Citv of Sunset Beach
Road, Traffic Signal and Streetlight Maintenance Costs
The estimated cost of road traffic signal and streetlight maintenance services is based on
County s per lane mile and per signal unit costs provided by the County to LAFCo for use
in LAFCo s July 8 2009 hearing regarding the Huntington Beach sphere of influence The
community of Sunset Beach contains 3 98 lane miles of roadways 5 signals and 102
streetlights The annual combined cost for maintenance is $118 500
Sunset Beach receives much less traffic than most other urbanized parts of the County and
lower maintenance costs may appl} in Sunset Beach relative to the average cost countywide
Streets in Sunset Beach are smaller than the typical streets found elsewhere in the County In
the CFA that will be prepared these road traffic signal and streetlight costs should be
reNiewed and adjusted to fit maintenance cycles expected for Sunset Beach By relying on
countywide averages this PFA uses a more consern ative method of cost estimation to
minimize that chance that the PFA underestimates the true cost
Additionally the County allocated fund to repave the streets nn the community North and
South Pacific Avenue were repaved but the side streets we note It is understood that the
County is still committed to repa`ing the side streets in the near future
WILLDAN 27
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Final Draft Sunset Beach Preliminary Feasibility Analysis
Total Costs
Total costs including estimated personnel and contract employee costs (Table 4 3) and non-
personnel costs (Tables 4 4) are summarized in Table 4 5 These costs along with a five
percent contingency for General Fund related costs are also shown in the summary tables in
the Executive Summary (Tables E 1 E 2 and E 3) and in Chapter 6 (Tables 6 1 6 2 and 6 3)
/WILI_DAN
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Item 19 e Page 82 -528-
h wL Draft �urrset Rer rb Preliminary Feasibility i alysis
Table 4 4 Non Personnel Costs
Year Year Year Year Yea 5 Year Year Year Year Yea 10
Cost Factor 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
City C uncl - - - -
Council Members 5 members
Stipend $ 100 per member/month $ 6 000 $ 6 000 $ 6 000 $ 6 000 $ 6 p00 $ 6 000 $ 6 000 $ 6 000 $ 6 000 $ 6 000
Travel $ 1 000 per member 5 000 5 000 5 000 5 000 5 000 5 000 5 000 5 000 5 000 5 000
Training $ 2 500 per year 2 500 2 500 2 500 2 500 2 500 2 500 2 500 2 500 2 500 2 500
All Other $ 4000 peryear 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Subtotal $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500
C ty Menace
All Other 5/salaries $ 3 900 $ 4 000 $ 1t 000 $ 4 000 $ 4 100 $ 4 100 $ 4 100 $ 4200 $ 4200 $ 4 300
Cdv AN mey
Rate nor Similar cities $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000
Ass/sta t City Manager/City C/ k
Elections $ 2000 per election $ $ 2000 $ $ 2000 $ $ 2000 $ $ 2000 $ $ 2000
All Other 5/ salaries 3,400 3,500 3.500 3,600 3,700 3,700 3,700 3.800 3,800 3,900
Subtotal $ 3 000 $ 6 000 $ 4 000 $ 6 000 $ 4 000 $ 6 000 $ 4 000 $ 6 000 $ 4 000 $ 6 000
City Treasurer
All Other 5/ salaries $ 2 100 $ 2200 $ 2200 $ 2200 $ 2 300 $ 2 300 $ 2 300 $ 2 400 $ 2 400 $ 2 400
Development Services
General Plan $ 500 000 over 3 years $ 167 000 $ 167 000 $ 166 000
All Other 5/ salaries 8,800 8,900 8,900 9.000 9,100 9,200 9,300 9,400 9,500 9,600
Subtotal $ 175 800 $ 175 900 $ 174 900 $ 9 000 $ 9 100 $ 9200 $ 9 300 $ 9 400 $ 9 500 $ 9 600
Porte
Sheriff(contract) 1 0/ real annual nc ease $ 374 500 $ 378 200 $ 382 000 $ 385 800 $ 389 700 $ 393 600 $ 397 500 $ 401 500 $ 405 500 $ 409 600
Startup Costs $ 70 000 one time cost 70.000
Subl tal $ 444 500 $ 378 200 $ 382 000 $ 385 800 $ 389 700 $ 393 600 $ 397 500 $ 401 500 $ 405 500 $ 409 600
A mal Control(co tract) 1 0/ real annual Increase $ 800 $ 800 $ 800 $ 800 $ 800 $ 800 $ 800 $ Boo $ 800 $ 800
Non Departmental
Fire Station/City Hall Purchase' 6/ Interest loan $ 15 000 $ 15 000 $ 15 000 $ 15 000 $ 15 000 $ 15 000 $ 15 000 $ 15 000 $ 15 000 $ 15 000
Utllltl s $ 17 000 per year 17 000 17 000 17 000 17 000 17 000 17 000 17 000 17 000 17 000 17 000
Furnishings Equipment &
A Computers(start up) $ 4 000 per employee 10 400
N Insurance Similar cities 60,000 60.000 60.000 60,000 60,000 60,000 60,000 60,000 60,000 60,000
Subtotal $ 102 400 $ 92 000 $ 92 000 $ 92 000 $ 92 000 $ 92 000 $ 92 000 $ 92 000 $ 92 000 $ 92 000
G eenbe/t.Restrooms.Parking Lot
s Janitorial for 5 new Restrooms 1 0/ real annual increase $ 21 000 $ 21 200 $ 21 400 $ 21 600 $ 21 800 $ 22 000 $ 22 200 $ 22 400 $ 22 600 $ 22 800
Landscaping and Sprinklers 1 0/real annual increase 45 000 45 500 46 000 46 500 47 000 47 500 48 000 48 500 49 000 49 500
Trash Disposal 1 0/ real annual increase 15 000 15 200 15 400 15 600 15 800 16 000 16 200 16 400 i6 600 16 800
Utilities 1 0/ real annual me ease 42,600 43,000 43,400 43,800 44,200 44,600 45,000 45,500 46,000 46,500
Subtotal $ 123 600 $ 124 900 $ 126 200 $ 127 500 $ 128 800 $ 130 100 $ 131 400 $ 132 800 $ 134 200 $ 135 600
Beach Maintenance
Trash Disposal 1 0/ real annual increase $ $ $ $ $ $ 15 000 $ 15 200 $ 15 400 $ 15 600 $ 15 800
Sand Replentishment 58 000
Beach Cleaning 1 0/ real annual Increase 40,000 40,400 40 800 41,200 41,600
Subtotal $ $ $ $ $ $ 113 000 $ 55 600 $ 56 200 $ 56 800 $ 57 400
Lifecuards
Annual Cost 1 0/ real annual increase $ $ $ $ $ $ 307 000 $ 310 100 $ 313 200 $ 316 300 $ 319 500
Start Up Costs $ 142 000 one time cost 142,000
Subtot I $ $ $ $ $ $ 449 000 $ 310 100 $ 313 200 $ 316 300 $ 319 500
Public Works
Road Maintenance Cost $ 24 322 per center I ne mile $ 96 800 $ 96 800 $ 96 800 $ 96 800 $ 96 800 $ 96 800 $ 96 800 $ 96 800 $ 96 800 $ 96 800
Bata Traffc Signal Operation 6 000 annually 5 s gnals 6 000 6 000 6 000 6 000 6 000 6 000 6 000 6 000 6 000 6 000
M' St set Light Operation 15 700 n ally 102 lights 15,700 15,700 15,700 15,700 15,700 15,700 15,700 15,700 15,700 15,700
Subtotal $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 600 $ 118 500 $ 118 500 $ 118 500
N I FTE f It tm q I t t ff C 1 I t if co t I d d p lb dg Is
All Oth e I I d ppl m l g M y th de t I w is
IA A m G IEI t mbs dy C t tm I f ty f pp in l ly 30 000 p p I I
Y/ As m ire It will b P h d If rted t C ty H II A m 30 y f ed t W f$20D 000 with 6/ t t
B If g m thly hl ty bill f S is h comm 1 11 If
B d OC H m a h d P k h f d pl h hm t Oct b 2009 P OC HBP d pl h hod ry 5 t 7 y
wso B d FY2009 p I m I Is P d d by O g C ty LAFC
W
IJAN
M F na ctal services 29
W
Final Draft Sunset Beach Preliminary Feasibility Analysts
e
Table 4 5 Cost Summary
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Department 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Fund
City Council
Non Personnel $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500
City Manager
Personnel $ 78 000 $ 79 000 $ 79 000 $ 80 000 $ 81 000 $ 81 000 $ 82 000 $ 83 000 $ 84 000 $ 85 000
Non Personnel 3,900 4,000 4,000 4,000 4,100 4,100 4,100 4,200 4,200 4,300
Subtotal $ 81 900 $ 83 000 $ 83 000 $ 84 000 $ 85 100 $ 85 100 $ 86 100 $ 87 200 $ 88 200 $ 89 300
City Attorney
Non Personnel $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000 $ 45 000
Assistant City Manager/City Clerk
Personnel $ 68 000 $ 69 000 $ 70 000 $ 72 000 $ 73 000 $ 74 000 $ 74 000 $ 75 000 $ 76 000 $ 77 000
Non Personnel 3,000 6,000 4,000 6,000 4,000 6,000 4,000 6,000 4,000 6,000
Subtotal $ 71 000 $ 75 000 $ 74 000 $ 78 000 $ 77 000 $ 80 000 $ 78 000 $ 81 000 $ 80 000 $ 83 000
City Treasurer
Personnel $ 42 000 $ 43 000 $ 44 000 $ 44 000 $ 45 000 $ 46 000 $ 46 000 $ 47 000 $ 47 000 $ 48 000
Non Personnel 2,100 2,200 2,200 2,200 2,300 2,300 2,300 2,400 2,400 2,400
Subtotal $ 44 100 $ 45 200 $ 46 200 $ 46 200 $ 47 300 $ 48 300 $ 48 300 $ 49 400 $ 49 400 $ 50 400
Development Services
Personnel $ 175 000 $ 177 000 $ 178 000 $ 180 000 $ 182 000 $ 184 000 $ 185 000 $ 187 000 $ 190 000 $ 191 000
Non Personnel 175,800 175,900 174,900 9,000 9,100 9,200 9,300 9,400 9,500 9,600
Subtotal $ 350 800 $ 352 900 $ 352 900 $ 189 000 $ 191 100 $ 193 200 $ 194 300 $ 196 400 $ 199 500 $ 200 600
a
(� Police
® Non Personnel $ 444 500 $ 378 200 $ 382 000 $ 385 800 $ 389 700 $ 393 600 $ 397 500 $ 401 500 $ 405 500 $ 409 600
® Animal Control
Non Personnel $ 800 $ 800 $ 800 $ 800 $ 800 $ 800 $ 800 $ 800 $ 800 $ 800
Non Departmental
Non Personnel $ 102 400 $ 92 000 $ 92 000 $ 92 000 $ 92 000 $ 92 000 $ 92 000 $ 92 000 $ 92 000 $ 92 000
Greenbelt Restrooms Parking Lot
Non Personnel $ 123 600 $ 124 900 $ 126 200 $ 127 500 $ 128 800 $ 130 100 $ 131 400 $ 132 800 $ 134 200 $ 135 600
Beach Maintenance
Non Personnel $ $ $ $ $ $ 113 000 $ 55 600 $ 56 200 $ 56 800 $ 57 400
Lifeguards
Non Personnel $ $ $ $ $ $ 449 000 $ 310 100 $ 313 200 $ 316 300 $ 319 500
Road Fund
Public Works
Non Personnel $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500
Sources Tables 4 3 and 4 4 W Ildan F nanc al Se ces
J Y ILLDAN
TV F anc k Sirs,cos 30
5. Revenue Analysis
This section describes the methodologies used to estimate revenues for the new city and
summarizes the results
Property Tax
Property tax estimates are based on a projection of real property assessed value multiplied by
a local public agency's share of the one percent property tax called a tax allocation factor
(TAF) 1 The TAF for the new city is calculated per a statutory formula based on the cost of
services transferred to the new city
Assessed property value within an area generates property tax for all jurisdictions that serve
that area For example in an incorporated area the city general fund, county general fund
the public school district and possibly separate fire and recreation and parks district funds
would each have a TAF that in sum would equal the one percent tax
TAFs may vary by tax rate area within a jurisdiction and are calculated by the—County
Auditor-Controller The methodology used in this study to estimate property tax is explained
below
It must be noted that incorporations result in a redistribution of existing property tax
revenue Property taxes do not increase as a result of incorporation
Land Use
The only land use land use assumption used to estimate assessed value for existing
development is the holding period assumption Holding period reflects the length of time
property is held prior to re sale when the property is re-assessed at market values A holding
period of ten years is assumed for all existing development
Assessed Value
Assessed value is based on the assessed value of the current building stock and the market
value of newly constructed buildings Market value captures the current transactional prices
for residential and nonresidential property Assessed value is the value carried on the
property tax rolls for calculating property taxes Market value is almost always higher than
assessed value because Proposition 13 limits annual increases in assessed value to two
percent until the property is resold 2
This Proposition 13 constraint on assessed value requires estimating property tax based on
nominal property values and then discounting revenues to exclude inflation Discounting
revenues to real dollars (excluding inflation) makes the results consistent with all other
revenue and cost estimates generated by the fiscal model
The fiscal model assumes a nominal annual property appreciation rate of 6 7 percent The
6 7 percent property appreciation rate is based on an analysis of Federal Housing Agency s
1 Proposition 13 limits the propert` tax to one percent of assessed value unless increased by two thirds toter
approval to support bonded debt
2 California Constitution Article YIIIA
WILLDAN I 31
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Final Draft Sunset Beach Preliminary Feasibility Analysts
Housing Price Index (HPI) data The data was examined to determine the annual property
appreciation rate in the Santa Ana-Anaheim Irvine CA (MSAD) from 1995 to 2009 — the
annualized rate from low point to low point the area s real estate cycles Including the
current recession and the recession of the rnid 1990s the average annual appreciation rate is
6 7 percent
For the purposes of estimating nominal value inflation is estimated at three percent per year
Assessed value for a given year is calculated for each land use type and is the sum of the
following two values
• Existing assessed value is typically the share of total assessed value from the prior
year that is not re sold is increased by the Proposition 13 constraint of two
percent The share is based on a 10 year holding period assumption for all
existing properties
• The share of total market value from the prior year that is re-sold based on the
holding period assumptions increased by the nominal annual appreciation rate to
the current year
Total assessed value is based on the sum of assessed values for all parcels in 2009 based on
the County assessors data Total property (assessed value) is shown in Table 5 1
WILLDAN
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Table 5 1 Assessed Property Value
Y 1 Y 2 Year Y ar4 Ye 5 Year Y a 7 Y a 8 Yea 9 Y a 10
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
A d V l e(nom 1)
All Pr p t s Increased at 2/ [A] $313 080 735 $319 342 350 $325 729 197 $332 243 781 $338 888 656 $345 666 429 $352 579 758 $359 631 353 $366 823 980 $374 160 460 $381 643 669 $389 276 542 $397 062 073
All P pe t In r d t 6 7/ 1e1 313 080 735 334 057 144 356 438 973 380 320 384 405 801 850 432 990 574 462 000 942 492 955 005 525 982 991 561 223 851 598 825 849 638 947 181 681 756 642
90/ f P p t do t t no er fC A 90/1 $287 408 115 $293 156 277 $299 019 403 $304 999 791 $311 099 786 $317 321 782 $323 668 218 $330 141 582 $336 744 414 $343 479 302 $350 348 888 $357 355 866
10/ f Prop t d t [D s 10i] 33 405 714 35 643 897 38 032 038 40 580 185 43 299 057 46 200 094 49 295 501 52 598,299 56 122 385 59 882 585 63 894 718 68 175 664
Tot IN m IA ss d Val [e] $320 813 829 $328 800 174 $337 051 441 $345 579 976 $3 54 3 88 844 $363 521 876 $372 9 33 718 $382 739 881 $392 866 799 $403 361 887 $414 243 606 $425 531 530
I fl t 3/o C mp d d llv [F] 1 0000 1 0300 1 0609 1 0927 1 1255 1 1593 1 1941 1 2299 1 2668 1 3048 1 3439 1 3842 1 4258
A s d V 1 !eal) fc e F1 $311 469 737 $309 925 699 $308 449 815 $307 043 332 $305 707 556 $304 443 848 $303 253 633 $302 138 397 $301 099 688 $300 139 126 $299 258 395 $298 459 254
N m I d I f I f d I wh I d I th m I I t d f fl t b k t th b (FY 2009 09)
P 1 13 d I 1 m m m f2/p
A Iy fm k t I th S t A A h m Iry M5AD d t th t m im k t I p 1 t67/
S F d I H g Ag y H g P I d f th S t A A h Im Iry MSAD 1995 2009 O g C ty A W lid F IS ry _
e
Un
a
mP
3
a
WILLDAN 1 33
F 1anc A Services
Final Draft Sunset Beach Preliminary Feasibility Analysis
Property Tax Allocation
Assessed value is multiplied by the one percent property tax rate and then by the tax
allocation factor (TAF) applicable to the public agency to calculate property tax in nominal
dollars Nominal property tax revenue is discounted back to the present to generate revenue
estimates in real (constant 2009) dollars This approach ensures consistency with other
model fiscal estimates that are expressed in real dollars
In most cases the TAF for a new city upon incorporation is based on the services transferred
from existing public agencies to the new city If a service is transferred then propertv tax
revenue to fund that service is transferred as well For TAFs dedicated to specific services
such as for a fire or park district the entire TAF is transferred to the city if the service is
transferred For a county s general fund TAF, only a portion is transferred because while the
county transfers some services to the city such as law enforcement it retains other services
such as the courts
County General Ford Property Tax Allocation
The property tax transferred to a new incorporated city from the County s general fund
share is based on the following statutory formula
(Net county cost) x (Auditor s ratio) = New city property tax revenue in base year
Where
Net county cost = Total cost of services transferred to the new city from the
county net of designated revenues (such as charges for
services and restricted tax revenue) and
Auditor s ratio = Total general fund property taxes divided by total general
fund undesignated revenues
To calculate property tax after the base year the County Auditor-Controller calculates the
new city s TAF applied to future increases in assessed value is calculated as follows
New city property tax in base year
One percent of assessed value in base year
New city tax allocation factor (new city TAF)
Net County Cost
The first part of this formula is an estimate of the current net county cost of providing
services that will be transferred to the new city Net county costs represent service costs
funded by discretionary tax revenues such as property and sales taxes net of all fees
charges and transfers Estimated net county costs for the new city are based on both case
study analysis and on a per capita cost analysis of actual expenditure data for FY 2008-09
and are shown in Table 5 2 Transferred services include general government development
services and sheriff services
WILLDAN
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Final Draft Sunset Beach Preliminary Feasibility Analysts
Table 5 2 Net County Cost (FY09)
Service Cost
Transferred to Source of FY09 Net County
