‘It’s a game changer’ Fresno council approves new tax-sharing agreement

It took some freaky Friday the 13th vibes to break an over four-year stalemate between city and county leaders over how they share property tax revenues — but in a rushed, eleventh hour special meeting late Friday afternoon, the Fresno City Council ratified the agreement, in a 6-1 vote.

With just Councilmember Miguel Arias in opposition, the agreement will move to the Fresno County Board of Supervisors for final approval at their meeting Tuesday morning.

Councilmembers applauded the ‘equitable’ tax-sharing agreement that they say will bring in more city revenue and reduce restrictions on new development outside of city limits.

“This MOU is a game-changer for the city and county of Fresno,” said Councilmember Annalisa Perea. “Not having an agreement in place, I believe, is one of the several reasons why our city is experiencing such a drastic housing shortage,” she added.

The agreement represents a sea-change in city development policy, shifting financial incentives towards growth in the city’s southeast development area, called SEDA, with nominal changes to incentives to annex areas west of 99, formerly the city’s top growth priority.

Under the new tax-sharing agreement, the city also has a strong financial disincentive to annex county islands.

The agreement also improves the city’s share of sales tax revenue, resulting in about $500,000 per year, according to Councilmember Tyler Maxwell. It also includes a provision that requires the city to discuss whether they’ll drop litigation against Fresno County’s General Plan in 90 days.

Councilmembers Perea, Maxwell, Nelson Esparza, Mike Karbassi, and Luis Chavez took pains to stress that the agreement doesn’t commit the city to approving SEDA, noting they just approved another extension to the environmental impact report for the project at their meeting last week.

But while the agreement doesn’t greenlight new development, it changes the financial incentives for it, creating a more favorable revenue split for SEDA. Under the expired agreement, the city would have retained just 38% of property taxes, while the new deal points, if approved by the county, would give the city 51% of property tax revenues for land annexed.

The more favorable revenue split for SEDA could result in “a few million” in additional property tax revenue for every $100 million in land value annexed into the city, according to City Manager Georgeanne White — money that will go back to the city’s general fund to pay for city services, not to cover the estimated multi-billion dollar price tag for infrastructure to build out the new 45,000 home development area.

In contrast, the city will receive 40% of property tax revenue from annexing undeveloped land into city limits not in SEDA - an improvement from the former agreement, but only resulting in about $11,000 yearly for every $100 million in land value added.

Arias wasn’t convinced that the additional revenue would change the underlying financial concern.

“We’ve always said development should pay for itself, but somehow developers always come to us asking for a public subsidy — whether it’s waiving of impact fees, waiving of infrastructure improvements, having the city pay for these improvements — it never seems to pay for itself,” he said.

“I appreciate the half-a-million dollars of additional sales tax revenue this agreement would generate, but to put in context, that’s half a playground in a city park. So in exchange for getting half a million more a year, we would be down the path of spending billions of dollars on public infrastructure at a moment in time when we’re about to go to budget reductions,” he added.

Perea acknowledged the shift in incentives, but stressed that it doesn’t open the floodgates for SEDA, either.

“While this might result in a couple million more generated in property tax, we haven’t seen what the true cost will be for building out the infrastructure. There’s still a lot of work that would have to go into getting any of us to the point where we can confidently get behind a decision of approving SEDA,” she said.

White said that the public infrastructure costs associated with SEDA will be released to the public in the next 30 to 60 days.

Fresnoland has been requesting these documents since the fall of 2023.

Arias asked whether the city’s abrupt meeting on Friday violated California’s Brown Act by invoking a pandemic-era special meeting exemption, allowing them to provide just 24 hours notice with an agenda and share the deal points the evening before the meeting.

While the City Council has held on to that special meeting rule established during the height of the coronavirus pandemic, they faced heavy criticism this summer for scrapping another COVID-era rule that allowed residents to comment on public issues online.

City Attorney Andrew Janz said his office did not believe the meeting violated the state’s open meeting laws.

As to why a special meeting, after the last city council meeting of the year had been held just a day before — White pointed to a 199-home residential subdivision near California and Willow Avenues in Sunnyside that had been held up for 18 months because she said the county didn’t want to move forward on a ‘one-off’ tax-sharing agreement.

Later in the meeting, Councilmembers Chavez and Garry Bredefeld — who will both be joining the Fresno County Board of Supervisors in January — joked that the impending change in representation on the county board may have helped bring the county to the table more quickly.

Community opposition to the rushed meeting was noted in letters to the council from Keith Bergthold, executive of Regenerate California Innovation, and a former Fresno planning director — along with Dillon Savory, executive director of the Central Labor Council.

“It looks like developers still run City Hall,” Savory said Friday in a telephone interview with Fresnoland.

Several members of the residential and industrial development community were at the meeting expressing their support.

Several dozen county islands and peninsulas exist across Fresno’s city limits, resulting in a patchwork of inconsistent streets and intersections.

The agreement requires the city to annex two county intersections in the next year — Clinton and Millbrook, near McLane High, and Belmont and Minnewawa in Sunnyside.

Bredefeld stressed that he won’t be allowing new development in the city’s sphere to get away with developing under county, not city standards, which are more stringent on safety.

But the changes in revenue sparked a discussion as to whether the city will need to levy additional fees on developers through community facilities districts to pay for police and fire protection.

In recent years, the city formed CFD 18, which levied an additional fee on new homes projected to be built in east-central Fresno, due to a projected $1.8 million shortfall for service provision for the recently annexed neighborhood. The developer, Darius Assemi with Granville Homes, successfully petitioned the city to waive the fee, leaving some council members frustrated.

The agreement doesn’t fully resolve the city’s angst about paying fire transition fees to the county for land annexed into the city away from Fresno County Fire Protection District, an agreement likely to get renegotiated next year.

Mayor Jerry Dyer addressed the council, supporting the agreement, stressing the city’s increasing reliance on property tax revenue, which now represents about 40% of the general fund, a 10% increase over historic levels.

But ultimately, for Dyer — it’s about keeping Fresno competitive with Clovis, Madera County, and other surrounding communities capturing suburban growth.

“I’m tired of losing our folks to Madera,” he told Fresnoland.

This article first appeared on Fresnoland and is republished here under a Creative Commons license.