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ADOPT A RESOLUTION APPROVING A PROPERTY TAX ALLOCATION AGREEMENT BETWEEN THE CITY OF STOCKTON AND THE COUNTY OF SAN JOAQUIN FOR THE MURRAY RANCH PROJECT ANNEXATION
recommended action
RECOMMENDATION
It is recommended that City Council adopt a resolution:
1. Approving a Property Tax Allocation Agreement (Exhibit 1 to the Resolution) between the City of Stockton (City) and the County of San Joaquin (County) establishing the exchange of property tax revenues associated with the Murray Ranch Project annexation area; and
2. Authorizing the City Manager to take appropriate and necessary actions to carry out the purpose and intent of the Resolution.
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Summary
The proposed agreement establishes the allocation of property tax revenues generated from the Murray Ranch Project annexation area, consisting of approximately 37.4 acres currently located in the County’s unincorporated area. The agreement provides that property tax revenue from the annexed area will be a tax sharing structure that would include a base property tax split of 90 percent to the County and 10 percent to the City for the annexation. This agreement will require detachment from Eastside Rural Fire, and the County will agree to the incremental growth adjusted to 60 percent to the County and 40 percent to the City. The City will require Eastside Rural Fire to be a signatory to the agreement.
Approval of a property tax sharing agreement is required under State law before annexation proceedings may be completed through the San Joaquin Local Agency Formation Commission (LAFCo). Adoption of this agreement allows the annexation process to move forward.
DISCUSSION
Background
The Murray Ranch Project involves the proposed annexation and future residential development of two contiguous parcels totaling approximately 37.4 acres located in the County’s unincorporated area. The property owners include the Pelowski Living Trust, Murray Revocable Living Trust, and Murray Revocable Family Trust.
In December 2023, Tim Lewis Land Group, L.P. submitted an application to the City requesting:
• Pre-zoning of the property to Residential Low (RL) zoning; and
• Annexation of the property into the City for future single-family residential development (217 units) and open space.
On July 29, 2025, through Resolution 2025-07-29-1603 (Attachment A), the City Council approved:
• Pre-zoning of the property; and
• Authorization to file an annexation application with LAFCo.
State law requires that affected local agencies adopt an agreement specifying the exchange of property tax revenues prior to LAFCo issuing a certificate of filing for annexation. The proposed agreement satisfies this requirement.
Present Situation
The agreement provides that property tax revenue from the annexed area will have a tax sharing structure that would include a base property tax split of 90 percent to the County and 10 percent to the City for the annexation. This agreement will require detachment from Eastside Rural Fire (which will be a signatory to the agreement), and the County will agree to the incremental growth adjusted to 60 percent to the County and 40 percent to the City. Applied to Murray Ranch, this proposed tax sharing structure differs from the former (expired July 31, 2025) master tax sharing agreement as follows:
Table 1 - Tax Sharing Structure Comparison
|
|
County |
City |
|
|
Base |
Increment |
Base |
Increment |
|
Former Master Tax Sharing Agreement* |
80% |
80% |
20% |
20% |
|
Proposed Murray Ranch Tax Sharing Agreement |
90% |
60% |
10% |
40% |
*NOTE: The former agreement did not include separate allocations between base & increment.
Table 2 - Tax Share Analysis Comparison†
|
|
County |
City |
|
Former Master Tax Sharing Agreement* |
+ $499,993 |
- $102,345 |
|
Proposed Murray Ranch Tax Sharing Agreement |
+ $420,218 |
- $ 22,256 |
†NBS. (2025). City of Stockton Tax Sharing Analysis (Draft).
Term and Implementation
• Following approval at the Stockton City Council meeting, the agreement becomes effective upon the County Board of Supervisors’ approval and only applies to the Murray Ranch annexation area.
• Property tax allocation will take effect consistent with State filing deadlines and statutory requirements.
Regional Cooperation Provisions
The agreement also includes provisions addressing:
• Joint review of tax records to ensure accurate distribution.
• Cooperation between the City and County regarding regional services and infrastructure.
• City participation in the County’s Capital Facilities Fee program supporting regional facilities.
• Coordination on land use planning and infrastructure within the City’s Sphere of Influence.
• Planning for community service facilities or development impact fees.
Termination
Either party may terminate the agreement with six months’ written notice; however, termination does not affect annexations already certified by LAFCo.
FINANCIAL SUMMARY
The agreement establishes a revenue-sharing framework for property tax generated within the annexation area. The agreement provides that property tax revenue from the annexed area be allocated via a tax sharing structure that would include:
• A base property tax split of 90 percent to the County and 10 percent; and
• Incremental property tax growth (excess of base) adjusted to 60 percent to the County and 40 percent to the City
Per the County, this agreement will require detachment from Eastside Rural Fire and will require Eastside Rural Fire to be a signatory to the agreement.
While the allocation provides the County with a larger share of property tax revenues, the proposed ratio is more equitable towards the City compared to previous agreements (see Tables 1 and 2 above). Further, the Murray Ranch annexation allows the City to continue its efforts in:
• Facilitating planned residential development within its Sphere of Influence;
• Expanding the City’s tax base over time; and
• Coordinating service delivery and infrastructure planning.
The detachment of Eastside Rural Fire will slightly decrease the amount of money that the City receives from its contract with the Eastside Rural District, which is based on a formula. However, that loss of revenue will be more than offset by the additional revenues that the City will receive from property taxes, sales taxes and the Citywide maintenance Community Facilities District.
Attachment A - Approved Resolution 2025-07-29-1603