San Luis Obispo supervisors keep proposed annexation but uphold policy requiring service transfer to justify tax exchange

The Board of Supervisors voted July 28 to approve staff's recommendation of a 0% property tax exchange for a proposed subdivision annexation into the Cayuca Sanitary District while directing staff to help convene negotiations between the district and the project applicant.

David Athey, district manager for Cayuca Sanitary District, told the board the district had not received a fiscal analysis explaining the tax increment share and asked the board to pull item 23 for a full hearing. "We rely on property taxes to run our district," Athey said, and asked for more time to negotiate what the district called a tax increment share.

Staff explained its review of the board's 2019 policy, state law and peer county practice concluded property tax exchanges should reflect whether county service responsibilities shift to the annexing agency. Because the Cayuca district would not assume county services, staff recommended a 0% exchange. "Property tax exchanges should primarily reflect whether a county government service responsibility and related costs are being transferred to that agency," Executive Office staff said.

Supervisors noted the applicant had indicated willingness to negotiate a private payment to make the district whole; the board asked the executive office to convene the parties to seek a way forward so the project can proceed if a private agreement is feasible. The board approved staff's recommendation by voice/roll call vote.