HomeMy WebLinkAboutSunset Beach Annexation Study - Study Session 06-07-2010 L'9AM" 10 CITY OF HUNTINGTON BEACH
1710 Office of the City Clerk
TO: Honorable Mayor and City Council
FROM: Joan L. Flynn, City Clerk
DATE: June 7, 2010
SUBJECT: COMMUNICATIONS TO THE CITY COUNCIL FOR THE
JUNE 7, 2010 CITY COUNCIL/RDA/PFA MEETING
Attached are Communications to the City Council received after distribution of the Agenda:
Study Session
PowerPoint Communication submitted by Paul Emery dated June 7, 2010, titled Sunset Beach
Annexation Study.
Sunset Beach Annexation Study
Fiscal/Operational Analysis
Presented by John Goss
f/ RalphAn,dm..,
Li &Associates
Purpose
®Meet General Plan Requirements
e Fiscal Impacts
e Public Service Impacts
®Operational Impacts
®Infrastructures Issues
Why Change the Status Quo?
® Small, isolated unincorporated
island
® 1,227 people, 85 acres
® Surrounded by Huntington
Beach and Pacific Ocean
ke For years State law
5�,'drecognized the
inefficiency of large
counties providing
municipal services to
isolated unincorporated
islands.
®Orange County started
pulling back from
providing municipal
services several years
ago.
. LAFCO placed Sunset
Beach in the City's Sphere
of Influence last summer.
oThis means that Sunset
Beach can only be
annexed into Huntington
Beach.
Implications of Annexing
Sunset Beach
Fiscal Analysis
Revenues
Tt
i
General Fund = $795,510
Prof-tecl Annual:anxral Fund Reronna
Sun.e�r eaacn Annexation.ROl§-t8
=ropeny Tax $145 sob;
.T..._.
p...yTrans x 66
i esi j x t
.. .....__I -
.-... ._._.__... ... .........I_ ._.... .._..._..
P p y Sa T 3E
Motor Veh'ce uof Ve+ce L'cense Fee � 134,521'I
n'.Occ noy tax 5E1
ire n:Occ x,Bus 5513E ns�e upancy Ta Improvement Dist
cen 331
en er se 5 Fees ]4.
ntl Forte s
TOTAL GENERA-FUND REVEN UE
3195,510;,
m e.a- ¢ a cma amo aes avmi,oar s2zae�arch .om tm:aNrm n u eallyrevenues which areroRset by expenpllures lberetore oiotlucinga"wssh"in pros'
ling the buage(aneeaed ro serve me sunset Beacn com
Other Municipal Revenues = $439,855
TmA.11
Prolectecl Annual Other Municipal Revenue+z
Su n sect Beach Annexation.2oo9-"U
57 d Fire Funtl P p rly Tax $350,731
i Lo f E argancy MeC I ContreA R (8,000)'
Fi M tl 24 300
FT.7 F e Oepartme t R venue _ _ _ _ $367,031
15,calAss—ments j 3,94Sj
__r
I La f W111,81oM1 � J4
Library Propetly Tax 52,029 1
R l P gram(J L f g tl cool ct) 1 40 111
1 TOTAL OTHER MUNICIPAL REVENUE 439,855
Restricted Road Funds = $176,555
Table III
Projected Restricted Road Revenues
Gas Tax $148,381
Measure M 28,174
��Total Restricted Road Revenues $1T6,555
Revenue Summary
%,W" IV
Projacted ban -!Fund
Omar ManldptN and Rastr clod Road Revenues
Sunset Beach,2009—10
General Fund $796 510
Other MunlciPl 439,855
Total AVdllable for City Operations $1,235,365
ResUicled Road Revenue 1]fi,555
Total Rovanae Produoo4 from Sunset nose- 51,411,920
Expenditures
Actual Expense Projection =
$664,140
P --y ---
T.We VII
Annual Actual Operating Expetice Proient Surn—
Sunset Beach,2009—10
A ma Control
City �.-.-- $31 000� nil
Clerk 1 250
I Community Services j 11
! Mech Maintenance
neRSalfenishment __- ._5331,250
—__ -J 30
FlreMed 20,760
I Public Works—Park Maintenance
135,000
u Total Estimabad Operatin EXnse —'
.4 oRestricted Road Revenues
_ $176,555
oRoad Expenditures
= $123,521
Annexation Revenue/
Expenditure Summary
Revenues Expenditures Projected Surplus
General Fund $795,510
Other $439,855
Revenues
Available for Operations $1,235,365 $664,140 $571,225
Road Revenues $176,555 $123,521 $53,034
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 Marine Safety Services within Sunset Beach for
a two to three year period past annexation.
One Time Expenditures
Table Vlll ----------
Potential One-Time Planning Costs
e.
