Ukiah Annexation Debate Heats Up as City Lays Out Tax-Sharing Plan with County

Press release from the City of Ukiah:

The City of Ukiah hosted a community workshop on Thursday, June 11th, at the Alex Rorabaugh Recreation Center to continue discussions regarding the proposed annexation initiative and the long-term future of the Ukiah Valley. The meeting drew approximately 75 community members and lasted three hours, with City officials remaining until all questions and comments had been addressed.

The workshop included presentations and question-and-answer sessions with Ukiah City Councilmembers Mari Rodin and Doug Crane, City Manager Sage Sangiacomo, Deputy City Manager Shannon Riley, Police Chief Tom Corning, Fire Chief Doug Hutchison, Chief Planning Manager Jesse Davis, Finance Director Dan Buffalo, and Special Counsel Phil Williams.

While much of the discussion focused on how annexation would impact residents today, City leaders emphasized that the proposal is fundamentally about preparing the Ukiah Valley for the challenges and opportunities of the future.

“The Ukiah Valley is at a pivotal point in its history,” said Councilmember Mari Rodin. “We face serious issues such as insufficient housing stock, wildfires, and uncertain water reliability. The decision we make on annexation will determine whether we confront these challenges successfully or languish as a community.”

City officials explained that annexation is intended to create a governance structure that better aligns planning, representation, service delivery, and accountability across the region.

“Many of the most important issues facing the Ukiah Valley do not stop at existing jurisdictional boundaries,” said Deputy City Manager Shannon Riley. “Whether we are talking about housing, wildfire resilience, infrastructure, transportation, water reliability, or economic development, success depends on our ability to coordinate planning and investments across the Valley. Annexation provides a framework that helps us do that more effectively in the years and decades ahead.”

City officials noted that many residents outside current city boundaries already rely on City services and amenities, making regional coordination increasingly important as the Valley grows and evolves.

Officials also discussed how the City has been leading on a variety of efforts to improve regional coordination because local leaders and their community partners assumed that city boundaries would eventually align with service realities. For example, about a decade ago, when the Ukiah Valley Fire District was faltering financially and significantly understaffed, the City worked to create a partnership, now the Ukiah Valley Fire Authority, to help stabilize fire protection and emergency medical services and put the system on a better long-term course for the entire valley. Further, the City applied for and received a USDA grant to fund a Fire Fuels Crew that is creating and maintaining fire breaks and reducing fire fuel all over the valley, far outside the city limits.

Additionally, the City has taken a leadership role in water supply and management to improve infrastructure and drought resiliency.  With the formation of the Ukiah Valley Water Authority, the regional partnership helps local agencies pursue infrastructure updates and water-security funding together.

“Annexation is not about changing neighborhoods or taking something away from residents,” Riley said. “It is about positioning the Ukiah Valley to address future challenges together. Change is inevitable, and we must be thinking ahead and be ready to respond effectively when it does, rather than sit back and wait for problems to arise. Annexation helps ensure that the government responsible for serving an area is also accountable for planning, maintaining, and improving it.”

City staff also addressed several common misconceptions regarding annexation. Officials reiterated that annexation does not automatically change zoning rules that will guide what can built, alter neighborhood character, or eliminate representation by water districts and their own boards within the regional Water Authority. Any future development proposals would continue to undergo their own public review and approval processes.

Tax Sharing Implications of Annexation

City officials also emphasized that annexation should not be viewed as a competition between the City and County, but rather as a discussion about how government can be structured to best serve the community over the long term.

With annexation, the City would take over responsibility for previously unincorporated areas identified in the Sapling map, and that would include management of emergency response, street maintenance, parks management, community events, economic development initiatives, and planning and building. That shift in service responsibility would allow the County to save costs, or to shift its financial spending away from those areas to other County needs.

Under the terms of the previously negotiated Master Tax Sharing Agreement adopted by Mendocino County and its four cities, a portion of the tax revenue generated in annexed areas would gradually shift from the County to the City under a structured timeline:

• Property tax revenue: As property tax revenue in the annexed area grows each year, the City receives half of smaller increases (up to 2%) and all growth above that level, continuing until the City’s share reaches a capped 15% of total property tax revenue – ensuring a gradual shift while the County retains the majority share.
• Sales tax revenue: The City will eventually collect the 1% Bradley-Burns sales tax on purchases within the annexed area, but in year one that full amount is returned to the County; over 15 years, the County’s share of the Bradley-Burns sales tax is reduced incrementally until the City retains the full 1%. Annexation would have zero impact on the nearly three percent of sales tax that goes to the County from both inside and outside the city limits.
• Transient Occupancy Tax (TOT) revenue: The City will collect TOT from hotel stays in the annexed area, but like sales tax, 100% is returned to the County in year one and then gradually shifts to the City over 5 years until the City retains the full amount.

The City has conducted modeling to assess the cost/benefit impacts of the annexation proposal. The “Sapling” annexation footprint has a relatively de minimis financial impact to the County, particularly when considered with the shift in service provision, while allowing the City to build the financial capacity needed over time to expand services responsibly.  The City’s analysis shows that, in the newly annexed areas, revenues would begin to catch up with expenses after about three years, thereafter providing additional resources for infrastructure and service improvements.

While a portion of the property tax will be shared by the City and the County, annexation would not result in increased property taxes for property owners.  Additionally, because only a portion of the annual growth of property tax is shared, the County’s revenue would continue to grow, even in the annexed areas.

Continued Engagement with the County

Earlier in the week, City Staff and annexation ad hoc members, Councilmembers Rodin and Crane, met with County Staff and elected officials to further discuss the City’s proposal. To provide additional clarity and transparency on the financial impacts to government, the City has recommended that the County and City coordinate on an independent, third-party fiscal and service impact analysis of the annexation proposal. Additionally, the City has suggested that the City and the County hold a joint meeting between the Mendocino County Board of Supervisors and Ukiah City Council to discuss the proposal together in an open forum.

Before any annexation can occur, the proposal must first be considered by the Ukiah City Council and then submitted to LAFCo for formal review. The LAFCo process includes public notice requirements, environmental review, public hearings, and opportunities for affected residents and property owners to participate in the protest process established under California law.

Community members are encouraged to review the proposed maps, watch the City’s informational video,  and stay engaged throughout the process. Background materials, frequently asked questions, and additional information are available at CityofUkiah.com/annexation.