Report Prepared by: Kim Espinosa, Planning Manager, Development Services Department
Title
SUBJECT: Update on North Merced Annexation Feasibility Study: Annexation Pre-Application Process and Conditional Wastewater Collection Capacity Allocation Process
REPORT IN BRIEF
City staff will present details about the proposed Annexation Pre-application Process and Conditional Wastewater Collection Capacity Allocation Process developed in response to the North Merced Annexation Feasibility Study.
RECOMMENDATION
Provide direction to staff on any proposed changes to the Annexation Pre-application Process and Conditional Wastewater Collection Capacity Allocation Process.
Body
ALTERNATIVES
1. Give direction to staff to proceed with the procedures as outlined in the report; or,
2. Direct staff to make changes to the procedures prior to implementation; or,
3. Request further information before giving final Council direction.
AUTHORITY
The Cortese-Knox-Hertzberg Local Reorganization Act of 2000 establishes procedures for city annexations and other local government changes in organization.
CITY COUNCIL PRIORITIES
In the FY 20-21 City Council Goals and Priorities, “Future Annexations/Growth of City/Sewer Master Plan” is listed under Goal Area 5, Future Planning.
DISCUSSION
Background
In March 2019, the City hired EMC Planning Group to prepare the North Merced Annexation Feasibility Study. The Study’s purpose is to provide recommendations to the City, landowners, and other stakeholders on future annexations within an approximately 7,600-acre study area in North Merced (Attachment 1). The Study would also provide direction regarding when the City would consider proposals for growth in North Merced and create a framework for considering such requests based on their merits, location, and Council priorities. Community input was sought through a series of public workshops, a survey, and a Joint City Council/Planning Commission Study Session in January 2020.
Previous City Council Direction
On August 17, 2020, EMC Planning Group and City staff presented an update to the City Council of the work that had been completed since January 2020. The City Council was then asked to provide direction to facilitate the completion of the Study in the following areas (the general direction given is also summarized):
• Wastewater Use Assumptions (Additional flow monitoring to be done)
• Growth Scenarios/Priorities for Development (Along the Bellevue Corridor on the west end with a focus on the east end, as well as Virginia Smith Trust lands south of UC Merced to support UC Merced growth)
• Conditional Sewer Capacity Allocation/Performance Standards (Further information to be provided by staff)
• Future Annexation Applications and Procedures (Further information to be provided by staff)
• Out of Boundary Service Requests (Annexation is Preferred)
• Additional Community Outreach (Future Council meetings, etc.)
On October 19, 2020, City staff provided the City Council with more details about the Annexation Applications and Procedures and the Interim Sewer Allocation/Performance Standards. Information was also provided about existing Annexation applications being processed by staff, preliminary annexation applications that had been reviewed by staff, AB 3312, and future General Plan Amendments in relation to the North Merced study.
The City Council direction provided in October 2020 included:
• General support for 3 of the 4 current annexation applications, but concern about the timing of the application north of Old Lake Road
• Request to discuss the pros and cons of the UC Merced Annexation per AB 3312
• Support for an Annexation Pre-application Process with the following provisions:
o Participation is voluntary
o Pre-applications would be reviewed on a continuous basis as they were submitted (no set time frame for submittal or review of all pre-applications at once)
o No public hearings or notification of surrounding property owners would be required
o No Planning Commission involvement
o Use of the existing General Plan policy regarding annexations as the “merit criteria”
• Support for the Conditional Wastewater Allocation process with the use of performance standards
On February 16, 2021, the City Council discussed the possible annexation of the UC Merced campus and directed staff to proceed with preparing the environmental review and application to LAFCO over the next 8 to 12 months.
The final topics that need to be clarified before the North Merced study can be completed are the Annexation Pre-application process and the associated Conditional Wastewater Collection Capacity Allocation process. This report addresses those procedures. It is anticipated that the final draft North Merced Annexation Feasibility Study can be presented to the City Council in April 2021.
Proposed Annexation Pre-Application Process
Based on the previous City Council direction, City staff along with EMC have developed an “Annexation Pre-Application Process,” which also incorporates a “Conditional Wastewater Collection Capacity Allocation” process. The process would be as follows:
1) Applicant submits an “Annexation Pre-application” along with supporting materials as shown in Attachment 2. Based on the level of staff effort required to process these pre-applications, Staff is recommending that the fee would be equivalent to the current fee charged for a Major Site Plan Review application, which is $1,135 in 2021. (That fee will be credited against a future annexation application.)
2) Planning staff will schedule meeting(s) with City staff members representing various City Departments (i.e. Police, Fire, Engineering, Public Works, Economic Development, Parks, etc.), as well as Merced County Local Agency Formation Commission (LAFCO) staff to discuss the pre-application with the applicants, including the inclusion of additional properties if recommended by LAFCO.