Budget Function/Service New City Transferred Cost Cost
General Government Yes Appendix Table A 1 $ 31 067
Public Protection Yes
Sheriff Patrol/Investigation Yes Appendix Table A 2 184 253
Animal Services Yes County 500
Development Services (Code
Enforcement and Planning) Yes County 6 932
Health Services No
Public Assistance No
Education No
Recreation &Cultural Services No
Debt Service No
Total $ 222 752
Auditor's Ratio
The second part of the formula used to calculate the share of the County s general fund
property tax to be transferred to the new city is the Auditors ratio The Auditors ratio
represents that share of the net cost of services that is funded by property tax revenues For
the purposes of this preliminary fiscal analysis Willdan Financial Services calculated the
Auditor's ratio using data from the County s fiscal year 2008 09 budget actuals For the CFA
the Auditor s ratio should be calculated directly by the County Auditor
County Library and O FA
The County Library and OCFA each have their own property tax allocation factors and
revenue These tax allocation factors and revenues are excluded from the analysis because
library and fire protection services are not assumed to transfer to the new city (See also the
municipal services plan discussion in Chapter 3)
Tax Allocation Factor
Table 5 3 shows the calculated property tax transfer and resulting TAF based on the
services transferred to the new city using the formula and assumptions presented above The
TAF is the same for all three scenarios
i4/WILLDAN I Financial35
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Final Draft Sunset Beach Preliminary Feasibility Analysis
Table 5 3 Property Tax Transfer Tax Allocation Factors (FY 2009)
Transfer of County General Fund Tax Base
Total Net County Cost $ 222 752
County Auditors Ratio 80 12%
Property Tax Base Transferred $ 178,000
Tax Allocation Factor
Assessed Value (FY 2008 09) $ 313 080 735
Property Tax (1% of assessed value) 1 00%
Total Property Tax Collected (1% of A V ) $ 3 131 000
Property Tax Base Transferred 178,000
Tax Allocation Factor(General Fund)' 5 69%
Note A tax allocation factor or TAF refers to a public agency s share of the one percent property tax
For every dollar of property tax revenue collected it is assumed that 5 69 cents will be allocated to Sunset
Beach
Sources Tables 5 2 and A4 Orange County FY2010 Budget Willdan Financial Services
Property Tax Revenue Projections
Total estimated General Fund propertv tax revenue is shown in Table 5 4
Other Taxes
Several other taxes will pro-,ide revenue to the new city Sales tax is the most important
source of revenue from other taxes Property transfer tax and gas tax revenues are also
included in the analysis These taxes are discussed below
Sales Tax
The estimate for annual sales tax reN enue is based on the actual 2008 09 revenue as reported
by the County in the City of Seal Beach s August 10 2009 staff report Council
Consideration— Sunset Beach Annexation Since no new retail development is projected to
occur no increases in sales tax revenue are expected Table 5 5 shows the sales tax revenue
estimate of$187 000 per year
Property Transfer Tax
Propertv transfer tax revenues are estimated using the cumulative estimates of real estate
market value and the holding period assumptions discussed in the property tax section
above Upon incorporation the new city would evenly split the current County
unincorporated area rate of $0 55 per $500 of value on each real estate transaction Tax
revenues are calculated as follows
® Land use type to calculate the value of transactions subject to tax in a that year
WILLDAN
W,4F nanckd Serve 36
Item 19 - Page 90 -536-
Final Draft Sunset Beach Prelzinmary Feasibility Analysts
o The transaction value is multiplied by the tax rate to calculate tax revenues in
current dollars and
• Tax revenues are discounted to 2009 dollars to be consistent with the other
projections in this study
Estimated property transfer tax revenue is shown in Table 5 6
Fina nc al Se a� 37
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Final Draft Sunset Beach Preliminary Feasibility Analysis
0
Table 5 4 Property Tax Revenue(2009$)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Assessed Value(Table 5 1) ]A] $ 308 449 815 $ 307 043 332 $ 305 707 556 $ 304 443 848 $ 303 253 633 $ 302 138 397 $ 301 099 688 $ 300 139 126 $ 299 258 395 $ 298 459 254
1/ Local Government Share of AV (B A t i] $ 3 084 498 $ 3 070 433 $ 3 057 076 $ 3 044 438 $ 3 032 536 $ 3 021 384 $ 3 010 997 $ 3 001 391 $ 2 992 584 $ 2 984 593
Tax Allocation Factor(Table 5 3) [o] 5 69/ 5 69/ 5 69/ 5 69/ 5 69/ 5 69/ 5 69/ 5 69/ 5 69/ 5 69/
Total Property Tax Revenue [o e c] $ 176 000 $ 175 000 $ 174 000 $ 173 000 $ 173 000 $ 172 000 $ 171 000 $ 171 000 $ 170 000 $ 170 000
S T bl 51 d53 Wlid F IS ry
Table 5 5 Sales Tax Revenue (2009$)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
E'xistin $ 187,000 $ 187,000 $ 187,000 $ 187,000 $ 187,000 $ 187,000 $ 187,000 $ 187,000 $ 187,000 $ 187,000
Total $ 187 000 $ 187 000 $ 187 000 $ 187 000 $ 187 000 $ 187 000 $ 187 000 $ 187 000 $ 187 000 $ 187 000
e
(� Sources County of Orange Wllldan Financial Services
cc
e
Table 5 6 Property Transfer Tax Revenue(2009$)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Nominal Assessed Value Properties Turning Over [Al $ 38 032 038 $40 580 185 $43 299 057 $46 200 094 $49 295 501 $52 598 299 $56 122 385 $59 882 585 $63 894 718 $68 175 664
Inflation' 161 1 0927 1 1255 1 1593 1 1941 1 2299 1 2668 1 3048 1 3439 1 3842 1 4258
Real Assessed Value Properties Turning Over ]c A/e] $ 34 804 703 $36 054 969 $37 350 147 $38 691 852 $40 081 753 $41 521 583 $43 013 135 $44 558 267 $46 158 904 $47 817 039
Property Transfer Tax Rate(Share of Sales Price) [o] 0 0550/ 0 0550/ 0 0550/ 0 0550/ 0 0550/ 0 0550/ 0 0550/ 0 0550/ 0 0550/ 0 0550/
Total Property Transfer Tax Revenue [E c o] $ 19 100 $ 19 800 $ 20 500 $ 21 300 $ 22 000 $ 22 800 $ 23 700 $ 24 500 $ 25 400 $ 26 300
I fl to t mat d t 3/ ally bed n q FY2008 09
S u c s Tabi 51 Wild F c IS ry as
uu I L.LIDAN
VV r nanc at Services 1 38
Final Draft Sunset Beach Preliminary Feasibility Analysis
Transient Occ par y Tax
The estimate for annual transient occupancy tax (TOT) revenue is based on the actual 2008
09 revenue as reported in the Seal Beach staff report The revenue is based on a 10% TOT
rate the existing rate in the unincorporated County In addition to the existing TOT this
analysis assumes that the new city will expand the types of establishments paying TOT to
include vacation rentals also at a rate of 10% Based on the vacation rentals in the area this
additional TOT re-,enue is conservatively estimated to equal $92 100 per year Table 5 7
details the estimate of TOT revenue for vacation rentals using data compiled by the Sunset
Beach Community Association
Table 5 7 Transient Occupancy Tax -Vacation Rentals
Low Season High Season
General Location Weekly Rent Weekly Rent
N Pacific Ave $ 3 000 $ 3 500
Ocean Front 1 450 2 500
S Pacific Ave 1 350 2000
Ocean Front 2200 3 400
Ocean Front 1 750 3 450
Numbered Street 1 500 2 700
Numbered Street 2 100 3 150
Ocean Front 2 250 4 500
Ocean Front 5 000 8 000
Ocean Front 3 000 5 000
Harbor 1 300 1 900
Numbered Street 2000 3 000
Ocean Front 4 900 4 900
Ocean Front 3 800 5 000
Ocean Front NA 3 500
$ 35 600 $ 56 500
Average Number of Weeks per Season 10 10
Gross Annual Vacation Rental Revenue $ 356 000 $ 565 000
10%Transient Occupancy Tax Revenue $ 35 600 $ 56 500
Total $ 92100
Source Sunset Beach Community Association www vbro corn
In total TOT revenue is estimated at $243 100 per year Annual TOT revenue estimates are
shown in Table 5 8
WILLDAN I 39
F nanc at Ser ees
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Final Draft Sunset Becacb Prelim znary Feasibility Analysis
tl�
Table 5 8 Transient Occupancy Tax Revenue (2009$)
S1 Assumption Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
FY2009 TOT
Revenue Revenue 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Fund Revenues
Transient Occupancy Tax Vacation Rentals $ 92 100 $ 92 100 $ 92 100 $ 92 100 $ 92 100 $ 92 100 $ 92 100 $ 92 100 $ 92 100 $ 92 100 $ 92 100
Existing Transient Occupancy Tax 151 000 151 000 151 000 151 000 151 000 151 000 151 000 151 000 151 000 151 000 151 000
Total Transient Occupancy Tax Revenue $ 243 100 $ 243 100 $ 243 100 $ 243 100 $ 243 100 $ 243 100 $ 243 100 $ 243 100 $ 243 100 $ 243 100
S O g C ty A dt C t II W Ild n F a c IS roc
0
0
WILLC7AN 1- e 40
nancal Sery
Final Draft Sunset Beach Preliminary Feaszbzlay Analysts
Utility Users Tax
The utility users tax (UUT) is a tax imposed on the users of certain utility services UUT is not
currently imposed by the County in unincorporated areas However the proposed City of Sunset
Beach would like to impose a UUT to supplement existing revenue sources in the event of
incorporation
To estimate UUT revenue a survey of Sunset Beach resident's and business s utility bills was
conducted by the Sunset Beach Community Association Average monthly bills for each-utility
and for each land were estimated based on the survey data Table 5 9 contains the survey data
The utilities surveyed include electric gas phone (land and cellular), and cable Potential UUT
revenue was calculated based on a percentage of the estimated monthly charges for each utility
Scenarios 1 and 2 do not require as much revenue to achieve feasibility Consequently UUT
revenue for Scenarios 1 was calculated at 5 percent Scenario 2 was calculated at 7 5 percent and
UUT revenue for Scenario 3 was calculated at 10 0 percent UUT revenue projections are shown
in Table 5 10
WILLDAN 41
F namia3 Se—ces
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Final Draft Sunset Beach Preltmtnary Feastbtltty Analysis
Table 5 9 Sunset Beach - Utility User Tax Revenue
Phone -Total et o
r) Land Use Units' Water' Electric Gas Land Phone Cell Cable Total Water4
Average Monthly Bill
Single Family $ 31 $ 124 $ 52 $ 99 $ 140 $ 69 $ 515 $ 484
Multi Family 17 109 36 75 65 87 389 372
Commercial 64 420 302 155 334 86 1361 1297
Total Monthly Utility Charges
Single Family 225 $ 7 000 $ 27 900 $ 11 700 $ 22 300 $ 31 500 $ 7 800 $ 108 200 $ 101 200
Multi Family 265 4 500 28 900 9 500 19 900 17 200 11 500 91 500 87 000
Commercial 112 7200 47 100 33 800 17 300 37 400 4 800 147 600 140 400
$ 18 700 $ 103 900 $ 55 000 $ 59 500 $ 86 100 $ 24 100 $ 347 300 $ 328 600
Estimated Annual Charges $ 224 400 $1 246 800 $ 660 000 $ 714 000 $1 033 200 $ 289 200 $4 167 600 $3 943 200
Potential Annual UUT Revenue @ 5 0% $ 11 200 $ 62 300 $ 33 000 $ 35 700 $ 51 700 $ 14 500 $ 208 400 $ 197 200
Potential Annual UUT Revenue @ 7 5% 16 800 93 500 49 500 53 600 77 500 21 700 312 600 295 800
Potential Annual UUT Revenue @ 10 0% 22 400 124 700 66 000 71 400 103 300 28 900 416 700 394 300
Note Figures have been rounded
'Estimated based on GIs parcel data
e
2 Average water bills shown net of 10/ UUT imposed by the City of Huntington Beach
N3 Cable subscribers are assumed to 50/ of households Satellite service is the other 50/ and cannot be taxed by local governments
4 The new city will not charge a UUT on water as Huntington Beach provides that service and already charges a UUT of 10/
Sources Sunset Beach Community Association Wllidan Financial Services
Table 5 10 Annual Utilities User s Tax Revenue (FY$2009)
Assumption Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
FY2009 TOT
Revenue Revenue 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Fund Revenues
Utility Users Tax Cc 5Y $ 197 200 $ 197 200 $ 197 200 $ 197 200 $ 197 200 $ 197 200 $ 197 200 $ 197 200 $ 197 200 $ 197 200 $ 197 200
Utility Users Tax na 7 5% $ 295 800 $ 295 800 $ 295 800 $ 295 800 $ 295 800 $ 295 800 $ 295 800 $ 295 800 $ 295 800 $ 295 800 $ 295 800
Utility Users Tax do 10% $ 394 300 $ 394 300 $ 394 300 $ 394 300 $ 394 300 $ 394 300 $ 394 300 $ 394 300 $ 394 300 $ 394 300 $ 394 300
Note See Appendix Table A 6 for a comparison of neighboring citites utilities users tax rates
Source Willdan Financial Services
' WILLDAN 1 42
N ran al Sery crag
Final Draft Sunset Beach Preliminary Feasibility Analysts
Gas Tax
Gas tax (highway users tax) revenue is a subvention collected by the state and allocated to
cities and counties based on a statutory formula Gas tax is a restricted revenue source for
road purposes only The gas tax plays an important role in increasing revenues for
incorporating or annexing cities without generating a negative fiscal impact on counties The
State subvention formula for gas tax does not adjust the share of statewide revenue allocated
to counties because of an annexation or incorporation Incorporated or annexed areas
receive gas tax revenue from the share of statewide revenue allocated to cities Thus
counties are able to transfer costs for road maintenance to new incorporated cities while still
retaining this revenue source
Different gas tax distributions correlate and are named based on the corresponding
California Streets and Highways Code sections For example code sections 2105 2106 2107
and 2107 5 pertain to gas tax distributions made either entirely (2107 2107 5) or partially
(2105 2106) to cities 3 Calculations of gas tax distribution are made by the State Controller s
office and are fairly complex as described in the code
Gas tax distributions are based on population and other factors such as the percentage of
registered or exempt vehicles in a city compared to the state and also miles of maintained
road Gas tax Section 2107 5 is based on an unadjusted flat rate per year based on city
resident population ranges
For this analvsis the resulting statewide per capita amounts for FY 2008-09 have been
applied for 2105 and 2107 gas tax revenues and the flat rate of$7 500 has been applied for
2107 5 gas tax revenue Revenue from Section 2106 is estimated at $4 800 annually from
section (a) Section 2106 (c) revenue is estimated at $3 26 per capita amount estimated based
on recent apportionments to the City of Huntington Beach
Vehicle License Fees
Vehicle License Fee (VLF) revenue is a subvention collected by the state and allocated to
cities and counties based on a statutory formula Historically VLF played an important role
in increasing revenues for incorporating or annexing cities while reducing the potential
negative fiscal impacts on counties
Prior Law
Previously the State subvention formula for VLF did not adjust the share of statewide
revenue allocated to counties because of an annexation or incorporation Incorporated or
annexed areas received their VLF revenue from the share of statewide revenue allocated to
cities Thus counties were able to transfer service costs while still retaining a major revenue
source
Under the law prior to adoption of the State s FY 2004-05 budget the portion of VLF
revenue available for distribution as general revenue to cities and counties was divided in
half One half was distributed to cities on a per capita basis and the other half was
distributed to counties in a similar manner County distributions were based on countywide
3 Re-,enue from Section 2104 is not included to this anal)sis as it is only allocated to counties not cities
WILLDAN
, ( 43
F nanc I SA ces
-543- Item 19 - Page 97
Final Draft Sunset Beach Preliminary Feasibility Analysis
population not lust the population of unincorporated areas Counties and cities received
approximately$60 per capita in VLF revenue in FY 2003-04
Importantly for newly incorporated cities prior law allowed the population base for
purposes of determining VLF revenue to be calculated based on three times the registered
voter population This formula was applied for the first seven years of a new city's existence,
following which the formula relies on the same population basis as other cities This
approach tended to give new cities additional income than they would have had otherwise
because the estimated population using three times registered voters is usually greater than
the actual population
Starting in FY 2004 05 most of the VLF revenue allocated to cities and all of the revenue
allocated to counties is based on assessed value growth instead of population growth in a
jurisdiction This revenue is distributed as property tax in lieu of VLF funded by each
county s ERAF (educational revenue augmentation fund) account so that existing property
tax revenue to local jurisdictions is not affected A significantly smaller portion of the VLF is
allocated to cities based on population In total $50 per capita per year in VLF revenue is
assumed (before the bonus) is assumed based on data on recent allocations
Assembly Bill 1 602
Assembly Bill 1602 (AB 1602) was signed into law in 2006 and restored VLF per capita
payments to newly incorporating cities to approximately the same levels as before the VLF—
property tax swap As enacted the bill was limited to cities incorporating between the dates
of August 5 2004 and July 1 2009 AB 1602 only provides $50 per capita
The total would be multiplied by the annual estimated resident population times a factor of
1 5 in the first year of incorporation 1 4 in the second year 1 3 in the third year 12 in the
fourth year and 1 1 in the fifth year The base $50 per capita is actually programmed to be
adjusted slightly each year as determined by the ratio of the growth of VLF revenue to the
