County of San Luis Obispo Board of Supervisors Agenda Item Transmittal (1) Department (2) Meeting Date (3)

Resolution 96-158, the Master Tax Exchange Agreement was adopted by the San Luis Obispo Board of Supervisors 28 years ago, on April 24, 1996. Although the agreement was not agreed to by all seven Cities within the County, the County has continued to use the agreement as the basis for annexation negotiations. We Wholly or Partially Disagree with the Finding for the following reasons: ☒ The Master Tax Exchange Agreement was adopted by the City Councils of Arroyo Grande, Grover Beach, Morro Bay, San Luis Obispo, and the County Board of Supervisors at a special joint meeting held on April 25, 1996.

The County has failed to re-examine the Master Tax Exchange Agreement every five years as required in Resolution 96-158. We Wholly or Partially Disagree with the Finding for the following reasons: ☒ The Master Tax Exchange Resolution 96-158 does not direct the County to update the Master Tax Exchange Agreement every five years. Rather it directs the County and the Cities to agree to re- examine the policies at five-year intervals to assure that they remain appropriate and current for all parties.

In November 2021, the County of San Luis Obispo along with the Cities of Arroyo Grande, Atascadero, Paso Robles, and San Luis Obispo engaged in a contract with an outside consultancy firm to perform a financial analysis to inform a revised tax sharing agreement. The study, contracted for cost of $187,400, has not been completed due to the County not providing the modeling information needed by their consultant. We Wholly or Partially Disagree with the Finding for the following reasons: ☒ In 2019, an informal review process occurred, and the County and participating cities reviewed proposals from three consultants. The County and the participating cities selected The Natelson Dale Group, Inc (TNDG) as the consultant to conduct the study and entered contract negotiations. However, due to the COVID-19 Pandemic, the study was placed on hold. On July 20, 2021, the Board of Supervisors approved a contract with The Natelson Dale Group, Inc. together with the cities of Arroyo Grande, Atascadero, Paso Robles, and San Luis Obispo to provide financial analysis and modeling to inform a revised tax sharing agreement related to annexations. The County has provided information to the Consultant. However, the model hasn’t been completed yet because an analysis is underway as part of verifying the model data. The effort was paused by the County in the fall of 2023 due to a shortage in staffing resources, but the County plans to reinitiate the project in the summer and finalize the project by December 1, 2024. 2 of 3 Attachment 2