General PlanS Am
it, [nd, 14,950
�CP Amendment - �� --_- �- 11,212 1
Feaslbll (RAA)endment S37,299
i Zoning Map Amendment 9,733
Environmental Assessment 8,522!
Zoning Text Amendment 15,178 F
Total $96,894
Note:These estimated costs assume use of a consultant rather than staff.
Potential CIP One Time
Expenses
® Broadway Bridge Repair = $96,000 (Gas
Tax or Measure M)
o Sunset Harbor Dredging = Shared
Funding with or without annexation
o Underground Projects = Rule 20A;
homeowner initiated
Public Service/
Infrastructure Impacts
Minimal impacts on City services, except for:
o Community Services (beach maintenance,
marine safety) _ $476,130
® Public Works (Park Maintenance) _
$135,000
No additional costs projected for:
o Police
e Fire
Summary
City services can be provided to the
annexed area without additional burden
on the taxpayers
o This annexation will provide more efficient
service to Sunset Beach compared to
other service alternatives
Sunset Beach Community Association
is Concerned with a Number of Issues
e Maintain Identity with Signage
e Liaison with the City Council
e Keep LCP;new plans submitted to local advisory board
• Keep parking permits at same price
e Continue encroachment programs;transfer current
records to City
Support police use of fire station
Maintain independence of the Sanitary District
e Support current postal delivery system
e City take over maintenance of beach and greenbelt
• Limit future undesirable businesses
Confirm County Jr.Lifeguard contract details
Complete undergrounding projects
Obtain County funds to repave certain streets
Annexation Benefits to
Sunset Beach
• More efficient local municipal services. Preferred
Services Scenario($1,348,600)vs.Annexation
($664,000)
• Funds available for Capital Improvements and
Repair
o No Utility Users Tax
e Elimination of 10%water surcharge
o Regulations that prevent undesirable land uses
e Engineering support for underground projects
• Eligible for FireMed program
o Street sweeping twice a month
Key Incorporation Issues
Raised in the Sunset Beach
Commissioned Report
Annual Operations More Expensive
oIncorporation = $1,348,600
oAnnexation = $664,000
Incorporation Requires New Taxes and Fees
o UUT of 5 - 10%
e 10010 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
r oShare of dredging project
oFuture 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
Annexation Process
o Complete fiscal and operational
analysis (General Plan
�j
Requirement)
o Submit Application to
LAFCO/CEQA documents
o Prezone the area
o Certificate of Filing issued by
LAFCO
r' 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
Timeline
Upon Council Direction to proceed:
July 2010 Planning Commission
Environmental and Zoning
August 2010 City Council
Resolution for Application to LAFCO
Environmental and Zoning
Tax Sharing Agreements
September 2010 LAFCO Public Hearing
October 2010 Record Annexation
Questions
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Page
ExecutiveSummary..................................................................................................................'I
FiscalAnalysis............................................................................................................................1
Revenues..............................................................................................................................1
Expenditures.........................................................................................................................1
OperationImpacts ......................................................................................................................2
PublicService Impacts..........................................................................................................2
InfrastructureImpacts ...........................................................................................................3
OtherIssues..........................................................................................................................3
AnnexationProcess....................................................................................................................4
Sunset Beach Annexation Study— Fiscal/Operational Analysis...........................................5
Purpose......................................................................................................................................5
Background ................................................................................................................................5
WhyChange the Status Quo? ....................................................................................................6
Methodology...............................................................................................................................7
FiscalAnalysis ......................................................................................................................7
Revenues..............................................................................................................................8
GeneralFund Revenues.............................................................................................................8
PropertyTaxes......................................................................................................................8
PropertyTransfer Tax...........................................................................................................9
SalesTax..............................................................................................................................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
TransientOccupancy Tax .....................................................................................................9
Transient Occupancy Tax (Business Improvement District) ................................................10
FranchiseFees...................................................................................................................10
UtilityUsers Tax..................................................................................................................10
BusinessLicense Tax.........................................................................................................10
Animal License/Shelter Fees...............................................................................................11
Permit and Regulatory Fees................................................................................................11
Planningand Zoning Fees...............................:.............................................................11
BuildingPermit 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
OtherMunicipal Revenues........................................................................................................13
Structural Fire Fund Property Tax.......................................................................................13
FireMed...............................................................................................................................13
Special Assessments..........................................................................................................13
Water/Wastewater Fees......................................................................................................13
LibraryProperty Tax............................................................................................................13
Recreation Programs..........................................................................................................14
ParkingFees.......................................................................................................................14
Total Other Municipal Revenues.........................................................................................14
Table II — Projected Annual Other Municipal Revenues, Sunset Beach
Annexation, 2009— 10..............................................................................................................14
RestrictedRoad Revenues .................................................................................................15
GasTax Funds..............................................................................................................15
MeasureM ....................................................................................................................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,
SunsetBeach, 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
AnimalControl ....................................................................................................................19
CityClerk............................................................................................................................19