increase in State population For the purposes of this analysis it is assumed that the $50
portion of the VLF funding remains at $50 based on the latest data from the State
Senate Bill 301
Amendments to the VLF law (Senate Bill 301) were approved in 2008 These amendments
extended the date for incorporating cities to qualify for the VLF revenue based on
population from July 1 2009 to July 1 2014
Other Revenues
The new city will receive revenue from a number of other non tax sources Some revenues
are estimated based on per capita calculations consistent with the Orange County budget
actuals for FY 2008-09 Some adjustments have been made and are discussed in the
following section
Franchise Fees
This revenue is generated through franchise agreements for services such as cable television
Franchise fee revenue was calculated based on an assumption that the new city would enact
a 5 0 percent fee of gross receipts for cable gas and electric franchises The same survey data
contained in Table 5 9 that was used to calculate UUT revenue was used to estimate
franchise fee revenue
WILLDAN
F an a1 Ser yes ! 44
Item 19 - Page 98 -544-
Final Draft Sunset Beach Preliminary Feasibility Analysts
Fines, Forfeitures and Penalties
Revenue from traffic fines is calculated based on per capita revenue assumptions from other
cities in the County It is assumed that $1 66 per resident in revenue is generated per year in
fines forfeitures and penalties
Charges for Services
For the proposed new city, charges for services are calculated based on recovery of costs
projected for the development services department Unlike other types of municipal services,
planning, development and code enforcement services can often recover up to 100 percent
of their costs through fees and charges For the new city revenue from charges for services
is based on a cost recovery rate of 80 percent applied to total development services
department costs
Parking deters - Warner Lot
Parking meter revenue is estimated based on 150 metered parking spaces and $685 of
revenue per year (parking citation revenue is not included here but it is included in fines
forfeitures and penalties above) The figure of revenue per year per parking space is derived
from the average revenue and average number of municipally maintained metered spaces in
the western region as reported in the National Parking Association's 2009 Parking in
America report
This figure is well below the parking meter revenue realized by Huntington Beach
(approximately $1 600 per space per year) and other beach communities in the region
(Manhattan Beach estimated $1 276 per space per year) Despite higher revenue generation
per space in the region the $685 per space estimate is a better estimate for Sunset Beach
since the community has an absence of a developed beachfront attracting shoppers or
people seeking greater dining or entertainment options compared to the other cities
surveyed
Junior Lifeguards
The County currently receives approximately $40,000 per year from its contract with the
Junior Lifeguards It is assumed that the new city will also receive this same revenue under
Scenario 3 in vear 6 when the new city assumes responsibility for beach maintenance and
lifeguard costs
Use of Money and Property
Revenue from use of money and property is assumed to be equal to one percent of General
Fund revenue for a given year
Business License Tax
Although the County currently does not charge a business license tax the new city may
consider imposing such a tax if it wishes to better enforce regulations within the new
city s power This analysis assumes that the new city does not adopt a business license
tax
WILLDAN I 45
Fi.vic al Se we-,
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Final Draft Sunset Beach Preliminary Feasibility Analysis
Other Tax and Revenue Projections
Projections of other taxes and revenues are shown in Table 5 11 It should be noted
that not every revenue sources is utilized in every scenario Scenario 1 includes UUT at a
rate of 5 percent Scenario 2 at a rate of 7 5 percent and Scenario 3 includes UUT at a
rate of 10 0 percent Scenario 3 includes revenue from parking meters
WI LLDAN 46
Fina�,c M se��es
Item 19 - Page 100 -546-
I-i w Draj t Sunset Beach Prelzmznary Feaszbzlzty li nalyszs
Table 511 Per Capita and Other Revenue(2009$)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue Assumptions 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Licenses and Permits
Resident Base $ 1 66 per resident $ 2200 $ 2200 $ 2200 $ 2200 $ 2200 $ 2200 $ 2200 $ 2200 $ 2200 $ 2200
Franchise Fees
Franchise Fees' $ 124 300 per year $ 124 300 $ 124 300 $ 124 300 $ 124 300 $ 124 300 $ 124 300 $ 124 300 $ 124 300 $ 124 300 $ 124 300
Fines&Penalties
Traffic Fines&ForfeitureS2
Resident base $ 2 66 per resident $ 3 500 $ 3 500 $ 3 500 $ 3 500 $ 3 500 $ 3 500 $ 3 500 $ 3 500 $ 3 500 $ 3 500
Employee base 0 82 per employee 300 300 300 500 300 300 300 _300 300 300
Total $ 3 800 $ 3 800 $ 3 800 $ 3 800 $ 3 800 $ 3 800 $ 3 800 $ 3 800 $ 3 800 $ 3 800
Charges for Services
Development Services 80/ cost recovery rate $ 147 000 $ 149 000 $ 150 000 $ 151 000 $ 153 000 $ 155 000 $ 155 000 $ 157 000 $ 160 000 $ 160 000
Vehicle License Fee WITH AB1602
VLF Per Capita Total $ 5000
AB1602 Population Bonus 1 0 15 14 1 3 1 2 11 1 1 11 11 1 0
Total Per capita rate x residents $ 65 000 $ 98 000 $ 91 000 $ 85 000 $ 78 000 $ 72 000 $ 72 000 $ 72 000 $ 72 000 $ 65 000
Parking Meters
Parking spaces3 $ 685 per parking space $ 103 000 $ 103 000 $ 103 000 $ 103 000 $ 103 000 $ 103 000 $ 103 000 $ 103 000 $ 103 000 $ 103 000
Junior Lifeguards $ 40 000 annually $ $ $ $ $ $ 40 000 $ 40 000 $ 40 000 $ 40 000 $ 40 000
Road Fund
iQ Road Fund
Highway Users Tax 21055 576 per resident $ 11 000 $ 11 000 $ 11 000 $ 11 000 $ 11 000 $ 11 000 $ 11 000 $ 8 000 $ 8 000 $ 8 000
Highway Users Tax 2106(a) 4 800 annually 4 800 4 800 4 800 4 800 4 800 4 800 4 800 4 800 4 800 4 800
Highway Users Tax 2106(c)5 326 per resident 4 000 4 000 4 000 4 000 4 000 4 000 4 000 4 000 4 000 4 000
Highway Users Tax 21075 801 per resident 11 000 11 000 11 000 11 000 11 000 11 000 11 000 11 000 11 000 11 000
Hiqhway Users Tax 2107 56 1 000 flat rate 1 000 1 000 1 000 1 000 1 000 1 000 1 000 1 000 1 000 1 000
Measure M 28 174 Total Existing 28,000 28,000 28,000 28,000 28,000 28,000 28,000 28,000 28,000 28,000
Total $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 56 800 $ 56 800 $ 56 800
As um d annual re e u b ad on 5/of est mated gr ss r ceipts n cable gas and electric franchises
Bas d n pe apita e t mate fr m th Or nge County FY2008 09 budget actuais Approximately 83/of a base traff f go s t the ty where the violation occurred
Assumes 150 pa king spaces Assumes$685 n annual avenue per space based on the a erag a ue and a e age umber of mu icipally maintained metered spac s th w t r egion as reported in the Nat onal Park g Associatio s 2009 Parking
n Am rca report vailabie at http//npapa k org
Based on gross an ual sales of$18 700 000 Sales tax overr de is a voter approved fund ng so rce
® Based on allocations per esident in the City of Huntington Beach
�F�AA Flat amount based on Streets and Highways Code Section 2107 5 for cit as with res dent populations of less than 5 000
�Y
Source Tables 2 1 and A 3 League of California Cities National Parking Assoc ation Cal forn a State Controllers Office Adopted Budget FY09 11 for the City of Huntington Beach Wlldan Financial Services
a
T
0)
112
1 ISeAN c t � 47
6. Results
Feasibility
The fiscal feasibility of the proposed city is evaluated based on net revenue (revenues minus
costs) as a percent of total costs and trends in the City s fund balances Generally speaking a
proposed city is considered to be potentially feasible if net revenue is within plus or minus
10 percent of total costs in a given vear (or total revenue is more than 110 percent of total
cost) and the city s fund balances in a given year are greater than 10 percent of the annual
revenue
The minimum legal requirement for making a finding of fiscal feasibility as stated in
Government Code Section 56720 (e) requires the proposed city to receive revenues
sufficient to provide public services and facilities and a reasonable reserve during the three
fiscal years following incorporation This study includes analysis over a longer period to
have a more complete picture of the fiscal balance of the city given that certain state
subventions are reduced after five years pursuant to statute The analysis includes a five
percent contingency which is assumed to be expended each year
Conclusion
Each scenario in this analysis shows net revenue that is within plus or minus 10 percent of
total costs or total revenue that is more than 110 percent of total costs Additionally each
scenario maintains a fund balance in excess of 10 percent of operating revenue annually
Given both findings the analysis indicates that each scenario meets the criteria for feasibility
The results of the analysis are presented in Tables 6 1, 6 2 and 6 3 Results are separated
for the new city s general fund and road fund and shown for both funds combined
'WILLDAN
F€a sic at Se ices 48
Item 19 - Page 102 -548-
Tzn� Dr,- Sunset Beach Prelim znary Teasibdity A yszs
Table 6 1 Net Revenue Detail Scenario 1 Limited Services Scenario
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
FY Ending 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Fund
Revenues
Property Taxes $ 176 000 $ 175 000 $ 174 000 $ 173 000 $ 173 000 $ 172 000 $ 171 000 $ 171 000 $ 170 000 $ 170 000
Sales Tax 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000
Property Transfer Tax 19 100 19 800 20 500 21 300 22 000 22 800 23 700 24 500 25 400 26 300
Transient Occupancy Tax 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100
Utilities Users Tax 197 200 197 200 197 200 197 200 197 200 197 200 197 200 197 260 197 200 197 200
Licenses and Permits 2200 2200 2200 2200 2200 2200 2200 2200 2200 2200
Franchise Fees 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300
Fines and Penalties 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800
Charges for Services 147 000 149 000 150 000 151 000 153 000 155 000 155 000 157 000 160 000 160 000
Vehicle License Fees 65 000 98 000 91 000 85 000 78 000 72 000 72 000 72 000 72 000 65 000
Use of Money&Property 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Total $ 1 176 700 $ 1 211 400 $ 1 205 100 $ 1 199 900 $ 1 195 600 $ 1 191 400 $ 1 191 300 $ 1 194 100 $ 1 197 000 $ 1 190 900
Costs
City Council $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500
City Manager 81 900 83 000 83 000 84 000 85 100 85 100 86 100 87 200 88 200 89 300
City Attorney 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000
City Clerk 71 000 75 000 74 000 78 000 77 000 80 000 78 000 81 000 80 000 83 000
City Treasurer 44 100 45 200 46 200 46 200 47 300 48 300 48 300 49 400 49 400 50 400
Development Services 183 800 185 900 186 900 189 000 191 100 193 200 194 300 196 400 199 500 200 600
General Plan 167 000 167 000 166 000
Police 444 500 378 200 382 000 385 800 389 700 393 600 397 500 401 500 405 500 409 600
e Animal Control 800 800 800 800 800 800 800 800 800 800
61 Non Departmental 102 400 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000
Contingency @ 5 percent 61,000 57,000 58,000 49,000 50,000 50,000 51,000 51,000 51,000 52,000
o� Total $ 1 219 000 $ 1 146 600 $ 1 151 400 $ 987 300 $ 995 500 $ 1 005 500 $ 1 010 500 $ 1 021 800 $ 1 028 900 $ 1 040 200
Net Revenue $ (42 300) $ 64 800 $ 53 700 $ 212 600 $ 200 100 $ 185 900 $ 180 800 $ 172 300 $ 168 100 $ 150 700
Net Revenue/Costs (3%) 6/ 5/ 22/ 20Y 18/ 18/ 17% 16/0 14/
General Fund Operating Reserve $ (42 300) $ 22 500 $ 76 200 $ 288 800 $ 488 900 $ 674 800 $ 855 600 $ 1 027 900 $ 1 196 000 $ 1 346 700
Road Maintenance Fund
Revenues
Gas Tax $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 56,800 $ 56,800 $ 56,800
Total $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 56 800 $ 56 800 $ 56 800
Costs
Road Maintenance $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500
aF Net Revenue $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (61 700) $ (61 700) $ (61 700)
(D Net Revenue% Costs (50/o) (50/) (50/o) (50/) (50/o) (50/o) (50/) (52%) (52%) (52/)
Net Revenue All Funds $ (101 000) $ 6 100 $ (5 000) $ 153 900 $ 141 400 $ 127 200 $ 122 100 $ 110 600 $ 106 400 $ 89 000
Net Revenue%Costs (8/) 0/ (0/0) 14% 13/ 11/0 11/ 10%o 9% 8/
Operating Reserve All Funds (101 000) (36 200) 17 500 230 100 430 200 616 100 796 900 966 200 1 134 300 1 285 000
a Reserve/of Revenues (8/) (3%) 1/ 18/ 34/ 49/ 64/ 77/ 90Y 103/
Sources WUldan Financial Services
W1U.DeAN mmes 49
w
Final Draft Sunset Beach Preliminary Feasibilaty Analysis
Table 6 2 Net Revenue Detail Scenario 2 Preferred Services Scenario
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
° FY Ending 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Fund
Revenues
Property Taxes $ 176 000 $ 175 000 $ 174 000 $ 173 000 $ 173 000 $ 172 000 $ 171 000 $ 171 000 $ 170 000 $ 170 000
Sales Tax 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000
® Property Transfer Tax 19 100 19 800 20 500 21 300 22 000 22 800 23 700 24 500 25 400 26 300
Transient Occupancy Tax 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100
Utilities Users Tax 295 800 295 800 295 800 295 800 295 800 295 800 295 800 295 800 295 800 295 800
Licenses and Permits 2200 2200 2200 2200 2200 2200 2200 2200 2200 2200
Franchise Fees 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300
Fines and Penalties 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800
Charges for Services 147 000 149 000 150 000 151 000 153 000 155 000 155 000 157 000 160 000 160 000
Vehicle License Fees 65 000 98 000 91 000 85 000 78 000 72 000 72 000 72 000 72 000 65 000
Use of Money&Property 13 000 13 000 13 000 13 000 13 000 13 000 13 000 13 000 13 000 13 000
Total $ 1 276 300 $ 1 311 000 $ 1 304 700 $ 1 299 500 $ 1 295 200 $ 1 291 000 $ 1 290 900 $ 1 293 700 $ 1 296 600 $ 1 290 500
Costs
City Council $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500
City Manager 81 900 83 000 83 000 84 000 85 100 85 100 86 100 87 200 88 200 89 300
City Attorney 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000
City Clerk 71 000 75 000 74 000 78 000 77 000 80 000 78 000 81 000 80 000 83 000
City Treasurer 44 100 45 200 46 200 46 200 47 300 48 300 48 300 49 400 49 400 50 400
Development Services 183 800 185 900 186 900 189 000 191 100 193 200 194 300 196 400 199 500 200 600
General Plan 167 000 167 000 166 000
Police 444 500 378 200 382 000 385 800 389 700 393 600 397 500 401 500 405 500 409 600
Animal Control 800 800 800 800 800 800 800 800 800 800
Non Departmental 102 400 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000
° Greenbelt 123 600 124 900 126 200 127 500 128 800 130 100 131 400 132 800 134 200 135 600
v9 Contingency @ 5 percent 67,000 64,000 64,000 56,000 57,000 57,000 57,000 58,000 59,000 59,000
® Total $ 1 348 600 $ 1 278 500 $ 1 283 600 $ 1 121 800 $ 1 131 300 $ 1 142 600 $ 1 147 900 $ 1 161 600 $ 1 171 100 $ 1 182 800
° Net Revenue $ (72 300) $ 32 500 $ 21 100 $ 177 700 $ 163 900 $ 148 400 $ 143 000 $ 132 100 $ 125 500 $ 107 700
Net Revenue/Costs (5/) 3/ 2/ 16/ 14/ 13/ 12/0 11/ 11/ 9/
General Fund Operating Reserve $ (72 300) $ (39 800) $ (18 700) $ 159 000 $ 322 900 $ 471 300 $ 614 300 $ 746 400 $ 871 900 $ 979 600
Road Maintenance Fund
Revenues
Gas Tax $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 56,800 $ 56,800 $ 56,800
Total $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 56 800 $ 56 800 $ 56 800
Costs
Road Maintenance $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500
Net Revenue $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (61 700) $ (61 700) $ (61 700)
Net Revenue/Costs (50/) (500/) (50/) (50/) (50/) (50/) (50/) (52/o) (52/) (52/)
Net Revenue All Funds $ (131 000) $ (26 200) $ (37 600) $ 119 000 $ 105 200 $ 89 700 $ 84 300 $ 70 400 $ 63 800 $ 46 000
Net Revenue/ Costs (9/) (2/) (3/) 10/ 8/ 7/ 7/ 5/ 5/ 4/
Operating Reserve All Funds (131 000) (98 500) (77 400) 100 300 264 200 412 600 555 600 684 700 810 200 917 900
Reserve/of Revenues (10/) (7/) (6/) 7/ 19/ 311 411 511 60/ 68/0
,, �Souu��cep/Willdan Fina�nctial Services
'8�1�1 Y Y I LLDA v
8 i� F nanaal Services 50
.rz w Dra; Sunset Beach Preliminary Feasibility A alysts
Table 6 3 Net Revenue Detail Scenario 3 Maximum Services Scenario
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
FY Ending 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Fund
Revenues
Property Taxes $ 176 000 $ 175 000 $ 174 000 $ 173 000 $ 173 000 $ 172 000 $ 171 000 $ 171 000 $ 170 000 $ 170 000
Sales Tax 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000 187 000
Property Transfer Tax 19 100 19 800 20 500 21 300 22 000 22 800 23 700 24 500 25 400 26 300
Transient Occupancy Tax 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100 243 100
Utilities Users Tax 394 300 394 300 394 300 394 300 394 300 394 300 394 300 394 300 394 300 394 300
Licenses and Permits 2200 2200 2200 2200 2200 2200 2200 2200 2200 2200
Franchise Fees 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300 124 300
Fines and Penalties 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800 3 800
Charges for Services 147 000 149 000 150 000 151 000 153 000 155 000 155 000 157 000 160 000 160 000
