RMWD property tax revenue okayed to go to FPUD

If San Diego County’s Local Agency Formation Commission (LAFCO) approves the consolidation of the Fallbrook Public Utility District and the Rainbow Municipal Water District, the property tax revenue currently collected by Rainbow would be transferred to FPUD.

Before LAFCO can consider a proposed jurisdictional reorganization, the San Diego County Board of Supervisors must approve a property tax exchange resolution which stipulates the property taxes to be transferred from the agency losing territory to the agency gaining territory. The Board of Supervisors approved such a resolution October 22 on a 5-0 vote.

“The board is not evaluating the merits of the jurisdictional reorganization,” said Mark Wardlaw, the director of the county’s Department of Planning and Development Services (PDS).

“The important question for today’s hearing is the tax revenue if the Rainbow district is dissolved,” said PDS project manager Noah Alvey.

“Exchange of taxes is not controversial,” said FPUD legal counsel Paula DeSousa.

At a March 10 special meeting FPUD’s board approved an application to LAFCO to consolidate FPUD and Rainbow. The consolidation would dissolve the Rainbow district while annexing that territory into FPUD and expanding FPUD’s latent sewer powers area to cover the Rainbow territory. FPUD initially submitted the application to LAFCO on March 11. Due to concerns whether the special meeting was property noticed, FPUD’s board took another vote April 28 which approved the resubmittal of the application.

LAFCO staff will conduct a review of the proposed consolidation prior to scheduling a hearing. One of the components of the staff report will be the property tax exchange, so the Board of Supervisors’ action was a prerequisite for the LAFCO study. Because the County of San Diego collects property taxes, Board of Supervisors approval is needed for a property tax exchange between two districts.

LAFCO’s board has eight members: two county supervisors (currently Bill Horn and Dianne Jacob), one San Diego City Council member (currently Lorie Zapf), two City Council members from the county’s other 17 incorporated cities (currently Sam Abed of Escondido and Jim Janney of Imperial Beach), two special district board members (currently John Ingalls of the Santa Fe Irrigation District and Bud Pocklington of the South Bay Irrigation District), and one public member (currently Andy Vanderlaan). Vanderlaan lives in Bonsall and is a Rainbow Municipal Water District ratepayer, so alternate public member Harry Mathis may hear the consolidation request when it is before the LAFCO board.

During the October 22 Board of Supervisors hearing County Counsel determined that Horn and Jacob could participate even though they will be considering the merger itself as LAFCO board members.

“At least from my standpoint these are two separate issues,” Jacob said. “Whatever happens on this board today on the tax exchange issue will not influence my vote on LAFCO in any way.”

Horn also noted that his support of the tax exchange resolution did not translate to an early decision on the consolidation. “It does not influence me either way,” Horn said. “This activity does not affect LAFCO whatsoever.”

The California Revenue and Taxation Code indicates that the tax exchange resolution must reallocate tax revenue based on the service area or responsibilities which will be altered by the jurisdictional change. Since FPUD would be responsible for the entire former Rainbow area, the entirety of the tax revenue would be transferred to FPUD. During Fiscal Year 2013-14 Rainbow received $346,552.80 of property tax revenue.

Rainbow general manager Tom Kennedy noted that the county’s resolution didn’t stipulate that tax revenue for existing Rainbow improvement districts would remain dedicated to those areas. “Those separate improvement districts on the tax rolls we want to make sure stay in Rainbow,” he said.

LAFCO could include that condition, but the property tax exchange only covers overall revenue for each district. “I don’t think we should be part of the negotiations,” Horn said. “That’s up to the districts.”

Kennedy was selected as Rainbow’s general manager August 26. The county’s 60-day period of negotiations ended August 23. The county’s letter notifying Rainbow of the negotiation period was sent to interim general manager Chuck Sneed on June 23. Sneed never brought the negotiation discussions to the Rainbow board.

“This negotiation period never started,” said Rainbow legal counsel Greg Moser.

“The county’s version of negotiations is sending us a letter,” Kennedy said.

Moser asked for a 30-day continuance, although the county supervisors did not grant that. “It wouldn’t result in any new information,” Alvey said. “There wouldn’t be anything gained or accomplished during that 30 days.”

Wardlaw noted that additional negotiations wouldn’t change the exchange resolution. “With the dissolution there’s little to negotiate,” he said.