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April 19, 2005 AGENDA ITEM 11.A REQUEST CITY COUNCIL DIRECTION REGARDING CONSIDERATION OF FUTURE ANNEXATION REQUESTS IN THE LARCH CLOVER AREA DISCUSSION The Larch Clover area consists of approximately 364 acres located along the City's northern border, primarily between Tracy Boulevard and Corral Hollow Road. There are 189 separate parcels. The estimated population is 600 people. The City of Tracy and San Joaquin County have been working on the potential annexation of the Larch-Clover area and for the provision of sewer services to the area for over 15 years. Many property owners have maintained support for annexation in order to increase their property's development potential or obtain access to City sewer or other services, such as police. Other property owners have maintained opposition to annexation because of changes it might bring to the area, costs of new public facilities, or other reasons. In the Fall of 2003 a majority of Larch-Clover area property owners voted, through a weighted vote, in favor of forming an assessment district to pay for sewer lines to be installed to serve the existing development in the area, and for the cost of one Equivalent Consumer Unit (ECU) for those parcels that had an existing use. Vacant parcels were assessed only for the cost of the pipes. It was anticipated the City would obtain a very low interest rate (about 2.6%) loan from the State Water Resources Control Board (California Environmental Protection Agency) that would be paid back from the annual assessments levied on the property owners. No bonds were to be issued. The State loan was to be for a period of 20 years. The cost of the improvements is estimated to be about$5.3 million with an annual debt service of approximately $343,000. The annual assessment for one house on a typical Larch Clover lot is approximately $1,625 per year. Assessment districts are formed by a simple majority vote of the property owners of those property owners submitting ballots with the vote weighted based on the dollars to be assessed. In contrast, the annexation of an inhabited area such as Larch Clover is potentially subject to a vote of the registered voters in the area. An annexation also requires the approval of the Local Agency Formation Commission (LAFCO). Due to the differences in procedure, the vote on an assessment district and a vote on an annexation of an inhabited area may not have the same result, which was the case with the Larch Clover area. On January 21 the Local Agency Formation Commission (LAFCO) held a public hearing and approved, subject to a potential protest hearing, the City's proposal to annex the Larch Clover area. Several people spoke in support of the annexation, and several people spoke in opposition. The next step in the process was for LAFCO to conduct a "protest hearing"which took place on February 23, 2005. If a protest was filed by 25% to 50% or the 262 registered voters in the area, LAFCO would conduct an "annexation election." If a protest was filed by more than 50% of the registered voters, the