Vehicle License Fees 65 000 98 000 91 000 85 000 78 000 72 000 72 000 72 000 72 000 65 000
Parking Meters 103 000 103 000 103 000 103 000 103 000 103 000 103 000 103 000 103 000 103 000
Junior Lifeguards 40 000 40 000 40 000 40 000 40 000
Use of Money&Property 15 000 15 000 15 000 15 000 15 000 15 000 15 000 15 000 15 000 15 000
Total $ 1 479 800 $ 1 514 500 $ 1 508 200 $ 1 503 000 $ 1 498 700 $ 1 534 500 $ 1 534 400 $ 1 537 200 $ 1 540 100 $ 1 534 000
Costs
City Council $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500 $ 17 500
City Manager 81 900 83 000 83 000 84 000 85 100 85 100 86 100 87 200 88 200 89 300
City Attorney 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000 45 000
City Clerk 71 000 75 000 74 000 78 000 77 000 80 000 78 000 81 000 80 000 83 000
City Treasurer 44 100 45 200 46 200 46 200 47 300 48 300 48 300 49 400 49 400 50 400
Development Services 183 800 185 900 186 900 189 000 191 100 193 200 194 300 196 400 199 500 200 600
General Plan 167 000 167 000 166 000
Police 444 500 378 200 382 000 385 800 389 700 393 600 397 500 401 500 405 500 409 600
Animal Control 800 800 800 800 800 800 S00 800 800 800
Non Departmental 102 400 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000 92 000
Greenbelt 123 600 124 900 126 200 127 500 128 800 130 100 131 400 132 800 134 200 135 600
Beach Maintenance 113 000 55 600 56 200 56 800 57 400
Lifeguards 449 000 310 100 313 200 316 300 319 500
Contingency @ 5 percent 67,000 64,000 K000 56,000 57,000 87,000 77,000 78,000 78,000 79,000
c Total $ 1 348 600 $ 1 278 500 $ 1 283 600 $ 1 121 800 $ 1 131 300 $ 1 734 600 $ 1 533 600 $ 1 551 000 $ 1 563 200 $ 1 579 700
Net Revenue $ 131 200 $ 236 000 $ 224 600 $ 381 200 $ 367 400 $ (200 100) $ 800 $ (13 800) $ (23 100) $ (45 700)
Net Revenue/Costs 10/ 18/ 17/ 34/ 32/ (12/) 0/ (1/) (1/) (3/)
General Fund Operating Reserve $ 131 200 $ 367 200 $ 591 800 $ 973 000 $ 1 340 400 $ 1 140 300 $ 1 141 100 $ 1 127 300 $ 1 104 200 $ 1 058 500
Road Maintenance Fund
Revenues
Gas Tax $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 59,800 $ 56,800 $ 56,800 $ 56,800
Total $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 59 800 $ 56 800 $ 56 800 $ 56 800
Costs
Road Maintenance $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500 $ 118 500
a Net Revenue $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (58 700) $ (61 700) $ (61 700) $ (61 700)
wP Net Revenue/Costs (50/) (50/) (50/) (50/) (50/) (50/) (50/) (52/) (52/) (52/)
3 Net Revenue All Funds $ 72 500 $ 177 300 $ 165 900 $ 322 500 $ 308 700 $ (258 800) $ (57 900) $ (75 500) $ (84 800) $ (107 400)
Net Revenue/Costs 5/ 13/ 12/ 26/ 25/ (14/) (4/) (5/) (5/) (6/)
Operating Reserve All Funds $ 72 500 $ 308 500 $ 533 100 $ 914 300 $ 1 281 700 $ 1 081 600 $ 1 082 400 $ 1 065 600 $ 1 042 500 $ 996 800
u Reserve/of Revenues 5/ 20/ 34/ 59/ 82/ 68/ 68/ 67/ 65/ 63/
S Wilda F a c I S iv s
WILLDAN Sl
0
Appendix A
Fable A 1 General Government Net County Cost (FY09)
Department Net County Cost
Clerk of the Board $ 3 110
Executive Office 6 338
County Counsel 4 374
Internal Audit 1 120
Human Resources 1 541
Office of the Performance Audit Diretor 289
Registrar of Voters 1 481
Clerk Recorder (2 064)
Assessors Office 10 606
Treasurer Tax Collectors Office 531
Auditor Controllers Office 3 741
Total General Government Net Count Cost $ 31 067
'As shown in Attachment A of the OC LAFCo July 8 2009 Agenda Packet Net County
Cost estimates based on the Countywide cost per capita applied to the population in the
unincorporated island
Sources Orange County Orange County LAFCo Willdan Financial Services
Table A 2 Net County Cost - Sheriff Services
Cost per
Existing Service
Item Cost per FTE Level
Direct Costs
Salaries and Wages $ 114 762 $ 688 572
Benefits 67 497 404 982
Services and Supplies 19 233 115 398
Total Direct Costs $ 201 492 $ 1 208 952 00
Indirect Costs $ 35 271 $ 211 626
Total County Cost $ 236 763 $ 1 420 578
Proposition 172 Share of Sheriff Costs Countywide' 87 03%
Net County Cost $ 184 253
' Estimate based on$239 049 667 in Proposition 172 revenue relative to$274 675 838 sheriff
coroner police protection appropriations in FY2008 09
Source Sheriff Coroner Department County of Orange
WILLDAN
F n n at Se mes I A I
Item 19 - Page 106 -552-
h Drafi Sunset Beach Prehmmary Feastbtltty 1 ysts
Table A 3 General Fund Per Capita Revenue
Allocation By Allocation By Countywide Allocation Unincorporated Allocation
FY 2008 09 Service Area Service Population Per Capita Revenue Per Capita Revenue
Revenue County Unmcor Allocated Per Per Emp Allocated Per Per Emp
Actual wide porated Resident Employee Revenues Resident to ee Revenues Resident to ee
Fines&Penalties
Vehicle Code Fines $ 2 434 677 100% 0% 1 00 031 $2 434 677 $ 069 $ 021 $ $ $
Other Court Fines 6 920 024 100% 0% 1 00 031 6 920 024 1 97 061
Total Fines $ 266 $ 082
Licenses and Permits
Animal Licenses $ 5 204 389 100% 0% 1 00 5 204 389 1 66 $
1 66
Sources County of Orange FY 2009 10 Budget Wilidan Financial Services
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Wll.LDAN A 2
F nanciat Sery ces
14
Final Draft Sunset Beach Preliminary Feasibility Analysts
Table A4 Auditor's Ratio (FY 2008-09 Actual)
Revenue Amount (in 1,000s)
Total Property Tax Revenues
Current Secured $ 204 054
Current Unsecured 7 992
Prior Secured 625
Prior Unecured 467
VLF Swap 232 760
Curret Supplemental 7 581
Prior Supplemental 1 441
Homeowners 1 785
Penalties 19 427
Property Transfer Tax 11 626
Total Property Tax Revenues $ 487 758
Other General Purpose Revenues $ 121,033
Total General Purpose Revenues $ 608 791
Estimated Auditor Ratio (Property Tax as a%of Revenue) 80 11912134%
Sources County of Orange Second Available Financing Report FY 2010 11 Schedule A
Wdldan Financial Services
Appendix Table A 5 Sunset Beach Greenbelt Maintenance Costs
Item Greenbelt Beach Total
Janitorial for 5 new Restrooms' $ 21 000 $ - $ 21 000
Lifeguards(AnnuaIf 307 000 307 000
Landscaping and Sprinklers3 45 000 45 000
Trash Disposal 15 000 15 000 -
Beach Cleaning4 40 000 40 000
Utilities5 42 555 - 42 555
Total $ 123 555 $ 362 000 $ 485 555
OC Parks allocated$21 000 of$23 310 to Sunset Beach for janitorial services 5/27/09
2 Lowest annual lifeguard cost from all provides is from Seal Beach $142 000 in startup costs required in first
year of service
3 Estimated based on data from SC Yamamoto Inc
4 Estimated costs from Seal Beach
5 Estimated costs from OC Parks
WIl1DAN
Fines c al Se �c� A 3
Item 19 - Page 108 -554-
Final Draft Sunset Beach Preliminary Feasibility Analysts
Appendix Table A 6 Utilities Users Tax Comparisons
Sunset Beach
Huntington Scenarios 1 Sunset Beach
Utility Beach Seal Beach' and 2 Scenario 3
Telephone 5 00% 11 00% 7 50% 10 00%
Electrical 5 00% 11 00% 7 50% 10 00%
Gas 5 00% 11 00% 7 50% 10 00%
WatW 5 00% Not charged 10 00% 10 00%
Cable TV 5 00% Not charged 7 50% 10 00%
Cell Phone 0 00% 11 00% 7 50% 10 00%
People over 65 with incomes of less than$45 000 don t have to pay the utilities users tax
2 Huntington Beach now charges residents of Sunset Beach a 10%utilities users tax on water service
Huntington Beach is assumed to continue providing water service to Sunset Beach so the existing rate for that
utility will stay in place
Sources City of Huntington Beach City of Seal Beach Wdldan Financial Services-
WILLDAN
Ft -inc a,Se mea A-4
-555- Item 19 - Page 109
About Wilidan
Willdan Group Inc is a nationwide firm serving more than 800 public agencies and private
sector clients We provide engineering management, sustainabihty and financial consultant
services that ensure the quality value and security of our nation's infrastructure systems
facilities and environment The firm has been a consistent industry leader in providing all
aspects of municipal and infrastructure engineering public works contracting public
financing planning building and safety construction management and homeland security
services
Founded in 1964 and headquartered in Anaheim California Willdan was originally
-established as a civil engineering firm specializing in providing solutions for our public
agency clients Since that time we have evolved into a professional consulting firm offering a
broad array of services that allow us to provide a comprehensive and integrated approach to
our clients planning engineering financial economic public facility and public safety
challenges Today Willdan has hundreds of employees operating from offices located
throughout California as well as in Arizona Nevada Utah Colorado Florida Maryland
North Carolina and New York
V'I WLLDAN I
FI aic 3l Se s B I
Item 19 - Page 110 -556-
-557- Item 19 - Page 111
MEMORANDUM
To Joyce Crosthwa►te Executive Officer
Orange County LAFCO
From Richard Berkson
Subject Peer Review of Sunset Beach Annexation Study
EPS #20077
The Econornu of Load (sc Date June 24 2010
As you requested Economic and Planning Systems (EPS) has reviewed
the Sunset Beach Annexation Study (the"Study ) prepared by Ralph
Andersen &Associates for the City of Huntington Beach (April 27 2010)
Key findings of our review include
1 Much of the Study s cost and revenue data is derived from the
Orange County (OC) LAFCO Island Data Matrix The Matrix was
prepared with FY09 data (or earlier) which is inconsistent with the
FY10 forecast in the Study Although in most cases the differences
will not be significant(except as noted in our review) the
discrepancy should be disclosed in the Study The Study should
utilize City cost estimates as the Island Data Matrix in many cases
was based on County costs and would differ for Huntington Beach
2 The Study erroneously estimates Property Tax in lieu of Motor
Vehicle License Fee (MVLF) revenue of$184 521 The City will
receive MVLF per AB 1602 which the Study separately estimates
but not the $184 521 which does not apply to annexations This is
an example as noted in #1 above where the Study relied on the
Island Data Matrix estimates which applied to the County not to a
city annexation
3 The Study segregates Structural Fire Fund revenues of$350 000
2501 Ninth
StreePlannt Suite 200ems Inc from General Fund revenues It is EPS s understanding based on
2501 lVmth Street Suite 200
Berkeley CA 94710 2515 discussions with the Orange County Fire Authority that upon
510841 9190tel annexation the City s property tax base and tax increment factor will
510841 9208fax incorporate the Structural Fire Fund base and increment factor all
Berkeley property tax revenues will be available for general purposes The
Sacramento resulting increase in general revenues increases the General Fund
Denver surplus estimated in the report and more than offsets the correction
www epsys coin for the Property Tax MVLF noted in #2 above The Study should
clarify this issue
item 19. - Page 112 -558-
Peer Review of Sunset Beach Annexation Study June 24 2010
EPS#20077 Page 2
4 As noted in the review there are a number of potential corrections and clarifications that are
required in the Study s estimates but many of these corrections are not of a magnitude to
eliminate a surplus shown in Table IX (page 24 of the Study) for the General Fund minus
Actual Expense
Generally the Study segregates General Fund from other dedicated revenues and expenditures
with the exceptions noted below The summary of results in the text of the Study and in Table
IX (page 24 of the Study) should not combine the General Fund with other dedicated revenues
and expenditures The Study should also further segregate other revenues"and not add them
together as they are restricted to different uses
Revenues
The Study relies extensively on information generated by OC LAFCO for its County Island Data
Matrix As noted below the OC LAFCO data is largely based on FY09 which is one year prior to
the Study s assumed year of annexation and City operations In some cases the data is older
As noted previously much of the LAFCO Island Data Matrix applies to the County not to city
annexations
Following is a description of specific revenues and a review of the data and methodology used to
estimate the revenues
Property Taxes
The Study cites estimated property tax revenue to the City of$145 306 The source for this
number is not cited however it corresponds to the estimate contained in the County Island Data
Matrix The latter source was prepared for OC LAFCO and indicates that the data year is FY
2008 09 However the Study utilizes a budget year of FY 2009-10
The Study should utilize FY 2009-10 estimated property tax to be consistent with the rest of the
analysis According to Dennis Sorensen Finance Division of the Orange County Fire Authority
property taxes to OCFA are $392 000 for FY10 about 6 5% higher than FY09
It is EPS s understanding that the City s new property taxes would include the property taxes
currently generated to the Structural Fire Fund Upon annexation according to Dennis
Sorensen the Structural Fire Fund allocation would be added to the City s allocation in the
Sunset Beach tax rate area and the Structural Fire Fund would be eliminated from the list of
taxing entities receiving a share of the 1% property tax Therefore these revenues would be
available to the City for general purposes in addition to fire protection The Study should clarify
this issue with the City s legal counsel
EPS has not reviewed the master tax agreement between the City and the County Depending
on the results of corrected Study results the City and County may negotiate a revenue sharing
agreement that differs from the sharing assumed in the Study if necessary to mitigate impacts
on either party
Property Transfer Tax
The transfer tax estimate appears to be low however a revised estimate would not produce a
significantly larger amount The Study based its estimates on a Citywide per unit calculation
P�20000 i20O775 t8chlAepoM24J &s d�20077EP5 24J 2010 d
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Peer Review of Sunset Beach Annexation Study June 24 2010
EPS#20077 Page 3
which will tend to skew the result because it ignores relative differences in commercial property
as well as differences in property values and turnover rates between Sunset Beach and the City
An alternative method of calculation would multiply the tax rate by average unit values and
turnover rates For example approximately $15 000 would be generated based on values of
$lm►11►on/un►t and turnover rates of 5 percent annually Actual sales values and rates will differ
in any given year however this example suggests that the Study s estimate is very low by
approximately $10 000
Sales Tax
The Study cites the firm HdL as the source for the $186 857 sales tax estimate As noted for
property tax this apparently is derived from the OC LAFCO Island Data Matrix which provides
data for a prior year It is also not clear in the Study whether the Property Tax in lieu of Sales
Tax (see next item) has been deducted from the HdL figures this issue should be verified
Typically HdL reports actual total sales tax paid by sales tax permit holders the deduction of 25
percent of the sales tax which is swapped by the State for property tax is done after the
collection of sales tax
Nether the Study nor the OC LAFCO Island Data Matrix indicate whether the sales tax estimate
includes a share of the State and County"pool revenues which can add approximately 10
percent to the sales tax estimate
Property Tax in lieu of Sales Tax
The estimated property tax in lieu of sales tax appears to be low relative to the total sales tax
estimate generally the amount should be 25% of the 1% local sales tax The numbers cited in
the study are not consistent with this ratio however the source of the difference is not apparent
in the Study
If the sales tax estimate of$186 857 is the 1% local sales tax after deduction of the Property
Tax in lieu of Sales Tax the Property Tax in lieu of Sales Tax should be about $60 000 rather
than the $20 000 indicated in the Study
Motor Vehicle License Fees (MVLF)
The MVLF estimate appears to be correctly based on the AB 1602 formula
Cities also receive an allocation of MVLF in addition to the Property Tax in lieu of MVLF
described in the next item however it currently is a minimal amount(e g about$4/cap►ta or
$4 800 for Sunset Beach)
Property Tax in lieu of Motor Vehicle License Fees
The AB 1602 MVLF amount attributable to annexations which is described in the item above
provides the initial allocation of MVLF This allocation compensated for prior legislation which did
not provide for an increase in the Property Tax in lieu of MVLF due to annexations Therefore
the Study should not show an increase to the City of$184 521 from this source The revenue is
shown in the LAFCO Islands Data Matrix but reflected County revenues and was not intended to
apply to annexations
P 120000�20077Su s tgoq%R POrt{24J m med%20077EP5 24J 2010 d—
Item 19. - Page 114 -560-
Peer Review of Sunset Beach Annexation Study June 24 2010
EPS#20077 Page 4
Transient Occupancy Tax (TOT)
The estimated amount of$151 356 is based on actual TOT revenues from the area The
estimate is derived from the OC LAFCO Data Matrix which indicates that the numbers are for
calendar year 2008 The numbers should be updated and based on the most recent 12 months
for which data is available
Transient Occupancy Tax (Business Improvement Distract, or BID)
The TOT(BID) is also based on the OC LAFCO Data Matrix and should be updated The revenue