Community Services...........................................................................................................19
BeachMaintenance.......................................................................................................19
MarineSafety......................................................................................................................20
FireMed...............................................................................................................................20
PublicWorks.......................................................................................................................21
Park Maintenance .........................................................................................................21
Projected Actual Operating Expense Summary ........................................................................21
Table VI —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
Summaryof Fiscal Impact.........................................................................................................23
Table IX— Summary of Annual Revenues/Expenditures, Sunset Beach
Annexation, 2009 — 10..............................................................................................................24
FutureFinancial Impacts...........................................................................................................24
Public Service and Infrastructure Impacts............................................................................25
PublicService Impacts..............................................................................................................25
Administration, City Attorney, City Treasurer, City Clerk, Economic Development
Finance, Human Resources, Information Services..............................................................25
Building & Safety and Planning...........................................................................................25
CommunityServices...........................................................................................................26
Library.................................................................................................................................26
PublicSafety.......................................................................................................................26
PublicWorks.......................................................................................................................27
Water/Wastewater...............................................................................................................27
Summary .............................................................................................................................27
Infrastructure Impacts...............................................................................................................28
BroadwayBridge.................................................................................................................28
Drainage.............................................................................................................................28
FireStation .........................................................................................................................28
ParkFacilities......................................................................................................................28
Streetsand Roads ..............................................................................................................28
UndergroundUtilities...........................................................................................................29
Water..................................................................................................................................29
Wastewater.........................................................................................................................29
Summary ............................................................................................................................29
OtherIssues .............................................................................................................................29
@909 L I.FJa&HDAEMN o*o @W @9MHOWOUR A .
AnnexationProcess ...............................................................................................................32
Steps Toward Annexation.........................................................................................................32
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.
F�sca� Ana ysus
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.
Page 9
l_.1:C1AAMAEM l_J C
M 90 f1 oa @ a
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.
0peG'adon fill pasta
This portion of the report evaluates the public service and infrastructure impacts of this potential
annexation on the City of Huntington Beach.
Pubflc Service �rnpacts
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-
Page 2
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.
Otherissues
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 Association's 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.
Page 3
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.
Page 4
SunzW Beach h AnnsKaUan Mudy
Nzca000Opsratoona� Qna�yzoz
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
Why Change the Status Quo?
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
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.
Methoddogy
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.
Naca Ana ysus
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:
o Income that would accrue to the City's General Fund;
Page 7
• 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:
o General Fund Revenues, which is income which can be used for any municipal purpose;
o 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
o Restricted Road Revenues which can only be used for road maintenance and street
projects.
Genera0 Fund Revenues
Property Faxes
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-
Page 8
f�' Goo' 0
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 Tams
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).
S,al es 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 pn Lieu of Sai es 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 Vehide 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 Tali pro Lieu of Motor Vehide 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
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 District)
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
ft0@9 MA&90AEft 1*_M 9 Mmmay.M
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/Sheffer 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
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.
ToW 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
Projected) Annual General Fund) Revenue
Sunset Beach Annexation, 2009 — 10
Property Tax $145,306
Property Transfer Tax 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 Tax 151,356
Transient Occupancy Tax, Bus. Improvement Dist. 15,136
Franchise Fees 10,660
Business License Fee 13,337
Animal License/Shelter Fees 1,745
Fines and Forfeitures 1,236
TOTAL GENERAL FUND REVENUE $795,510
(')Planning, building 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-
jecting the budget needed to serve the Sunset Beach community.
Page 12
Other Ma.oMdpap Revenues
Structural mire band 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).
Species 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.
Water/Wastewater Gees
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
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.
Barking 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 Other Municipal al 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 11
Projected) Annual Other Municipal Revenues
Sunset Beach Annexation, 2009 — 10
0�9 < < - G
Structural Fire Fund Property Tax $350,731
Loss of Emergency Medical Contract Revenue (8,000)
FireMed 24,300
Total Fire Department Revenue $367,031
Special Assessments 3,946
Loss of Water Surcharge (23,151)
Library Property Tax 52,029
Recreation Program (Jr. Lifeguard contract) 40,000
TOTAL OTHER MUNICIPAL REVENUE $439,855
Page 14
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 M
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
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
t°LUUc7l=:tS L t�Gi.�llU ' - o �o o � o o
Table IV
Projected General Fund
Other Municipal and Restricted Road revenues
Sunset Beach, 2009- 10
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
Expendkures
Per Capita Projection ®f General Fund Expenditures
ures
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 department's 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
i -�3DC�N�pGL�r'CL
-0
0 0 0 0 0 � 0 0 � 0 0 '?
