Shea Homes requested the City take various land use actions necessary for it to develop a gated small lot subdivision (the “Project”) on a 9.01-acre lot, located at the northwest corner of Lewis Street and Garden Grove Boulevard.  The Project consists of 70 single-family residential detached units with attached enclosed two car garages, along with related street and open space improvements, and has been designed to satisfy the special requirements set forth in Municipal Code for Small Lot Subdivisions.    

On April 6, 2017, the Planning Commission held a public hearing to consider General Plan Amendment No. GPA 001 2017, Planned Unit Development No. PUD 006 2017, Tentative Tract Map No. TT 17927 2017, Site Plan No. SP 028 2017, and Development Agreement No. DA 006 2017, which are the land use entitlements necessary to approve the Project.  The Planning Commission adopted Resolutions (i) recommending City Council adoption of a Mitigated Negative Declaration and a Mitigation Monitoring and Reporting Program for the proposed Project and approval of GPA 001 2017, PUD 006 2017, and DA 006 2017, and (ii) contingently approving SP 028 2017 and TT 17927-2017, subject to specified conditions of approval.  

Currently, a portion of the project site, at the northeast corner, is located within the jurisdictional territory and Sphere of Influence of the City of Orange. Development of the proposed Project requires a Sphere of Influence change and detachment/annexation of 0.901 acres (the “RO 17-01 Territory”) from the City of Orange to the City of Garden Grove and the Garden Grove Sanitary District.  The applicant requested that the City initiate proceedings with the Orange County Local Agency Formation Commission (LAFCO) for a change of organization that would adjust the boundary between the Cities of Garden Grove and Orange and result in the detachment and annexation of approximately 0.901 acres from the City of Orange to the City of Garden Grove and the Garden Grove Sanitary District.

Orange County LAFCO is the government agency charged with controlling the boundaries of cities and special districts.  Per state statute, Orange County LAFCO has the authority to adopt and update a "sphere of influence" for each city and to approve or disapprove all boundary changes/detachments/annexations.  A city's "sphere of influence" includes that property located outside of the city that is designated for potential future annexation to the city.  In order for Orange County LAFCO to approve the annexation of property to a city, the city's "sphere of influence" must include the property, and the city's General Plan must cover the property.  A city is also to "pre zone" property within its sphere of influence so that zoning and development standards are already in place when and if the property is ultimately annexed to the city.

On May 23, 2017, the City Council approved the Planning Commission recommendation and took the following actions:  (i) adopted a Resolution adopting a Mitigated Negative Declaration and Mitigation Monitoring and Reporting Program for the Project; (ii) adopted a Resolution approving General Plan Amendment No. GPA 001 2017 to amend the City of Garden Grove’s General Plan Land Use Map to modify the General Plan Land Use Designation of the portion of the project site that is located within the City of Garden Grove from Civic/Institutional to Low Density Residential and to include the properties to be annexed under the General Plan Land use Designation of Low Density Residential; (iii) introduced and conducted the first reading of an Ordinance approving Planned Unit Development No. PUD 006 2017 to amend the City’s official Zoning Map to change the zoning for the portion of the project site that is located within the City of Garden Grove and to “pre zone” the properties to be annexed to residential Planned Unit Development zoning (PUD 006 2017) with R 1 (Single-Family Residential) base zoning; (iv) introduced and conducted the first reading of an Ordinance approving Development Agreement No. DA 006 2017; and (v) adopted a Resolution authorizing the initiation of, and recommending the Orange County Local Agency Formation Commission take proceedings for the Lewis Street Reorganization Between the City of Garden Grove and the City of Orange (RO 17-01), consisting of the detachment and annexation of approximately 0.901 acres of territory from the City of Orange to the City of Garden Grove and the Garden Grove Sanitary District, in the manner provided by the Cortese/Knox/Hertzberg Local Government Reorganization Act of 2000.