is restricted to BID uses and should be segregated from other General Fund discretionary
revenues particularly since no offsetting expenditures are shown in the analysis This revenue
may require voter approval from the annexed area
Utility Users Tax
The Study correctly indicates that the Sunset Beach residents would not be subject to the current
Utility Users Tax since the tax requires voter approval The residents would be subject to any
future Citywide votes on other tax measures or on the extension or modification of the current
Utility Users Tax that may occur Should the City elect to extend the Utility Users Tax to Sunset
Beach residents extension of the tax would require voter approval of Sunset Beach residents
only
Business License Tax
The Study calculates business license tax based on a per capita approach This estimate will
be reasonably accurate if the mix and type of businesses and employment in the City and
businesses relative to population is similar to the mix in Sunset Beach A slightly more accurate
approach would base the estimate on a per employee basis which would capture any significant
differences in the amount of business activity Business data can also be purchased from various
private vendors which estimate number and size of businesses within an area
Animal License/Shelter Fees
The estimated revenue is equal to the revenues shown in the OC LAFCO Island Data Matrix
which is for the year prior to the Study s stated year
Permit and Regulatory Fees
This category of revenue is estimated in the Study but not included in the calculation of net
fiscal impacts The Study indicates that the revenues will fund offsetting costs The Study also
indicates that the offsetting costs would not be significant This conclusion partially depends
upon existing staff capacity to handle some increase in workload The Study does indicate that
there could be some minimal diversion of staff time from existing City services to the Sunset
Beach Area but assumes it does not create an actual staff cost that exceeds permit and
regulatory fee revenue
The Study should indicate the City s historical cost recovery ratio to document the extent to
which costs are likely to be covered The Study also implies that Staff capacity exists as a result
of a reduced workload due to recessionary conditions which helps support the conclusion that no
significant additional staff costs are anticipated
P\20000\20077Su tBcMRep rt%243 re—d�20077EPS 24J 2010 n d
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Peer Review of Sunset Beach Annexation Study June 24 2010
EPS#20077 Page 5
Fines and Forfeitures
The Study projects a minimal amount of revenue from this source based on current
unincorporated Countywide collections per capita from FY08 two years prior to the Study s
target year of FY10 The amount should be based on Huntington Beach s per capita average for
a more current year
Other Municipal Revenues
Structural Fire Fund Property Tax
The Study indicates that the City would receive property tax revenues currently accruing to the
Structural Fire Fund these revenues would continue to accrue to the Fund but would be
remitted to the City and would continue to be dedicated to the provision of fire protection The
Study also assumes that the City would lose its current revenue of$8 000 for contract services
to Sunset Beach once it becomes part of the City
As previously noted for property tax the amount is based on the OC LAFCO Island Data Matrix
which is for the year prior to the Study s analysis year The Study should utilize FY 2009-10
estimated property tax to be consistent with the rest of the analysis According to Dennis
Sorensen Finance Division of the Orange County Fire Authority property taxes to OCFA are
$392 000 for FY10 about 6 5% higher than $368 000 in FY09 The Study assumes $350 000
No offsetting costs for fire protection are projected as discussed in the Expenditures section
below It is EPS s understanding that the Fire Fund property tax would become part of the City s
unrestricted tax factor and revenue base however this issue requires further research and legal
confirmation Even if the revenue is dedicated to fire protection it may effectively free up an
equivalent amount of City General Fund money currently used for fire protection If this is the
case these revenues could be considered to offset other General Fund impacts of Sunset Beach
annexation
FireMed
The Study appears to use a reasonable approach to estimate revenues based on current City
fees and participation rates However the Study applies a 33% household participation rate to
the total population rather than to the number of Sunset Beach households Applying the rate
to 685 households results in about 226 participating households rather than the 405 households
assumed in the Study The correction reduces revenues by about$11 000
Special Assessments
The Study cites minimal revenues from existing assessments ($3 946) which coincides with the
estimates in the OC LAFCO Island Data Matrix The Study does not indicate what the
assessments are applied towards and therefore it is not clear whether there are any additional
costs that may be attributed to the City responsibility for those services Assuming the
assessments are based directly on corresponding costs there would be no net impact on the
City If the assessments were for a district that will not be affected by annexation then there
would be no assessment revenue accruing to the City
P 120000 120077S s tBc 1R portl2 J re ed120077EP5 24) 2010 d
Item 19. a Page 116 -562-
Peer Review of Sunset Beach Annexation Study June 24 2010
EPS#20077 Page 6
Water/Wastewater Fees
The Study correctly assumes that water/wastewater fees from the area are paying for services
which would continue as currently provided The exception would be the loss of a water
surcharge of 10 percent currently paid by Sunset Beach residents to the City The basis for the
estimated loss is not documented
Library Property'Pax
The property tax to the City of$52 029 is from the OC LAFCO Island Data Matrix The Data
Matrix indicates it is based on a pro rata allocation formula it is not apparent how the formula
works or whether the tax factor is shifted to the new City tax factor for the area thus benefitting
the City
It is possible that this revenue would effectively free up revenue to help cover General Fund
money otherwise required for library services Therefore the revenue could be viewed as a
benefit to the General Fund and not restricted solely to library services
Recreation Programs
The primary revenue shown is for the Junior Lifeguard program no source for the amount is
cited Presumably there would be some effect on other recreation program costs and revenues
but the effects are likely to be minimal
Parking Pees
Revenue from driveway parking permits are not estimated in the Study and assumed to be
minimal An exact estimate of revenue from this source is not available but the County s
website indicates that parking permits cost$20 for the first permit and $10 for each additional
permit
Road Fund Revenues
The Study estimates additional gas tax revenues that would accrue to the City based on current
per capita allocations to cities In addition the City would receive an additional share of Measure
M revenues which are allocated relative to sales tax generated in the area
The Study indicated that it adjusted for revenues that would accrue to the City which were not
reflected in the LAFCO Island Data Matrix however the adjustments were not documented in
the Study
Expendutures
The Study provides estimates for expenditures based on per capita estimates but indicates
that actual costs are more appropriate EPS would agree that actual costs are a better basis
and per capita estimates should only be utilized in those instances where actual costs are
unavailable
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Peer Review of Sunset Beach Annexation Study June 24 2010
EPS#20077 Page 7
Fire
The Study indicates that Huntington Beach responds to nearly all fire service calls to Sunset
Beach therefore there would be no impact on existing services The City would lose $8 000 of
revenue from its current contract with OCFA whereby the City provides ALS (paramedic) service
to portions of Sunset Beach
It is unlikely there would be any change to current mutual aid arrangements between the City
and the OCFA particularly since OCFA is an equal (or greater) beneficiary of the arrangement
Mutual aid is a common practice in the provision of fire services in California
Police
The Study states that City staff reviewed crime statistics for Sunset Beach for Part 1 crimes and
concluded that the level of service (39 and 44 Part 1 crimes for 2007 and 2008 respectively) in
addition to traffic collisions would not require additional staff The 44 Part 1 crimes in 2008 is
less than 1 percent of the City s total Part 1 crimes in 2008 of 5 725 according to the City s
webs►te
Given the City s size relative to Sunset Beach and its proximity it is reasonable that existing
capacity could be sufficient to serve the area The City will also be responsible for traffic control
and investigation which is currently the responsibility of the California Highway Patrol (CHP) the
CHP s role was not mentioned in the Study Recent court decisions which reduce pay
requirements for police officers could potentially provide capacity to fund any additional staff
time that may be required to serve the area
Animal Control
The City s Animal Care Services is a division of Orange County Health Care Agency The Study
estimates an average number of calls of 309 based on 37 calls in 2007 and 545 in 2008 The
average number of calls is multiplied by the cost per call charged by the County The Study
should investigate the source of the significant variation in calls to assure that the differences are
not due to a reporting issue
City Clerk
The Study estimates a minor election cost however the basis for the estimate is not clear The
costs can be compared to the City s per capita costs the costs should include not only the costs
associated with the polling place but also any costs related to City ballot measures candidates
election pamphlets etc as well as any special election costs (if applicable)
Beach Maintenance
The Study estimates costs for beach maintenance including the additional cost for a daytime
crew due to the residential nature of the area from estimates by the City s Community Services
Department According to information reported by Willdan Financial Services(per
correspondence with OC Parks) additional utility costs of $42 555 should be included in the total
costs
The Study s cost for beach replenishment is based on a periodic cost comparable to Huntington
Beach The basis for the estimate is not provided The Study then spreads the cost over
P 120000 t200775.site hiRep Ri241 _ --dJ20077EP5 243 2010 d
Item 19 - Page 116 -564-
Peer Review of Sunset Beach Annexation Study June 24 2010
EPS#20077 Page 8
multiple years to arrive at $1 250 per year According to information from Orange County Parks
(email from Ray Leslie, Coastal District Supervisor to Enka Rivera and Mark Denny April 26
2010) the sand replenishment project completed in October 2009 cost$57 509 Spread over 5-
7 years results in an annual cost of about$8 200 to $11 500 compared to the Study s estimate
of$1 250 per year
Marine Safety
The cost for lifeguards is based on a current County contract amount of$333 000 according to
the Study Information provided by Lyman Lokken from a meeting with the contract company
(email from Lyman Lokken to Eric Nickell March 16 2010) indicated that the estimate excluded
3 months and therefore the cost should be $363 000
FereMed
The estimates for the City s voluntary program to effectively purchase insurance to pay for
paramedic and ambulance services appear reasonable and are based on Citywide participation
rates and costs As noted in the revenue section it appears that Study incorrectly applied a
household participation rate to a total population number
Public Works/Park Maintenance
The cost for maintenance of a 13-acre linear park/greenbelt is based on current County janitorial
and landscape maintenance contracts and estimates of City staff costs which would replace
current County staff costs The bans for the latter estimates is not provided It is also not
apparent whether all costs including utilities are included
Road Fund
The Study estimated road-related expenditures based on a per capita estimate however the
estimated $118 501 corresponds to the estimates in the OC LAFCO Island Data Matrix the latter
source which is for FY09 rather than the Study year of FY10 indicates that it is based on a cost
per mile per signal and per light based on County costs The road maintenance component is
$96 800 or about$24 200 per centerline mile which is generally in line with unincorporated area
road maintenance costs for roads that do not receive a high degree of heavy traffic The Study
also added estimated street sweeping costs
The Study should reference City maintenance costs as well since average Countywide
unincorporated costs may differ from Sunset Beach costs
P 110000 W0077Su WchlRep rtV4J re sMV10077EP5 24J 2010 d
-565- Ite>t>re 19 - Page 119
Item 19 - Page 120 -566-
MEMORANDUM
To Joyce Crosthwaite Executive Officer
Orange County LAFCO
From Richard Berkson
Subject Peer Review of Sunset Beach Incorporation
Preliminary Feasibility Analysis (PFA)
EPS #20077
Die Ecotwinus of Lund 1.se Date June 24 2010
As you requested Economic and Planning Systems (EPS) has reviewed
the Sunset Beach Incorporation Preliminary Feasibility Analysis (PFA)
i prepared by Willdan Financial Services (June 3 2010)
Key findings of our review include
1 Scenarios 1 and 2 do not meet the minimum criteria for feasibility
within the first three years as required by Government Code Section
56720 Net revenue (all funds) is negative and reserves are
negligible or negative by the end of the third year The PFA should
show actual costs and revenues for the first year a portion of
revenues are likely to be delayed e g property tax and sales tax
due to the timing of collections and payments relative to city
formation These delayed revenues in the first year as well as
potential County transition year services and repayment will
significantly alter annual cash flows and fund balances in the first
several years
2 Scenario 3 which includes a 10 percent Utility Users Tax shows that
revenues exceed costs by more than 10 percent in year three and
reserves exceed costs by more than 30 percent However by the
end of year five when the additional Motor Vehicle License Fee
Economic&Planning Systems Inc revenues provided by the State end the city experiences annual
2501 Ninth Street Suite 200 shortfalls The shortfalls continue to be negative by year 10 the
Berkeley CA 94710 2515 shortfall is a negative 3 percent of costs which should not be
510 8419190 tel deemed feasible
510 8419208 fax
Berkeley 3 The PFA indicates that there is likely to be a negative impact on the
Sacramento County if the city is feasible however the PFA does not calculate the
Denver impact or potential additional mitigation payments to the County
that may be required County impacts and potential mitigation
www epsys com
-567- Item 19 - Page 121
Peer Review of Sunset Beach Incorporation PFA June 24 2010
EPS#20077 Page 2
payments should be calculated in order to disclose all potential costs that may face the new
city
4 Scenarios 1 and 2 presume that the County continues to provide certain services even
though it has shifted revenues to the new city including property tax revenues which
currently fund those services Scenario 3 assumes that the County continues to provide
beach services through year 5 Feasibility would be more unlikely if additional mitigation
payments are required and/or if the County does not continue providing services
5 In addition to the utility users tax that will be required by the new city expansion of the
Transient Occupancy Tax will also require a majority voter approval
6 The PFA appears to have miscalculated the amount of property tax to be transferred from
the County to the new city The calculation of the Auditors Ratio should not include VLF
swap revenues The Auditor Controllers Office has calculated a ratio which excludes those
revenues and makes a number of other adjustments the resulting ratio is 34 4 percent
rather than the 80 1% shown in the PFA which reduces the transferred property tax
revenues by about $100 000 further adversely affecting feasibility
7 The PFA assumes a relatively low contingency of 5 percent This contingency may be
appropriate for a much larger city but a city with a small budget has much less ability to
absorb potential adverse fiscal events for example litigation reduction in State revenues
increases in maintenance costs due to a natural disaster etc The PFA has assumed low
staff and other costs as noted below which could also be greater than anticipated
8 The Road Fund shows a shortfall in all scenarios which adversely affects the ability to
provide General Fund services
The following sections describe these findings in greater detail
Costs
Service Levels
The PFA presents three scenarios ranging from a limited set of services to assuming all the
