Hollister council strays off agenda on tax-sharing topic

City Hall

In taking up a non-agendized issue Monday, Hollister council members violated the state open meetings law by straying off the scheduled topic and engaging in open discussions when the agenda merely mentioned receiving a presentation, according to the legal counsel for the state newspaper association.
Since the meeting’s agenda gave the impression council members would “passively” receive a presentation on a property tax-sharing agreement, the act of engaging in a discussion was a violation of the state Brown Act governing open meetings, argued Nikki Moore, legal counsel for the California Newspaper Publishers Association.
“They’re going to hear a report,” Moore said of the public’s expectation based on the agenda. “They’re going to receive it.”
With all prospective annexations into Hollister in limbo—due to a recent Award Homes lawsuit nullifying the county and city’s 18-year-old annexation fee that topped $11,000 per single-family unit—Hollister council members were scheduled to hear a presentation Monday from the their attorney on the master tax-sharing agreement between the two government entities.
That item on the special meeting agenda—with a subject line of “Master Property Tax Sharing Agreement”—merely called for the council in the description to “receive a report.”
Contracted City Attorney Brad Sullivan gave that report detailing the history of a property tax split between the city and county, along with that of the annexation fee.
But council members also engaged in open discussions on the item while the city attorney and city manager requested specific direction—whether to wait for a county consultant to finish a study on a new agreement or whether to move ahead on piecemeal, individualized development agreements with builders. Development agreements would allow the city to forego the current legal delays because those contracts allow for wide discretion on charges levied or not levied.
The Free Lance, from the audience, openly objected to the council’s handling of the agenda item as City Manager Bill Avera asked for council consensus on direction moving forward.
During that same agenda item prior to the manager and attorney’s requests for direction, council members’ discussion had included an extended tangent about using “community facilities districts”—or CFDs as referred to by officials Monday—as a budgetary mechanism to help offset lacking property tax dollars funneled back to local jurisdictions.
According to the City of Santa Clara, which used a CFD to finance Levi’s Stadium, it is a “special district that can issue debt for the planning, design, acquisition, construction, and/or operation of public facilities, as well as provide public services.” Special tax assessments are used to repay the debt, according to a Santa Clara web page describing CFDs, which are formed only when OK’d by most property owners.
While council members were discussing CFDs as an option Monday, resident Marty Richman interjected and called a “point of order” from the audience. He contended the topic was off the agenda because officials were discussing how CFDs might help the overall budget picture, not how they directly related to the tax-sharing agreement.
Avera then denied it was off topic because he argued it could relate back to the tax-sharing agreement, although Councilman Ray Friend supported Richman’s view about straying off topic when he had a chance to speak on it.
Richman also spoke again on it during public comment. He told council members it was “exactly how you got in trouble, getting off the tax-sharing agreement” by creating the annexation fee that prompted the lawsuit from Award Homes and separate litigation from Benchmark Homes. That litigation, along with protests or threats of litigation from other developers locally, is pending, Sullivan told council members.
Sullivan in his presentation explained how the two local governments’ tax-sharing agreement included a 75-25 split of property tax revenue, with the larger amount going to the county. He also described how the annexation fee in question originated in the late 1990s as a strategy devised by the local governments to offset revenue shortfalls caused by Prop. 13, which froze property tax levies at mid-1970s levels before legislation later amended language to create inflationary caps.
Sullivan told council members he believed a county appeal of the court decision on annexation fees could take up to two years. That speculation on timing led to Sullivan suggesting the council give him specific direction to engage in piecemeal development agreements with builders.
Four of five council members discussed the item, while three members appeared to share their views on how the city attorney should proceed.
Councilman Karson Klauer asked if the problem was the fee itself or the implementation, and Sullivan responded it was the fee itself because a nexus study of costs was needed to justify those charges.
Councilwoman Mickie Luna noted how developers are “waiting” and “deserve support of the council.” She said while the city can study the issue, “I still believe that we have an obligation here.”
“Is it going to take another study session?” Luna said.
Councilman Ray Friend also indicated he would support exploring development agreements, but Mayor Ignacio Velazquez said he wanted to wait for completion of the county consultant’s study.
With a time frame for that unclear, Sullivan reiterated his request for direction.
“I want the guidance from you,” he told the council.
Avera on Tuesday, in response to a question sent over email by the Free Lance asking to clarify the direction he received, responded. 
Avera replied with the following:
“My reiteration of what I heard last night was intended to clarify the discussion.  I clearly heard Karson, Mickie and Ray discuss problems with waiting for a master tax sharing agreement. Ignacio wanted to wait for the study before anything was considered. Your definition of “piecemeal” would be the same as individual tax sharing agreements, which I heard at least three members say they would consider. Individual tax sharing agreements or negotiated tax sharing agreements would not be initiated by the City. They would be initiated by a property owner. So the City cannot “move ahead on individual tax-sharing agreements” because it simply is not our place or responsibility to do so.  Listening to the Council members speak and provide an opinion doesn’t mean they made a decision. It merely means that they would consider it if one was presented to them. 

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