On October 20, 2015, the Board of Supervisors referred to the Internal Operations Committee the development of a policy for Board consideration to guide the sharing of costs between the County and local jurisdictions of annexation feasibility studies.
Municipal government exists to provide services to urban populations and to regulate them in an orderly fashion. But an anomalous city development is that cities are ringed with urban populations that receive different or fewer services. Disparities in cost and quality of urban services between incorporated and unincorporated areas lead inexorably to incorporation or, in a few cases, to county government on a municipal scale.
It is with these urban but unincorporated communities that annexation may be a solution. Careful study is required to determine whether or not an annexation is justified and feasible. Annexation feasibility studies typically involve a determination of the study area and its characteristics, an inventory of current and needed services, the cost of furnishing needed services, and potential revenue to fund those services. Planning staffs of the involved agencies are usually called to study annexation proposals, but sometimes commercial planning contractors are hired to conduct these studies. |
| Need for Policy. The purpose of a policy is to apply a standard set of principles to repetitive decisions to achieve rational outcomes. As a first step in response to this referral, the Committee may wish to examine the potential need for cost sharing of annexation studies in the future, to determine if a cost-sharing decision should be made in accordance with a policy or on a case-by-case basis.
Most annexations are initiated by cities or districts in response to a current or future need and upon a determination that a fiscal advantage (or at least no fiscal detriment) would accrue from annexation. Consequently, costs for annexation studies in Contra Costa County have traditionally been borne by the requesting agency because the annexation is often to its fiscal advantage.
However, that is not always the case. In the absence of a fiscal advantage to a requesting agency and when the County finds that annexation would best serve the welfare of a population, it may be appropriate for the County to share in the costs of the feasibility study.
As a first step, the Committee may wish to examine remaining unincorporated areas to determine the likelihood that there will be future annexations that might meet criteria that would be addressed in a cost-sharing policy. Attached for the Committee’s review are two Contra Costa County maps showing incorporated and unincorporated areas, and also unincorporated “islands” under 300 and under 150 acres.
Guiding Principles. If the Committee wishes to develop a policy, it should identify the goals of the policy and consider developing some guiding principles to promote rational and consistent outcomes. Some examples of guiding principles or cost sharing of annexation studies might include some or all of the following findings:
- The Board finds that the area proposed to be annexed is within the sphere of influence of the requesting agency.
- The Board recognizes an unmet need for services and/or infrastructure exists in the area proposed for annexation.
- The Board finds that the proposed annexation will improve service levels and/or infrastructure within the area to be annexed.
- The Board finds that there is not potential for economic development and stimulation in the area to be annexed.
Sourcing Policy. The Board has previously adopted fiscal policies that are applicable to a cost-sharing policy for annexation studies:
County Budget Policy (Resolution No. 2006/677):
- “The County will not directly allocate a specific General Purpose Revenue source to specific programs/communities. The policy would not apply to mitigation revenue that is derived from a project and intended to offset the environmental impacts from the project on the ‘host’ community.”
- “Short-term funding sources shall be used for short-term requirements, one-time uses, or contingencies.”
- “Revenue windfalls not included in the budget plan will not be expended during the year unless such spending is required in order to receive the funding.”
County Reserves Policy (Resolution No. 2005/792):
- "In the event the County realizes reserves above the minimum levels defined by this policy, the first use shall be to annually deposit the funds into an account designated for capital projects and other one-time uses, up to an amount equal to 1% of General Fund revenues per year.”
- “Reserves may be drawn below the minimum level in order to address an unforeseen emergency, to fund a non-recurring expense, or to fund a one-time capital cost; but only following the adoption, by a four-fifths vote, of a resolution of the Board of Supervisors specifying the circumstances that justify the invasion of the minimum reserve level.”
Government Accounting Standards Board (GASB), Statement 54:
- Paragraph 18: Classifying Fund Balance Amounts. "Fund balance classifications should depict the nature of the net resources that are reported in a governmental fund. An individual governmental fund could include nonspendable resources and amounts that are restricted, committed, or assigned, or any combination of those classifications. Typically, the general fund also would include an unassigned amount. A government should determine the composition of its ending fund balance by applying its accounting policies regarding whether it considers restricted or unrestricted amounts to have been spent when an expenditure is incurred for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) amounts are available. Similarly, within unrestricted fund balance, the classification should be based on the government‘s accounting policies regarding whether it considers committed, assigned, or unassigned amounts to have been spent when an expenditure is incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. If a government does not establish a policy for its use of unrestricted fund balance amounts, it should consider that committed amounts would be reduced first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used."
The GASB 54 excerpt above generally states that funds should be expended in the order of the most restricted to the least restricted funds. Therefore, any restricted, committed, or assigned funds that could be used for an expenditure should be used in that order prior to spending unassigned amounts. Potential revenue sources other than unassigned general purpose revenue that might be allowable for annexation studies may include the the Livable Communities Trust and, depending on the area, community benefit funds such as the Keller Canyon Surcharge and Crockett Co-Generation revenues may also be available funding sources.
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