municipal services currently provided by the County after beach services are transferred in the
fifth year
The limited transfer of services will depend upon concurrence by the County therefore the
viability of scenarios 1 and 2 is highly uncertain In addition it is likely that the County will
consider the fiscal impacts of the scenarios before deciding about retaining certain services The
PFA has not evaluated the fiscal impacts on the County typically a PFA would include such an
analysis particularly since fiscal mitigation ( revenue neutrality ) payments could have a
significant bearing on city feasibility
While it may be appropriate to show scenarios which assume various levels of continued
County services depending on the outcome of negotiations the PFA should show a"base case
that assumes no continued County services beyond initial transition year services (for which the
County may require repayment) The Base Case will be adversely affected if the County does
not agree to continued provision of services at no cost
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Peer Review of Sunset Beach Incorporation PFA June 24 2010
EPS#20077 Page 3
Proposed Stang Plan
The PFA proposes a half-time position for the city manager and a combined assistant city
manager/city clerk position Although the size of the new city is very small and it is essentially
built-out it would not be likely that part time city manager position would be sufficient to handle
the full range of responsibilities that will be required including management of contracts for
services compliance with legal and regulatory requirements inter-governmental relations and
participation in regional agencies The assistant city manager/city clerk position would provide
assistance however based on the proposed $52 000 annual salary that position appears to be
more clerical in nature and therefore less likely to provide management services
A part-time city treasurer will not be sufficient to provide for the segregation of accounting
responsibilities under generally accepted accounting standards for municipal governments The
budge does not includes any additional costs for outside contract support or auditing City
attorney costs are likely to be higher in initial years as contracts are negotiated city codes and
ordinances are adopted and intergovernmental agreements established
The PFA includes a contract with a traffic engineer however no other public works engineering
costs The new city will require the services of an engineer to assist with road maintenance and
other capital projects
The PFA adds 30 percent to salaries to account for taxes and benefits based on comparable
cities however the rate appears low 35% to 40% or more would be more likely depending on
the position and salary level The PFA did not provide comparable information for specific cities
to document the salaries or the 30% factor
The PFA does not show any staff for human resources or information technology support nor
does the PFA include any contract costs for these services in the non departmental cost
category
City Council
The PFA proposes minimal costs for the city council which is appropriate for a city of this size
Council members would receive a nominal stipend per month and a small allowance for
expenses (e g attendance at conferences etc )
Police
The PFA assumes that Seat Beach would contract for services at an annual cost of$375 000 the
PFA should note that if Seal Beach did not provide a contract the only option may be a contract
with the County The County s estimate of service costs was $1 4 million (see Table A 2 in PFA)
although a negotiated contract could differ If the sheriff contract cost were significantly greater
than the $375 000 the new city would be infeasible The sheriff contract cost could be less than
$1 4 million but the contract would not benefit from Prop 172 funds which remain with the
County and would not be applied to contract services
Animal Control
The animal control costs of$800 appear to be low These costs are typically at least $2-$5 per
capita which would be $2 500 to $5 500 The OC tAFCO Data Matrix indicated a current cost of
$500 but the basis for this cost was not documented
P 120000 V00775u tBchJRepo t%247 _ ed\20077EP5 243.2010—1P doc
-569® Item 19 - Page 123
Peer Review of Sunset Beach Incorporation PFA June 24 2010
EPS#20077 Page 4
Non-Departmental Costs
Facility costs appear low The PFA assumes that city office space would be accommodated
through the purchase of the existing fire station for$200 000 It is not known whether the
station would be available for sale at that price It is understood that the station does not meet
current seismic or accessibility standards which could add significantly to the facility costs The
annual cost budgeted in the PFA for city office space is approximately equal to 500 to 1 000
square feet of rented space depending on prevailing rents(e g at$2 00/sq ft/month the
budgeted $15 000 would pay for 625 square feet) This would be inadequate for city offices and
council space if the city did not purchase/rehab the fire station
The PFA appears to underestimate initial equipment costs The city would have to provide
equipment including computers for contract employees while on the premises as well as for
permanent employees Equipment would include computers/network equipment printers
copier furniture and desks filing and storage
The PFA apparently does not allow for other expenses such as computer support (IT) services or
human resources (e g payroll tax services benefits accounting etc ) The new city will also
require annual audit services from an outside firm which apparently are not shown in the
budget
The overall budget includes a 5 percent contingency which is the minimum amount that should
be evaluated However considering the small size of the city and its budget a 10 percent
contingency would be more prudent and conservative The Office of Planning and Research
Incorporation guidelines recommend 10 percent
Greenbelt, itestrooms and Parking Lot Costs
These costs were based on current County costs including private contracts There is no reason
to believe they would vary significantly for the new city If the incorporation process moves
forward the Comprehensive Fiscal Analysis prepared for LAFCO will update the costs based on
the most recent actual cost data
Beach Maintenance
The costs for beach maintenance are based on estimates from Seal Beach for beach cleaning
Whether Seal Beach will commit to a contract at this cost is speculative the PFA should also
provide estimates based on current County costs
The costs include current County costs for sand replenishment According to information
submitted to the City of Huntington Beach (Lymon Lokken June 7 2010) future sand
replenishment costs could increase by $16 000 this cost increase is not shown in the analysis
Lifeguards
The PFA assumes the City of Seat Beach would contract to provide this service although the
basis for the cost estimate is not provided The PFA estimate of$310 000 is less than the
current County contract cost of$360 000 to $380 000 The PFA should be based on current
County costs due to the uncertainty about whether Seal Beach will provide a contract at the
lower costs
P V0000`200775 n tSchTepod�24J ri m ed�20077EP5 24)w2010 m p d
Item 19 - Page 124 -570-
Peer Review of Sunset Beach Incorporation PFA June 24 2010
EPS#20077 Page 5
Information submitted to the City of Huntington Beach (Lymon Lokken June 7 2010) indicated
that costs could exceed $500 000 per year based on discussions with the current vendor The
higher cost could result if the current vendor is not also providing service to other County
beaches which is beyond the control of the new city This higher cost would have a significant
adverse impact on the city s financial viability
Road,Traffic Signal and Streetlight Maintenance Costs
The PFA utilizes data from the OC LAFCO Data Matrix based on average countywide costs The
resulting amount appears reasonable considering the miles of roadway and relative light use
however other costs such as street sweeping could increase the costs above countywide
averages
Revenues
Property Tax
The PFA calculates the amount of property tax transferred to the new city by multiplying the cost
of County services to the area by the Auditors Ratio The Auditors Ratio is the ratio of total
County property taxes to all revenues available for general purposes The revenues are then
increased based on property appreciation and sales then adjusted to constant 2009 dollars
The PFA incorrectly calculates the Auditors Ratio by including property taxes in lieu of VLF in
the same category as property taxes generated from the County s share of the 1 percent
property tax The property taxes in lieu of VLF represents a swap"of State property tax
revenue from the State to the County to compensate for the County s loss of VLF the swap is
independent of the allocation of the 1 percent property tax based on the County s Tax Allocation
Factor (described in the PFA) The new city will receive its share of VLF per a statutory formula
as noted below the PFA effectively attributes an additional share of VLF allocations by including
it as a County property tax that increases the shift of property taxes from the County to the new
city
Excluding the"swap revenues from the property tax transfer reduces the property tax to the
new city by about half The Auditor Controller has provided LAFCO with a calculation of the ratio
which excludes"swap revenues and other dedicated revenues (January 20 2010) The
resulting Auditors Ratio was calculated by the County to be 34 4 percent thereby reducing the
property tax to the new city by about $100 000 This loss has a significant adverse impact on
city feasibility
The PFA shows property taxes declining slightly in constant 2009 value which is a conservative
estimate Given the relatively high property appreciation rate assumed in the PFA of 6 7 percent
annually property taxes should grow in constant dollars however the PFA incorrectly calculates
the change in assessed value, thereby offsetting the likely assessed value growth The PFA
assumes that when property sells its price will only reflect one year of appreciation in fact the
total appreciation of all property sold in a year will include many properties assessed at values
far below current market values because they were last sold several years earlier Properties
that have not sold for many years will jump substantially in value even given recent market
value reductions
P k20000�200775u-WdB lRep rtX24J re used►20077EP5 243w2010!m'p doc
-571- Item 19. m Page 125
Peer Review of Sunset Beach Incorporation PFA June 24 2010
EPS#20077 Page 6
Sales Tax
The PFA cites County data as the source for the $186 857 sales tax estimate This data
apparently is derived from the OC LAFCO Island Data Matrix It is not clear whether the amount
includes Property Tax in lieu of Sales Tax which is 25 percent of the 1 percent local sales tax
Further research is recommended to clarify this issue
Neither the Study nor the OC LAFCO Island Data Matrix indicate whether the sales tax estimate
includes a share of the State and County pool revenues which could add approximately 10
percent to the sales tax estimate
Property Transfer Tax
The transfer tax calculation considers the value of property that sells multiplied by the tax rate
As noted for property tax the actual jump in value upon sale of units is likely to be higher than
the annual appreciation rate however the appreciation rate is optimistic and likely to be lower
than 6 7 percent annually Consequently the result is within a reasonable range of values
Transient Occupancy Tax
The estimated amount of$151 356 is based on actual TOT revenues from the area The
estimate is derived from the OC LAFCO Data Matrix which indicates that the numbers are for
calendar year 2008 The numbers should be updated and based on the most recent 12 months
for which data is available
The PFA assumes that the new city will expand the current County TOT ordinance to apply to
vacation rentals The estimate of vacation rentals includes a range of rents however does not
indicate whether all of the rental units are 100 percent occupied for the full 20 weeks If not the
revenues would differ from the estimates shown
Revisions to the TOT ordinance may require 50 percent voter approval
Utility Users Tax
The PFA estimates the potential tax revenues from a new tax at different rates depending on the
amount required by a city budget The PFA indicates that the average utility bills are based on a
survey of residents Overall the amounts appear reasonable
Vehicle License Fees
The PFA estimates the VLF to the new city based on $50 per capita adjusted by a bonus
allocation in the first five years This bonus starts at 150 percent and declines to 100% after
5 years
Franchise Fees
The PFA estimates franchise fee revenues based on the same survey data used for the utility
users tax The revenue assumes that the new city will negotiate franchise fees of 5 percent for
gas electric and cable
P W000�200775 site h,Rep t�24J re w�20077EP5 24J 2010 -,p d
item 19 = Page 126 -572-
Peer Review of Sunset Beach Incorporation PFA June 24 2010
a EPS#20077 Page 7
Fines, Forfeitures and Penalties
The PFA includes a minimal amount of revenue from these sources The amount appears
reasonable
Charges for Services
The PFA assumes a cost recovery of 80 percent for planning development and code enforcement
services This recovery rate is reasonable for services which are largely fee based such as
development services however the recovery rate may be too high when considering the full
range of city functions For example code enforcement typically generates revenue from
penalties which is often much lower than the costs depending on enforcement policies e g
compliance with warnings vs issuance of citations and legal action
The city s planning costs need to account for costs of long-range planning and updates as well
as participation in regional planning activities planning for provision of affordable housing
opportunities and environmental and coastal planning which will not generate fee revenues As
noted previously the city staffing does not provide sufficient staff to address these needs
Parking Meters
The PFA estimates revenue based on national averages which result in amounts lower than
generated by parking spaces in Huntington Beach and other beach communities according to the
PFA The method and estimates appear reasonable
l
Junior Lifequards
The PFA estimate is based on current revenues received by the County
Use of Money and Property
The PFA assumes 1 percent of revenues which is reasonable The actual amount can vary
significantly depending on fund balances and prevailing interest rates
Business License Tax
The PFA assumes no business license tax revenue Currently the County does not charge a
business tax
Gas Tax
The PFA estimates gas tax revenues that are generally consistent with the per capita revenues
received by Huntington Beach in FY09 Gas Tax revenues declined in recent years and may be
less than projected in the PFA The PFA did not include Measure M taxes that would be available
for transportation purposes
P�20000s120077Su et8 tReportA241 re nW20077EP5 243n2010 m p do
-573- stem 19. - Page 127
COMMUNICATIONS REGARDING AUGUST 2, 2010
AGENDA ITEM
Authorize preparation of all documents required for
application to the ®range County Local Agency
Formation Commission (LAFC®) for annexation of the
unincorporated County of®range area of Sunset Beach
Esparta, Ratty
From Surf City Pipeline [noreply@user govoutreach com]
Sent Thursday July 08 2010 12 05 PM
To CITY COUNCIL age ndaalerts@su rfcityhborg
Subject Surf City Pipeline Comment on an Agenda Item (notification)
Follow Up Flag Follow up
Flag Status Flagged
Request#5769 from the Government Outreach System has been assigned to Johanna Stephenson
Request type Comment
Request area City Council - Comment on an Agenda Item
Citizen name Dave McPearson
Description Mr Dave Pearson called to express his opinion to Council He asked Kay to please
convey to the Council Members to vote for the annexation of Sunset Beach He also
commented that he thinks the full page newspaper ad put out by the Sunset Beach
Citizens for Cityhood in the 7/8 publication of The Independent is garbage and
misleading
Expected Close Date 07/09/2010
Click here to access the request
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monitored and will be ignored
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Esparza, Patty
From Surf City Pipeline [noreply@user govoutreach com]
Sent Tuesday July 06 2010 4 00 PM
To CITY COUNCIL agendaalerts@surfcity hb org
Subject Surf City Pipeline Comment on an Agenda Item (notification)
Request# 5751 from the Government Outreach System has been assigned to Johanna Stephenson
Request type Comment
Request area City Council - Comment on an Agenda Item
Citizen name Michael Cunningham
Description Mr Cunningham would like the Council to know that he is oposed to the Sunset Beach
Annexation He suggests contracting HB city services to Sunset and let them have their
own city
Expected Close Date 07/07/2010
Click here to access the request
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1
Esparza, Patty
From Surf City Pipeline [noreply@user govoutreach com]
