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Agenda Item 11.A April 19, 2005 Page 2 annexation could not proceed. LAFCO did receive valid protests from over 50% of the 265 registered voters, thus the annexation application did fail. The construction documents for the sewer line are nearing completion. However, staff recently learned that there is no funding available in the State's Revolving Loan Fund. The Finance Director has reviewed other possible funding sources and has concluded that none are feasible without significant additional cost. It now appears that the construction of the sewer line will be delayed at least a year, which will mean that the assessment will not be levied this fall as planned. The City has several options as to how to proceed: 1. The City could wait one year and submit the same application for annexation to LAFCO. This does not appear to be a viable option, as there is no reason to think that the vote would be any different in a year. 2. The City could, by policy, consider no further annexations proposals regarding Larch Clover at this time or until such time as the infrastructure master plans are updated and treatment capacities are analyzed. However, following the annexation vote, City staff has been contacted by numerous property owners, primarily in the vicinity of Tracy Boulevard and Larch Road, Corral Hollow Road and Larch Road, and Clover Road west of the current City limit and south of 1- 205 indicating their interest in annexation. 3. The City could consider a single application from those property owners that want to annex. This alternative would likely include property owners that don't want to annex in order to have a map that makes geographic sense, but the annexation would have to be structured to ensure that the protest would not be more than 25% of the registered voters. 4. The City could consider individual annexation requests upon application. A key factor in how the City proceeds is how San Joaquin County wishes to proceed with regard to future annexations in the Larch Clover area. On April 8, 2005 Mayor Bilbrey and City staff met with Supervisor Leroy Ornallas to discuss the options. The conclusion reached was that, with the concurrence of the City Council, the City would respond to requests for annexation from property owners, but not on a parcel-by- parcel basis. There would not be a City initiated effort. The actual shape of the annexation area could be irregular depending on which owners propose to annex. Basically, the "ends" of the Larch Clover area, and possibly the south side of 1-205 are considered the most likely areas for annexation as noted above. With City Council's concurrence, staff would send a letter to property owners and conduct a meeting to inform the property owners of the proposed approach, and to determine which property owners are interested in annexation. It will also be necessary to discuss alternative approaches to any funding of infrastructure capacity and analysis and the establishment of impact fees for the entire area.