3) Planning staff will schedule the pre-application for a regularly scheduled City Council meeting. No public hearing or notification to existing property owners shall be required.
4) Planning staff will prepare a report for City Council with the relevant information on the project and provide an analysis of how well the project addresses the “merit criteria” as described in the next section. An analysis of the project’s wastewater needs, both for a first development phase and for the entire project, will be prepared in consultation with Engineering and Public Works staff.
5) The City Council will weigh various factors to determine if the pre-application has sufficient merit to move forward, including the consistency with the “merit criteria,” the applicant’s demonstrated capacity to develop the project, the project’s design quality, and community benefits being offered. The City Council will then indicate general support or non-support for an official annexation application moving forward.
6) The City Council will also indicate if a Conditional Wastewater Collection Capacity Allocation should be conditionally made for the project. (An official agreement will need to be brought back within 3 months to formalize this allocation and to set forth the performance standards, benchmarks, and time frames to be met in order to keep the allocation.)
7) After the City Council meeting, it would be up to the applicant to decide if they wanted to move forward with an official Allocation Agreement and subsequently an official annexation application.
8) Adoption of the Conditional Wastewater Collection Capacity Allocation Agreement with an applicant would take place at a future City Council meeting (within 3 months of the original Council date) after the agreement had been drafted. Staff is recommending that the fee for this agreement be equivalent to the current fee charged for the City Attorney’s work on a Pre-Annexation Development Agreement, which is $6,673 in 2021.
General Plan Policy Regarding Annexations/Merit Criteria/Community Benefits
On October 19, 2020, the City Council gave direction to staff to use the existing Merced Vision 2030 General Plan Implementing Action Urban Expansion UE-1.3.g as the “merit criteria” for evaluating future annexation requests (shown below):
“1.3.g Evaluate future annexation requests against the following conditions:
a) Is the area contiguous to the current City limits and within the City’s Specific Urban Development Plan (SUDP)/Sphere of Influence (SOI)? Do the annexed lands form a logical and efficient City limit and include older areas where appropriate to minimize the formation of unincorporated peninsulas?
b) Is the proposed development consistent with the land use classifications on the General Plan Land Use Diagram (Figure 3.1)?
c) Can the proposed development be served by the City water, sewer, storm drainage, fire and police protection, parks, and street systems to meet acceptable standards and service levels without requiring improvements and additional costs to the City beyond which the developer will consent to provide or mitigate?
d) Will this annexation result in the premature conversion of prime agricultural land as defined on the Important Farmland Map of the State Mapping and Monitoring Program? If so, are there alternative locations where this development could take place without converting prime soils?
e) Will a non-agricultural use create conflict with adjacent or nearby agricultural uses? If so, how can these conflicts be mitigated?
f) Does annexation of the area help the City reach one of the following goals?
1) Does annexation of the area bring the City closer to annexation of the UC Merced campus and University Community?
2) Does the area contain significant amounts of job-generating land uses, such as industrial, commercial, office, and business/research & development parks?
3) Does the project provide key infrastructure facilities or other desirable amenities, such as the extension of major roads, utility trunk lines, parks and recreational facilities, etc.?”
Besides the criteria noted above, the Council would also look at other factors, including community benefits being offered by the project. These community benefits could include such things as constructing or funding affordable housing, constructing infrastructure or public facilities (i.e. parks, public transit, bike and roadway projects, sewer/water trunks, renewable energy projects, public health facilities, etc.) above what would normally be required of development; or funding of social programs (i.e. homeless, job training, recreation, etc.). Project design quality, the applicant’s track record of successful development, the applicant’s financial ability to ensure the development will move forward, and other factors could also be considered.
Proposed Conditional Wastewater Capacity Allocation Process
As reviewed by the City Council in August 2020, the City’s Wastewater Collection System has limited capacity until such time as the improvements called for in the 2017 Wastewater Collection System Master Plan are constructed. The assumed time frame for constructing such improvements is 5 to 10 years and the system is designed to accommodate the buildout of the Merced Vision 2030 General Plan. (The Final Environmental Impact Report for the Master Plan is currently being prepared for public hearings in Summer 2021.)
This interim capacity was calculated by determining remaining capacity in the system after the needs of existing users, entitled but yet unbuilt projects, and the necessary capacity for UC Merced’s build-out are accounted for. The interim capacity is enough to serve approximately 3,350 equivalent dwelling units (EDU). However, this could be reduced by approximately 750 EDU’s if current projects are approved. (The Hub 2.0 has already been approved but is currently under challenge and the “University Village” annexation at Yosemite and Gardner is pending.) Other proposed annexations or projects that increase the current density called for in the General Plan would reduce that even further, if approved. This is the capacity available to be allocated to future annexations and other new projects within the City. It is important to note that this limited capacity would likely only allow for the development of a “first phase” of a few projects or one or two large projects.