Sent Thursday July 01 2010 9 24 AM
To CITY COUNCIL agendaalerts@surfcity hb org
Subject Surf City Pipeline Comment on an Agenda Item (notification)
Request#5691 from the Government Outreach System has been assigned to Johanna Stephenson
Request type Comment
Request area City Council Comment on an Agenda Item
Citizen name Bill and Alice Selfridge
Description From Alice and Bill Selfridge [mailto selfridg@earthhnk net]
Sent Wednesday, June 30, 2010 10 37 PM
To CITY COUNCIL
Subject Sunset Beach Annexation
To All City Council Members
We would like to express our opinion that Sunset Beach should NOT be annexed to
Huntington Beach Huntington Beach, our city of residence, could lose thousands of
dollars annually if we have to share our city and emergency services with Sunset Beach,
and we do not want our taxes raised We feel that a better idea would be for Sunset
Beach to be allowed to become its own city
Thank you for your attention
Sincerely
Bill and Alice Selfridge
selfridgkearthlink net
Expected Close Date 07/02/2010
Click here to access the request
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monitored and will be ignored
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Esparza, Patty
From Surf City Pipeline [noreply@user govoutreach com]
Sent Tuesday June 29 2010 12 57 PM
To CITY COUNCIL agendaalerts@surfcity hb org
Subject Surf City Pipeline Comment on an Agenda Item (notification)
Request#5648 from the Government Outreach System has been assigned to Johanna Stephenson
Request type Comment
Request area City Council - Comment on an Agenda Item
Citizen name Ray & Betty Millett
Description From Betty Millett [mailto bettymillett@sbcglobal net]
Sent Tuesday, June 29, 2010 12 19 PM
To CITY COUNCIL
Subject Sunset Beach Annexation
Dear Council,
I am concerned about the annexation of Sunset Beach to our city, especially if it will
affect our taxes I am unable to attend the July meetings, but would like to voice my
objection Information has it, that Sunset Beach would rather become its own city, and
that this would be a more favorable situation for Huntington Beach Please vote
accordingly
Ray & Betty Millett
16231 Wayfarer Ln
Huntington Beach
bettymillettgsbcglobal net
Expected Close Date 06/30/2010
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i
no ir�l'z
June 28 2010 HEkLMYED
JUL 062010
Huntington Beach
Huntington Beach City Council CITY COUNCIL OFFICE
2000 Main St
Huntington Beach, CA 92648
Re Annexation of Sunset Beach
Dear Council Members
As a resident of the City of Huntington Beach I would like to express my
opposition to any plan to annex Sunset Beach I do not want to see an increase
in our taxes
I believe that Sunset Beach residents should be allowed to go through with their
plans to become their own city Let them determine who to contract with for their
municipal services Once they have achieved cityhood they can continue the
small town vibe that they currently have which benefits all of us in Huntington
Beach who spend time in Sunset Beach
Thank you
Vivian Valenzuela
3235 Anne Circle
Huntington Beach, CA 92649
i
I
PH 71 4 377 2600
5aLEs Tax F?Esr3URCE CiROLIP - --
FAX 71 4 377 2605
I _ _
16BB2 eOLSA C,HICA SUITE 206 HLJNTINGTON BEACH CA 92649
June 24 2010
V �
I
Honorable Mayor and City Council Members JUL2010
City of Huntington Beach Huntington Beach
2000 Main Street(4th Floor) CITY COUNCIL OFFICE
Huntington Beach CA 92648
I
I
i
I
RE Protest of Proposed Annexation of Sunset Beach
Dear Honorable Mayor and City Council Members
I am writing to protest the proposed annexation of the unincorporated community of
Sunset Beach As a Sunset Beach resident and a Huntington Beach business owner I
have serious concerns about the impact of the proposed annexation on both the residents
�I
of Sunset Beach and the residents and businesses of Huntington Beach
My first concern is that the residents of Sunset Beach are overwhelmingly in favor of
forming a City of Sunset Beach and are actively pursuing incorporation through the
LAFCO process A vote to annex Sunset Beach at the July 19 2010 city council meeting
would quash any opportunity to complete the incorporation process and deprive Sunset
Beach residents of their preferred form of governance that is self-governance
I agree with Ms Renee Ellerbrock s comment at the recent study session when she told
the city council Its one thing for Huntington Beach to annex a parcel that s undeveloped
its another thing to annex a community that's 100 years old without a vote as to whether
they want to be part of Huntington Beach or not
Regardless of LAFCO s small island provision allowing a city to annex an unincorporated
island of less than 150 acres without a vote the use of this provision would unjustly
j deprive the residents of Sunset Beach the opportunity to incorporate The truth is while
the provision allows a city to annex without a vote it does not require the city to annex
without a vote The city council is not bound to annex without giving the Sunset Beach
residents a vote and it is not bound to do what is against the wishes of those residents
Other concerns with annexation to Huntington Beach relate to the dilution of our ability to
control our governing body As a City of Sunset Beach each resident will be one of 1 300
residents As part of the City of Huntington Beach each resident will be one of 200 000+
residents The argument that we will have more local control as residents of Huntington
Beach as opposed to residents of the County of Orange is seriously flawed because the
I
WWW SALESTAXRESC]IJiZCE CAM
Protest of Proposed Annexation of Sunset Beach
June 24 2010
Page 2 of 2
possibility of remaining an unincorporated island within the County of Orange is no longer
realistic The only options are cityhood and annexation and we will not have more local
control under annexation
Furthermore many residents in Sunset Beach distrust the Huntington Beach City Council
because of the perception that the council does not listen to its own residents and does
not act according to their wishes The council has an opportunity before them to show the
residents of Sunset Beach and Huntington Beach that it does listen The residents are
shouting that they do not want the annexation of Sunset Beach to proceed Please listen
As a Huntington Beach business owner I oppose the dilution of public services provided
to residents and businesses currently provided by the City of Huntington Beach This
dilution would occur because the City has determined that it is not necessary to increase
fire and police staffing to protect the community of Sunset Beach It is simply unrealistic
that the city can increase services to one part of a city and not reduce services to another
without increasing overall staffing levels Annexing Sunset Beach will most certainly put
additional financial strain on an already burdened city
Therefore it is with great respect that I urge you to vote NO on the issue of annexation
of the community of Sunset Beach and allow the incorporation process to proceed to
completion
If you have any questions, please feel free to call me at(714) 377-2600
Sincerely
Graham Hoad
Esparza, Patty
From Surf City Pipeline [noreply@user govoutreach com]
Sent Thursday June 24 2010 4 35 PM
To CITY COUNCIL agendaalerts@surfcity hb org
Subject Surf City Pipeline Comment on an Agenda Item (notification)
Request# 5614 from the Government Outreach System has been assigned to Johanna Stephenson
Request type Comment
Request area City Council - Comment on an Agenda Item
Citizen name Joseph Vicic
Description I simply wish to state that I firmly believe that sunset beach should be part of
Huntington Beach I have lived/owned property in Sunset for nearly 40 years and I fear
that a stand alone city of Sunset beach will invite bankruptcy and eventual devaluation
Our entity is simply too small and with too few resources to adequately handle the
responsibility of becoming a city
I think that a few well intentioned people are making a big push and spending substantial
money to become a city but the majority of people would prefer to come under the
umbrella of HB ( and retain the name Sunset Beach)
I would be available to discuss this issue
thank you
Expected Close Date 06/25/2010
Click here to access the request
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monitored and will be ignored
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Esparza, Patty
From Surf City Pipeline [noreply@user govoutreach com]
Sent Thursday June 24 2010 11 38 AM
To CITY COUNCIL agendaalerts@surfcity hb org
Subject Surf City Pipeline Comment on an Agenda Item (notification)
Request# 5601 from the Government Outreach System has been assigned to Johanna Stephenson
Request type Comment
Request area City Council - Comment on an Agenda Item
Citizen name Sandy Davis
Description As a resident of Sunset Beach, I strongly oppose the Huntington Beach annexation It is
my belief, that we can "stand alone" as a city, given the options for outsourcing various
services We don't want to lose the small town feel of our community It is one of the
many reasons we love living there
Expected Close Date 06/25/2010
Click here to access the request
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monitored and will be ignored
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Esparza, Patty
From Surf City Pipeline [noreply@user govoutreach com]
Sent Wednesday June 23 2010 11 55 AM
To CITY COUNCIL agendaalerts@surfcity hb org
Subject Surf City Pipeline Comment on an Agenda Item (notification)
Request#5593 from the Government Outreach System has been assigned to Johanna Stephenson
Request type Comment
Request area City Council - Comment on an Agenda Item
Citizen name George Vogel
Description I have read the consultant's report and that of the HB council and conclude that it is in
the best interest of the home owners of Sunset Beach to be annexed by Huntington
Beach While I am a short time resident(approximately ten years) I feel we would
benefit from annexation I moved here from Corona del Mar While in CDM we
maintained our autonomy as a community while benefitting from being part of the larger
municipality of Newport Beach I forsee the same relationship in the annexation process
All 1,200 residents are not in favor of crtyhood for this beautiful stretch of beach Please
do what is right for the community
George B Vogel
17151 S Pacific Ave
Sunset Beach 90742
Expected Close Date 06/24/2010
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Page 1 of 1
Esparza, Patty
From Surf City Pipeline [surfcity@user govoutreach com]
Sent Tuesday June 23 2009 11 30 AM
To Esparza Patty
Subject Surf City Pipeline Message About Request# 1232 [99412099439]
---Enter your reply above this line---
Message from employee Johanna Stephenson sent you this message about Request# 1232
Reply to this email to send any comments or message back to the sender
Message Patty I don't see this topic on the next Agenda but I decided to send to you just
in case
Request Information
Request type Comment
Request area City Council - Comment on a Non-Agenda Item
Requestor name Christine Montana
Assigned To Johanna Stephenson
Description Letters (2) from Ms Montana sent to all individual Council Members regarding
her request to pass a resolution to officially not accept either the community of
Sunset Beach or the Sunset Beach Sanitary District as within the City of HB's
spehere of influence First letter dated 6/17/09 is to Joyce Crosthwaite @
LAFCO in Santa Ana with Council cc'd Second letter dated 6/22/09 is to the
Council Members Please open attachments to view
Expected Close Date 07/08/2009
6/23/2009
Honorable Mayor Cathy Green
P 0 Box 711
Huntington Beach CA 92648
June 13 2010
Dear Mayor Green
In Sunset Beach there is a small,vocal group of residents who favor cityhood but by no means are they
in the majority
Although many Sunset Beach residents are in favor of annexation to Huntington Beach some signed the
petition for cityhood even though they were not in agreement, because they didn't want to hurt the
feelings of people asking them to sign and also because we all have to live together when the question
of annexation versus cityhood is settled
This is a small community We are all neighbors We see each other at the Post Office almost every day
We are all members of the Sunset Beach Community Association We all work together on the Sunset
Beach Art Festival and other community events
Wild rumors circulating that if we become part of Huntington Beach the city will place parking lots on
the beach in front of oceanfront homes and will approve large commercial ventures much like the
redevelopment plan for the Edinger area where the closed Montgomery Ward and Levitz Furniture now
stand
When and if a vote takes place on whether to become an incorporated city,we believe it will fail to
achieve a majority
We are in favor of annexation to Huntington Beach as the best option available to Sunset Beach at this
time We believe that Huntington Beach has laws in place to deal with some of the undesirable
businesses proliferating in Sunset Beach such as marijuana dispensaries tattoo parlors and massage
parlors
We would be happy to work with Huntington Beach officials and staff to achieve an orderly transition to
becoming part of the city of Huntington Beach
Fra Maywhort_
Phyllis Maywhort
A' &�
P O Box 198
16851 Bayview Drive p
Sunset Beach CA 90742 201�
1
(562)592 1606
pwmavwhortPyahoo com N��t�� ��o fFLC�
Esparza, Patty
From Flynn Joan
Sent Monday July 19 2010 4 22 PM
To Esparza Patty
Subject Fw Vote NO on Sunset Beach Annexation
Joan L Flynn CIVIC
Huntington Beach City Clerk
From McKeeverLP@aol com <McKeeverLP@aol com>
To Green, Cathy, Hardy, Jill, Bohr, Keith, Carchio, Joe, Coerper, Gil, ddwyer@surfcity hb org <ddwyer@surfcity
hb org>, Hansen, Don
Cc Flynn, Joan, Broeren, Mary Beth, fwilson@surfcity hb org <fwilson@surfcity hb org>, Emery, Paul, rhall@surfcity
hb org <rhall@surfcity hb org>, Hess, Scott
Sent Mon Jul 19 16 08 28 2010
Subject Vote NO on Sunset Beach Annexation
Wendelyn McKeever Lack
1630 North Main Street, #258
Walnut Creek, CA 94596-4609
July 19, 2010
City of Huntington Beach
Mayor and City Council Members
2000 Main St
Huntington Beach, CA 92648
Re Proposed Sunset Beach Annexation
Dear Mayor and City Council Members
My family and I currently own residential properties in both Huntington Beach and Sunset Beach as part of our
rental property business We have owned property on South Pacific Avenue in Sunset Beach since 1925, when
my grandparents purchased a lot and built a beach cottage there Four generations of my family—all California
natives—have enjoyed the tight-knit, small-town Sunset Beach community with its unique, days-gone-by,
quasi-rural tone and tenor
I oppose both the annexation of Sunset Beach as well as Sunset Beach independent cityhood Sunset Beach
should remain unincorporated Doing so will retain our community's unvarnished look and feel, as well as
preserve property owners rare view rights and other idiosyncrasies that Sunset Beach natives and visitors
cherish
i
While I currently use my Sunset Beach and Huntington Beach real estate as rental properties, I maintain my
local community contacts and, among my friends and neighbors in both Sunset and Huntington I have heard
zero support for annexation In fact, there is no compelling reason for Huntington Beach to annex Sunset
Beach If Huntington Beach declines to annex Sunset Beach then the preferred status quo can be maintained
and Sunset Beach residents can live in peace
As a Huntington Beach property owner, I am also concerned about the additional net costs that Huntington
Beach could incur as a result of annexation of Sunset Beach
Please know that Sunset Beach residents and property owners will not go along quietly or cooperatively with
annexation We strenuously insist that we do not wish to be annexed to your city Please just let us live in
peace and maintain the status quo in our unique little slice of heaven Leaving us unincorporated doesn't harm
anyone
It is wrong for a huge city like Huntington Beach to trample on our freedoms to remain free and live in our
tranquil little unincorporated village You're an 800-pound gorilla and we're a little bit of nothing so this ain't a
fair fight Please just leave us in peace
Please don't swallow up Sunset Beach through annexation and then exploit us with land development and new
rules we neither want nor need—which everyone knows would inevitably result from Sunset Beach's
annexation to Huntington Beach We don't want development and we don't want to be bled dry by new taxes,
regulations and fees to help bail out Huntington Beach's budget
Won't you just mind your own business9 Please allow Sunset Beach residents to decide their own fates Please
vote against annexation and tell Orange County that the issue is closed for consideration
Third and fourth generation Orange County Californians in my family await your decision Please won t you
do the right thing and vote against Sunset Beach annexation
Sincerely,
Wendy McKeever Lack
Managing Partner
McKeever Rentals LLC
925-708-9637
McKeeverLP2aol com
Owner
16871-3 South Pacific Avenue
Sunset Beach, CA 90742
15861 Wicklow Lane
Huntington Beach, CA 92647
z
8/2/2010
Sunset Beach Annexation
fq
4
Why change the Status Quo?
