Tax Payers Will Pay More and Get Less With City of Ukiah Annexation

     More than a year ago, I wrote an article about a proposed tax-sharing and annexation agreement between the City of Ukiah and Mendocino County. The issue has resurfaced and many community members continue to have concerns.

     The last significant city annexation happened about 50 years ago, before we had Raleys, the completion of the Oak Manor subdivision, and the Vineyard View subdivision. Clearly, it is time to expand our city limits, and a tax-sharing agreement assures that when the City annexes property, the County doesn't lose so much revenue that it can no longer function. The vast majority of taxes will go to the City to pay for streets, law enforcement, and fire protection, but some revenue will still go to the County.

     The current proposal is a scaled-back version of the original plan but would still bring a significant stretch of unincorporated land under city jurisdiction (see the map at www.cityofukiah.com/proposed-annexation-project). A community poll is expected to reach property owners in the affected area before the end of June. If you own land or run a business anywhere in this corridor, now is the time to pay attention.

     The first question any property owner in the annexation path should ask is not whether city services sound appealing, but who pays for them and when. By the city's own projections, annexation would put the city in a deficit for the first three years, with revenue drawn primarily from city sales tax measures that currently fund fire, police, and street maintenance. Break-even is not expected until year three or four, after which the City anticipates having enough resources to begin enhancing service levels. Current Ukiah taxpayers should understand they are being asked to carry that gap.

     On the property tax side, the City and County would split incremental increases on newly assessed property values fifty-fifty, with a cap on the City's share. The county currently collects roughly $2.5 million annually in sales tax from the annexation corridor and would lose that revenue over five years at roughly $450,000 annually. However, the county would also be relieved of significant road repair obligations, including portions of North and South State Street, potentially costing $12–$20 million.

     The voting process also deserves scrutiny. If less than 25% of notified property owners return a disapproval, LAFCO's seven-member commission makes the final call on its own. Between 25–50% disapproval triggers a public election. Above 50% disapproval kills the application outright, and the City cannot reapply for a year.

     From a real estate standpoint, city jurisdiction brings changes beyond police and fire coverage. Development in annexed areas would be subject to curb, gutter, and sidewalk requirements, and city nuisance and sign ordinances would apply. The City intends to grandfather in existing county zoning, but whether those protections run with the land indefinitely or only until a property changes hands (or the City changes its mind) is worth clarifying.

     I understand that the City staff who put this annexation map together have worked hard and believe it is a good plan. Unfortunately, I disagree. Many community members think annexation won't matter too much and that the total taxes they pay won't change (whether they go to the City or the County). However, the annexed area will be more heavily regulated, and that comes with a cost. The City's electricity service will not be expanded into the annexed area, but its water and sewer will be. The City recently consolidated water districts and promised not to raise rates. However, the City now charges an "administration fee," so technically rates haven't gone up, but people are paying more for the same service.

     If you have questions about property management or real estate, please contact me at [email protected] or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.

     Dick Selzer is a real estate broker who has been in the business for more than 50 years. The opinions expressed here are his and do not necessarily represent his affiliated organizations.