The Cities of Garden Grove and Orange have discussed and agreed on the terms of the proposed reorganization of the city boundaries and annexation of the subject 0.901 acres to the City of Garden Grove.  In summary, the reorganization consists of: (i) the detachment of 0.901 acres from the City of Orange; (ii) annexation of the same territory to the City of Garden Grove and the Garden Grove Sanitary District; and (iii) concurrent amendment to each agency’s sphere of influence.  The reorganization would adjust the boundary between the City of Garden Grove and the City of Orange so that it would follow the centerline of Lewis Street north to the centerline of El Prado Avenue.  Just north of the triangular section of undeveloped land created by the rerouting of Lewis Street as a result of the construction of the SR-22 Freeway, the adjusted boundary would rejoin the existing boundary between the two cities.  The reasons for the proposed Reorganization are as follows:  The construction of the 22 Freeway to the north of the proposed reorganization required the realignment of Lewis Street, moving it almost completely within the City of Orange; and the Project, which consists of developing a small lot residential subdivision of 70 homes within the City of Garden Grove on parcels located on the west side of Lewis Street, requires the change in organization which will serve to promote logical, efficient, and cost effective delivery of public services to the annexed property.

The property owners and LAFCO are in support of this request.  The property owners have agreed to pay all processing fees associated with the annexation and necessary City land use actions and, following the annexation, to pay all generally applicable City taxes and assessments, including the City’s Paramedic Tax and City-wide street lighting and park maintenance assessments.  These additional tax and assessment revenues will help offset the incremental additional costs of providing fire, police, and other City services to the annexed property.  Upon completion of the annexation, the City will take over responsibility for providing police, fire, and other city services, including water service, to the property, and will also assume ownership of, and responsibility for all right-of-way and public facilities adjacent to the property that are currently owned by the City of Orange.

The City of Garden Grove has filed an application with the Orange County LAFCO for the reorganization of the City of Orange and City of Garden Grove boundaries affecting approximately 0.901 acres of territory currently located in the City of Orange, which reorganization is identified for reference as the “Lewis Street Reorganization Between the City of Garden Grove and the City of Orange” (RO 17-01) (the “Reorganization”).

Sections 99 and 99.01 of the California Revenue and Taxation Code requires jurisdictions involved in such a jurisdictional change to adopt resolutions agreeing to a property tax redistribution prior to LAFCO’s approval of the Reorganization pursuant to Section 56658 of the California Government Code.

The City of Orange, the City of Garden Grove, and the Garden Grove Sanitary District recognize that the RO 17-01 Territory would be more efficiently served by the City of Garden Grove and the Garden Grove Sanitary District and that it is appropriate to distribute one hundred percent (100%) of the City of Orange’s share of the one percent basic levy of property tax generated within the RO 17-01 Territory to the City of Garden Grove and the Garden Grove Sanitary District upon the effective date of the Reorganization. 

As such, an agreement with the City of Orange and the City of Garden Grove/Garden Grove Sanitary District have been reached, subject to approval of their respective governing bodies, regarding exchange of property tax as a result of the proposed Reorganization, whereby, upon the effective date of the Reorganization, the City of Garden Grove and the Garden Grove Sanitary District shall receive one hundred percent (100%) of the City of Orange’s share of the one percent basic levy of property tax generated within the RO 17-01 Territory.

The Auditor Controller, of the County of Orange, provided a revenue impact analysis for agencies affected by the proposed jurisdictional boundary change (RO 17-01).  The analysis states that the City of Orange’s share of the one percent basic levy of property tax generated within the RO 17-01 Territory, is $62.99, which is also the amount of property tax that is subject to negotiation between the City of Garden Grove/Garden Grove Sanitary District and the City of Orange.

Upon the effective date of the Reorganization, the City of Garden Grove and the Garden Grove Sanitary District will receive one hundred percent (100%) of the City of Orange’s share of the one percent basic levy of property tax generated within the RO 17-01 Territory, which shall be allocated between the City of Garden Grove and the Garden Grove Sanitary District in the following proportions, unless the City of Garden Grove and the Garden Grove Sanitary District mutually agree to adjust the allocation proportions:

City of Garden Grove: 83.532%

Garden Grove Sanitary District: 16.468%

It is recommended that the City Council and Sanitary District Board:

• Adopt concurrent Resolutions approving a Property Tax Exchange Agreement between the City of Garden Grove/Garden Grove Sanitary District and the City of Orange regarding the Lewis Street Reorganization Between the City of Garden Grove and the City of Orange (RO 17-01).

By:  Chris Chung, Urban Planner