. Small, isolated unincorporated
island
>Pz) 9 1,227 people, 85 acres
. Surrounded by Huntington
Beach and Pacific Ocean
8/2/2010
* For years State law
recognized the
` inefficiency of large
counties providing
municipal services to
isolated unincorporated
islands
• LAFCO placed Sunset
Beach in the City s Sphere
of Influence last summer
2
8/2/2010
oThis means that Sunset
Beach can only be
annexed into Huntington
Beach
Implications of Annexing
Sunset Beach
Fiscal Analysis
3
8/2/2010
Annexation Revenue/ Expenditure
based on original report
Revenues Expenditures Projected Surplus
General Fund $795 510
Other $439 855
Revenues
Available for Operations $1 235 365 $664 140 $571 225
Road $176 555 $123 521 $53 034
Revenues
TOTAL $1 411 920 $787 661 $624 259
Note The City of Huntington Beach is in ongoing discussions with the County
of Orange to continue funding Manne Safety Services within Sunset Beach for
a two to three year period past annexation
Public Service/
Infrastructure Impacts
Minimal Impacts on City services, except for
• Community Services (beach maintenance,
marine safety)
• Public Works (Park Maintenance)
No additional costs projected for
• Police
• Fire
4
8/2/2010
Summary
• City services can be provided to the
annexed area without additional burden
on the taxpayers
This annexation will provide more efficient
service to Sunset Beach compared to
other service alternatives
Peer Review Assessment of City
Annexation Study
o Completed by EPS, consultant to
Orange County LAFCO
o Identified underestimated and
overestimated revenues and
expenditures
o Net surplus assuming all of the
findings = $440,000
5
8/2/2010
Sunset Beach Community Association
is Concerned with a Number of Issues
Including but not limited to
Maintain Identity with Signage
Liaison with the City Council
O Keep LCP, new plans submitted to local advisory board
Keep parking permits at same price
Y Continue encroachment programs, transfer current
records to City
Support police use of fire station
Maintain independence of the Sanitary District
Support current postal delivery system
City take over maintenance of beach and greenbelt
Limit future undesirable businesses
Confirm County Ir Lifeguard contract details
Complete undergrounding projects
® Obtain County funds to repave certain streets
Annexation Benefits to
Sunset Beach
. More efficient delivery of local municipal services
Funds available for Capital Improvements and
Repair
No Utility Users Tax
Elimination of 10% water surcharge
Regulations that could prevent undesirable land
uses such as weekly vacation rental and medical
marijuana dispensaries
Engineering support for underground projects
Street sweeping twice a month
6
8/2/2010
Sunset Beach Commissioned
Incorporation Report
Annual Operations More Expensive
Incorporation Requires New Taxes and Fees
s UUT of 5 - 10%
910% TOT extended to weekly rentals
• 5% franchise fees
* Parking Lot Meters (Scenario #3)
Key Incorporation Issues (Continued)
No Provision for Capital Improvements
* Broadway Bridge Repair
W *Share of dredging project
* Future street resurfacing
Automatic Aid Agreements support adjacent
jurisdictions and not be the primary service
Agency
Need to resolve water service including
possible acquisition of water system
7
8/2/2010
Peer Review Assessment of
Incorporation
o Completed by EPS, consultant to
Orange County LAFCO
o Scenarios 1 and 2 do not meet
minimum criteria for feasibility per
government code section 56720
o Scenario 3 shortfalls continue to be
negative by year 10, should not be
deemed feasible
Sunset Beach Incorporation —
Application of Peer Review to the
Preliminary Feasibility Analysis
Presented by John Goss
® Ralph Andersen
■"� &Associates
8
8/2/2010
Peer Review Implications
-Scenarios 1 and 2 do "not
meet the minimum criteria for
feasibility "
-Scenario 3 which requires a
10% Utility Users Tax and
parking meters " shortfalls
continue to be negative by year
10, the shortfall is a negative
3% of costs, which should not
be deemed feasible."
Peer Fiscal Review
In addition to the Peer Review Conclusion
■ Scenarios 1 and 2 incorporation
budget is understated by $248 700
(expense) and $100 000 (revenue) for
a total shortfall of$348 700
■ Scenario 3 by year 6 understates
expense by $298 700 and revenue by
$100 000 for a total shortfall in
scenario 3 of$398,700
■ These additional shortfalls create
budget deficits for all three scenarios
for years 2 - 10
9
8/2/2010
Other Fiscal Impacts
It is unknown if Sunset Beach will
obtain the lowest cost provider for
services
It is unknown if Sunset Beach will need
to make mitigation payments to the
County for revenue neutrality
There is no funding when the next
round of street resurfacing is required
There is no funding for other city
capital improvements
Conclusions
Based on Preliminary
Feasibility Analysis Scenarios
1 and 2 do not meet minimum
criteria for feasibility The
review also concludes that the
proposed city would
experience shortfalls
beginning in year 5 under
Scenario 3, which should be
deemed infeasible
10
8/2/2010
Annexation Process
o Complete fiscal and operational
analysis (General Plan
Requirement)
o Submit Application to
LAFCO/CEQA documents
o Prezone the area
o Certificate of Filing issued by
LAFCO
Annexation Process (cont'd)
o LAFCO holds public hearing
o LAFCO Board has no discretion
to deny the application under
state law
o LAFCO Board approves the
application as filed, or with
conditions
11
8/2/2010
Timeline
Upon Council Direction to proceed
September 2010 Planning Commission
Environmental and Zoning
October 2010 City Council
Resolution for Application to LAFCO
Environmental and Zoning
Tax Sharing Agreements
December 2010 LAFCO Public Hearing
January 2011 Record Annexation
Questions
12
Esparza, Paa
From Surf City Pipeline [noreply@user govoutreach com]
Sent Friday July 30 2010 1 12 PM
To CITY COUNCIL agendaalerts@surfcity hb org
Subject Surf City Pipeline Comment on an Agenda Item (notification)
Request#6001 from the Government Outreach System has been assigned to Johanna Stephenson
Request type Comment
Request area City Council - Comment on an Agenda Item
Citizen name Diana Mizera
Description I urge your vote AGAINST annexation of Sunset Beach Of great concern is the
eventual destruction of Sunset's character However, of primary significance is that
Huntington Beach does not need the additional encumbrance of taking over marine
safety services in twenty-four months Long term,this annexation would not be a
prudent or fiscally beneficial choice for the City of Huntington Beach or her residents
PLEASE VOTE NO
Expected Close Date 08/02/2010
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Esparza, Eta
From Surf City Pipeline [noreply@user govoutreach com]
Sent Monday August 02 2010 11 01 AM
To CITY COUNCIL agendaalerts@surfcity hb org
Subject Surf City Pipeline Comment on an Agenda Item (notification)
Request#6022 from the Government Outreach System has been assigned to Johanna Stephenson
Request type Comment
Request area City Council - Comment on an Agenda Item
Citizen name Arlene Mayor
Description Arlene called to say she would like you to vote no on annexation
Expected Close Date 08/03/2010
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P �/1Q
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Request 6023 Entered on 08/02/2010 11 36 Ally By Johanna Stephenson
Customer Information
Name Jeff Nutts Phone
Address Alt Phone
Email
Request Classification
Topic City Council Comment on an Agenda Request type Comment
Item
Status Closed Priority Normal
Assigned to Johanna Stephenson Entered Via Phone
City Council 8 All Members of City Council
Description
Johanna spoke to citizen
Reason Closed
Thanked citizen for the call
Date Expect Closed 08/03/2010
Date Closed 08/02/2010 11 38 AM By Johanna Stephenson
Enter Field Notes Below
Notes A7VA-2-X - 7CJ,4-)
Notes Taken By Date
(-,412F C0J1 1f 6,-3-7 v,j _ 7
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Request 6024 Entered on 08/02/2010 11 41 AM By Johanna Stephenson
Customer Information
Name Patricia Swancutt Phone
Address Alt Phone
Email
Request Classification
Topic City Council Comment on an Agenda Request type Comment
Item
Status Closed Priority Normal
Assigned to Johanna Stephenson Entered Via Phone
City Council 8 All Members of City Council
Description
Johanna spoke to citizen
Reason Closed
Thanked citizen for the call
Date Expect Closed 08/03/2010
Date Closed 08/02/2010 11 41 AM By Johanna Stephenson
Enter Field (Votes Below
Notes 06'q)sd' ]2) /'-n21,)LM 101
Notes Taken By Date
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Esparza, Patty
From Surf City Pipeline [noreply@user govoutreach com]
Sent Monday August 02 2010 1 44 PM
To CITY COUNCIL agendaalerts@surfcity hb org
Subject Surf City Pipeline Comment on an Agenda Item (notification)
Request#6027 from the Government Outreach System has been assigned to Johanna Stephenson
Request type Comment
Request area City Council - Comment on an Agenda Item
Citizen name Elizabeth Gellatly
Description August 2, 2010
Dear Council Members, ALL
As a US citizen and current new resident of Huntington Beach, I am deeply troubled by
the actions of the City Council Members on the issue of the Sunset Beach Annexation
For any government entity to act in contrary to the U S Constitution is appalling
Although the law, as currently written, allows you act in contrary to the Constitution, I
believe you have a moral obligation not to do so In any case, it would be morally wrong
to deny even 1 citizen the right to vote if they chose to do so In the case of Sunset
Beach, over 80% of the Sunset Beach residents OPPOSE ANNEXATION and demand
the right to vote on this issue I am also a former Sunset Beach resident of ten years and
I know personally that most of these residents are against this
As elected officials, you have relied on the citizens of Huntington Beach for their vote
You would not be in the position you are today without their VOTE If those citizens
were denied that opportunity, you would not be in the position you are today
Whether or not Huntington Beach wants Sunset Beach or even needs Sunset Beach, the
issue before you is simple It's a matter of right and wrong Are you willing to do the
right thmg9
One of the definitions found for the term `moral" is founded on the fundamental
principles of right conduct rather than on legalities, enactment, or custom moral
obligations
You DO NOT have to vote on the annexation of Sunset Beach What you DO HAVE is
an obligation to act morally and allow the residents of Sunset Beach the opportunity to
decide for themselves what they want to do
As a parent, and grandparent, I taught about right and wrong, morals and ethics As a 27
year teacher, I do the same What would be the message being sent by the Huntington
Beach City Council if you voted in favor of annexation and denied the citizens of Sunset
Beach their right to vote or participate in their own destiny? The implications of this are
against you
What will you tell your own children when they ask you why you voted against 80% of
the citizens of Sunset Beach? The answer, "Because I could," is not morally acceptable
Please do the right thing
Sincerely,
Elizabeth Gellatly
19929 Derbyshire Lane /U
HB Ca 92646
Expected Close Date 08/03/2010 //^� 1, ��;'/ -7v
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2
Wendelyn McKeever lack
1630 North Main Street, #258
Walnut Creek, CA 94596-4609
July 19,2010
City of Huntington Beach
Mayor and City Council Members
2000 Main St
Huntington Beach, CA 92648
a
Re Proposed Sunset Beach Annexation
Dear Mayor and City Council Members
My family and I currently own residential properties in both Huntington Beach and
Sunset Beach as part of our rental property business We have owned property on South
Pacific Avenue in Sunset Beach since 1925,when my grandparents purchased a lot and
built a beach cottage there Four generations of my family—all California natives—have
enjoyed the tight-kmt, small-town Sunset Beach community with its unique, days-gone-
by, quasi-rural tone and tenor
I oppose both the annexation of Sunset Beach as well as Sunset Beach independent
cityhood Sunset Beach should remain unincorporated Doing so will retain our
community's unvarnished look and feel, as well as preserve property owners' rare view
rights and other idiosyncrasies that Sunset Beach natives and visitors cherish
While I currently use my Sunset Beach and Huntington Beach real estate as rental
properties, I maintain my local community contacts and,among my friends and neighbors
in both Sunset and Huntington I have heard zero support for annexation In fact,there is
no compelling reason for Huntington Beach to annex Sunset Beach If Huntington Beach
declines to annex Sunset Beach,then the preferred status quo can be maintained and
Sunset Beach residents can live in peace
As a Huntington Beach property owner, I am also concerned about the additional net
costs that Huntington Beach could incur as a result of annexation of Sunset Beach
Please know that Sunset Beach residents and property owners will not go along quietly or
cooperatively with annexation We strenuously insist that we do not wish to be annexed
to your city) Please just let us live in peace and maintain the status quo in our unique
little slice of heaven Leaving us unincorporated doesn't harm anyone
It is wrong for a huge city like Huntington Beach to trample on our freedoms to remain
free and live in our tranquil little unincorporated village You're an 800-pound gorilla
and we're a little bit of nothing so this ain't a fair fight Please just leave us in peace
Letter to Huntington Beach City Council
July 19, 2010
Page 2 of 2 ,
Please don't swallow up Sunset Beach through annexation and then exploit us with land
development and new rules we neither want nor need—which everyone knows would
inevitably result from Sunset Beach's annexation to Huntington Beach We don't want
development and we don't want to be bled dry by new taxes,regulations and fees to help
bail out Huntington Beach's budget
Won't you just mind your own busmess9 Please allow Sunset Beach residents to decide
their own fates Please vote against annexation and tell Orange County that the issue is
closed for consideration
Third and fourth generation Orange County Californians in my family await your
decision Please won t you do the right thing and vote against Sunset Beach
annexation?
Sincerely,
Wendy Mc eever Lack
Managing Partner
McKeever Rentals LLC
925-708-9637
Owner
16871-3 South Pacific Avenue
Sunset Beach, CA 90742
0
15861 Wicklow Lane
Huntington Beach,CA 92647
cc Annie Burns,Orange County Register