IrU° QO e 0 0 e e '0 0 0 e
�QED o 0 0
ft
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 $307,910 202,480 $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 $3,696,183 202,480 $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
Page 16
Table V
Per Capita General Fund Expenditures with Sunset Beach Population
@MU@M D�oA&D�Mg l W C mga)b
�•o. - o00 •o
'oo o §MW PW @MWft91 @Mwvw
9 ND 0
Finance $10,857,094 202,480 $54 $54 1,227 $65,792
Fire $32,240,905 202,480 $159 $159 1,227 $195,375
Information Services $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 $16 $16 1,227 $20,204
Police $60,015,155 202,480 $296 $296 1,227 $363,683
Public Works $19,362,379 202,480 $96 $96 1,227 $117,333
Non-Departmental $10,533,100 202,480 $52 $52 1,227 $63,829
Total General Fund $180,345,942 $891 $891 $1,092,871
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 Department's budget. This extra work would be ab-
sorbed and prioritized within Administration's 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 Y2 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
�l°1Il1�71�15 l'L;C' IU o �� llJ o 1J.�3�lU
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.
Genera0 Fund Expenditure Projections (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.
G' oUce
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 Sheriff's 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.
Page 18
C°lR1IllN7g - o o o o RMA
Table VI
Sunset Beach Parr 1 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 Department's 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:
"...periodic 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."
Page 19
1f o o W @9 o o
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 Safety
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
future.
It should be noted that there are no special events planned for this section of beach. Therefore,
no funds are projected to be added for this purpose.
Fire ed
This voluntary program allows members to receive paramedic and ambulance services without
out-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
Page 20
�t�UIR-715t5 LJ�GA.KIu ' - o U o'�o � o o moo .c
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.
PuNic 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.
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 Vil
Annual Actual Operating Expense Project Summary
Sunset Beach, 2009 — 10
Animal Control $31,000
City Clerk 1,250
Community Services
Beach Maintenance $141,880
Sand Replenishment 1,250
Marine Safety 333,000
476,130
FireMed 20,760
Public Works—Park Maintenance 135,000
Total Estimated Operating Expense $664,140
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
Page 21
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.
Page 22
Table Vill
Potential One-Time Planning Costs
M&
General Plan Amendment $37,299
Feasibility Study (RAA) 14,950
LCP Amendment 11,212
Zoning Map Amendment 9,733
Environmental Assessment 8,522
Zoning Text Amendment 15,178
Total $96,894
Note: These estimated costs assume use of a consultant rather than staff
Reatft�ed Road Fund EKpendKurea
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 Mac a �mpact
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."
Page 23
Table IX
Summary of Annual Revenues/Expenditures
Sunset Beach Annexation, 2009— 10
WAOM0 0 FIGW@UM Rumahmg 'r Q
General Fund Rev. minus Per Capita Exp. $795,510 $1,092,871 ($297,361)
Gen.Fd. + Other 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
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- 1,411,920 787,661 624,259
tual Expense and Street Main. Exp.
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.
Page 24
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pub floc Swvoca and
Wrestruc to rs oM pacts
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.
P ubflc SaMce Dmpac s
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, Cully Treasurer, dilly Uerk, Economic Devel-
opment, 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.
Page 25
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 Department's workload are minor compared to its overall work-
load. The Department's 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.
Page 26
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.
Water/Wastewater
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.
Page 27
Wrastrruc turre �mpac tz
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 Bridge
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 Fa►ciiifies
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
Page 28
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.
Water
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).
Other �zsues
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 29
IA:UUG7L5 0 0 YJ��liU 0 0 l:A'A'J.JVU _
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-
tion 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 summer's 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
was a willingness expressed to create a MOU with the Association to memorialize their 13
points or issues.
There 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
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.
Page 31
QnnsKaU0o n Process
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 Anne C don
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:
o LAFCO processing fees (may be waived for island annexations);
• Justification of Proposal Questionnaire;
o A Plan for Services;
o CEQA documents (this may involve a Negative Declaration or less);
Page 32
o Resolutions by the affected agencies agreeing to a transfer/split of the ad
valorem property tax revenues generated in the subject territory2;
o Prezoning3; and
o 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:
o LAFCO notices the County Assessor of the proposal;
o The Assessor determines which Tax Rate Areas (TRA) are involved and
calculates the total assessed valuation (AV) of the affected territory;
o The Assessor issues a report of the TRAs and AV to the County Auditor;
o 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 4; 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:
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 Prezoning 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.
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o Approves the application with modifications and subject to terms and
conditions5.
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
Recorder's 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.
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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.
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