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  Agenda Item   11.    
City Council Meeting
Meeting Date: 03/21/2023  
FROM: Bill Gallardo

Property Tax Exchange Agreement between the City of Brea and the County of Orange for the Annexation of Remnant Brea 265 Property
Adopt a Resolution (Attachment A) approving a Property Tax Exchange Agreement between the City of Brea and the County of Orange for the annexation of approximately 1.45 acres of unincorporated Orange County land that is generally located at the northeast corner of Valencia Avenue and Rose Drive.

On July 19 and August 16, 2022, the City Council approved Brea 265 Specific Plan and associated entitlements for a master planned residential community (Specific Plan) and certified the Environmental Impact Report prepared for the Specific Plan. The majority of the approved Specific Plan area included property that was already approved by the Orange County Local Agency Formation Commission (OC LAFCO) to be annexed from Orange County to the City. The said annexation, commonly referred to as Tonner Hills Annexation Extension, was finalized by OC LAFCO in November 2022 with adoption of OC LAFCO Resolution No. 03-12A. A 1.45-acre portion of the approved Specific Plan project area was not included in the above-mentioned annexation, and thus required a separate annexation process through OC LAFCO. The reason the 1.45-acre area was not included in the annexation was due to the fact that the Brea 265 Specific Plan applicant, Aera Energy, Inc., obtained ownership of this area during the City's entitlement and Tonner Hills Annexation Extension process. Aera subsequently filed a separate annexation application with OC LAFCO to annex the subject property into the City (Proposed Annexation).  The 1.45-acre area is currently located in unincorporated Orange County, at the northeast corner of Valencia Avenue and Rose Drive, as shown in Figure 1 below:


Figure 1. Aerial View of the 1.45-Acre Property

Property Tax Exchange
Sections 99 and 99.01 of the California Revenue and Taxation Code requires jurisdictions involved in a jurisdictional change (i.e. annexation) to adopt resolutions agreeing to a property tax redistribution prior to OC LAFCO’s approval of such jurisdictional change pursuant to Section 56658 of the California Government Code.

Because the 1.45-acre land in question is part of the Specific Plan and located directly adjacent to properties that were recently annexed into the City through Tonner Hills Annexation Extension, the County of Orange (County) and City staff agree that the property tax exchange rate approved for the Tonner Hills Annexation Extension is appropriate for the Proposed Annexation. As such, the proposed tax exchange rate for the Proposed Annexation, as specified in the attached resolution, is as follows:

  • City of Brea:                30.25%
  • County of Orange:      69.75%

In addition to the proposed property tax exchange rate, the City will receive 100 percent of the Structural Fire Fund generated in the subject property upon annexation since the City provides its own fire protection services through the Brea Fire Department. The County of Orange will retain 100 percent of the public library funds generated in the subject property upon annexation as the Orange County Public Library system will continue to provide library services to the subject property.

Next Steps
Following the City Council action on the proposed property tax exchange resolution, the County Board of Supervisors is expected to take action on similar resolution on April 25, 2023. OC LAFCO will then schedule its hearing on the Proposed Annexation once the certified copies of City and County’s resolutions have been approved.

The Orange County Auditor-Controller provided the Revenue Impact Analysis (Attachment B) for agencies affected by the Proposed Annexation. The analysis states that the County’s share of one percent basic levy of property tax generated within the subject 1.45-acre property is $225.80 based on the 2022 assessed value. Of this amount, $79.98 is subject to the proposed property tax exchange rate since the remaining $145.82 is the Structural Fire Fund that the City will receive in a full amount. As such, the City will receive annual property tax revenue of approximately $24.20 once the Proposed Annexation is approved by OC LAFCO and the subject property is successfully annexed into the City.
William Gallardo, City Manager
Prepared by:  Joanne Hwang, AICP, City Planner
Concurrence:  Jason Killebrew, Community Development Director
A. Draft Resolution
B. Revenue Impact Analysis

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