Ken Elwin, Public Works Director, has recently confirmed that the limited capacity is a constraint on growth in all areas of the City (not just North Merced) since all the wastewater in the collection system coming from North, South, and Central Merced ultimately winds up in the same trunks with limited capacity that lead to the City’s Wastewater Treatment Plant.
The amount of interim collection capacity could increase before the Wastewater Master Plan improvements are constructed. This may be possible if additional flow monitoring to be conducted later in 2021 shows the wastewater volume produced per capita as assumed in the Master Plan can be reduced. An additional option would be for entitled projects that have yet to be built to potentially transfer their wastewater capacity to other projects or property owners. However, the City has not yet defined how such a transfer might work. The interim capacity could also decline if the Planning Commission and/or City Council approve projects that would also need some of the capacity to develop.
City staff and EMC have developed a proposed set of performance standards that would be spelled out in the Conditional Wastewater Collection Capacity Allocation Agreement to track the applicant’s progress toward obtaining development entitlements in order to keep the Conditional Allocation. The time frames below would all be from the date that the Conditional Wastewater Collection Capacity Allocation Agreement was approved by the City Council. These standards could be modified to meet the needs of each specific development but would likely include performance standards similar to the following:
1. Within 6 months, the applicant shall provide a complete annexation application and all other associated applications for land use entitlements, including all required fees
2. Within 9 months, the applicant shall execute a contract for completion of the preparation of any project-related California Environmental Quality Act (CEQA) documents.
3. Within 2 years, the applicant shall complete the City and LAFCO annexation process, including recordation by LAFCO and submittal of tax rate area maps to the State of California. (Extensions could be granted for delays outside the applicant’s control.)
4. Within 90 days of the annexation approval above, the applicant shall file an application for a Final Map and Improvement Plans for any residential projects using the wastewater allocation, or an application for a Parcel Map for commercial or industrial projects. This will also include filing all necessary paperwork for annexation to the City’s Services Community Facilities District (CFD).
5. Within 90 days of the Final Map or Parcel Map approval and recordation above, the applicant shall file applications for an encroachment permit or grading/ drainage permit, along with building permits, for at least 25 percent of the proposed units or building floor area that will use the wastewater allocation. The CFD annexation shall also be completed prior to Final Map or Parcel Map recording.
6. Within 60 days of the permit filing above, the applicants will perform any actions required of the City to get the permits issued (i.e. responding to requested changes to meet codes, etc.), including paying all required fees.
7. Within 180 days of the permit issuance above, the applicant shall request a final inspection or certificate of occupancy, including completion of any off-site or subdivision improvements.
8. Within 30 days following the completion of 25 percent of the proposed units or building floor area using the wastewater allocation, the applicant shall provide the City with a performance plan for the remaining 75 percent. The performance plan shall not exceed 3 years from application to completion and will be reviewed by the Site Plan Review Committee. Quarterly progress reports shall be submitted to the Director of Development Services.
One important component of the Agreement will be the applicant’s agreement to participate in the future formation of an assessment district or other financing mechanism in support of the City’s Wastewater Collection System Master Plan. General conditions in such agreements would also include limited extensions of the time frames above that could be granted by the Director of Development Services; a prohibition against transferring the allocation without City permission; revocation provisions for failure to meet the performance standards; and other requirements as deemed appropriate. The City might also want to consider charging some sort of holding fee based on the amount of the allocation.
One important next step would be for the City Attorney’s office to develop a template for the Conditional Wastewater Collection Capacity Allocation Agreement that would spell out all the above terms.
Stakeholder Input
City staff sent out a draft copy of this report to approximately 25 stakeholders that the City has been working with on various annexation requests. City staff received two responses prior to the deadline set in order to be included in the final report. These responses can be seen at Attachment 3. More comments may be received prior to the City Council meeting and those will be forwarded to the Council as well.
City Council Policy Direction
After reviewing the above information, EMC and City staff are asking for policy direction from the City Council in the following areas:
• Is the “Annexation Pre-Application Review” as outlined above acceptable? Any changes?
• Is the “Conditional Wastewater Collection Capacity Allocation Program” as outlined above acceptable? Any changes?
IMPACT ON CITY RESOURCES
There is no impact on City resources with this request.
ATTACHMENTS
1. North Merced Annexation Feasibility Study Area
2. Draft Annexation Pre-application Packet
3. Stakeholder Comments
4. Presentation