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City Council Minutes 12 April 19, 2005 annexation because of changes it might bring to the area including the cost of new public facilities. In the Fall of 2003, the majority of Larch-Clover area property owners voted 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 loan (about 2.6%) from the State Water Resources Control Board (California Environmental Protection Agency) that would be paid back from 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 assess- ment 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 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. On February 23, 2005, LAFCO conducted a "protest hearing." However, since LAFCO received valid protests from over 50% of the 265 registered voters, the annexation application failed. 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 means 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 annexation 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,