Should Sunset pay the same utility taxes?

Sunset Beach should have to pay all the same taxes as Huntington Beach if it gets the same services, say a group of Huntington Beach residents threatening litigation.

Attorney Charles Goldwasser spoke at the Oct. 18 City Council meeting on behalf of residents upset that the Sunset Beach community will receive all the services of Huntington Beach when annexed without having to pay the city's Utility Users Tax.

The residents are angry enough to sue the Orange County Local Agency Formation Commission, or LAFCO, if the situation isn't fixed, Goldwasser said in a letter to LAFCO's executive director, according to public records.

"While my clients are not necessarily opposed to this annexation, they are concerned about the financial burdens that will be placed upon them as a result of the annexation," he wrote.

City Atty. Jennifer McGrath said Huntington Beach has also been contacted by a group of Sunset Beach residents with similar concerns.

Under state law, Huntington is legally required to impose the same taxes on Sunset Beach that it does on all its other residents, Goldwasser said in the letter.

Huntington Beach is under no legal obligation to impose the tax on Sunset Beach from LAFCO's perspective, said Carolyn Emery, who is overseeing the annexation for LAFCO.

The annexation is currently being processed as an island annexation, which is an exception to the law because it takes away the community's right to protest and therefore vote, Emery said.

A tax can't be imposed on a community without a vote under Proposition 218, she said.

Proposition 218 mandates that local taxes must go to a vote of the people.

"We're comfortable in our position that our…legal counsel has given us," Emery said.

Huntington Beach isn't as clear on the intersection of Proposition 218 and the island annexation exception, McGrath said.

"There isn't a clear direction in the law to how those things fit," she said.

The Huntington Beach City Council is expected to discuss the issue in closed session Nov. 1, McGrath said.

She couldn't talk about what exactly the council will be discussing in the session.

While Huntington Beach still has decisions to make regarding the Sunset Beach annexation, for LAFCO, the annexation is pretty much a done deal — it can only amend Huntington's application, Emery said.

How the tax will be handled remains to be seen, but Huntington has options.

The city could decide to extend the tax to Sunset before the annexation, which would give the community a vote and change the process from an island annexation, Emery said.

Huntington can also decide to impose the tax on Sunset Beach after the annexation, which would again give the community a vote on the tax, unless the city voted to amend the current tax, Emery said.

If the city decided to lower or increase the tax, it would go to a vote of the whole city and, if approved, be imposed on the community along with the whole of Huntington, Emery said.

Huntington Beach voted in August to move forward with the annexation of the small beach community of about 1,300, a little more than a year after it was put under Huntington's sphere of influence by LAFCO.

The final decision by LAFCO to grant the annexation is expected to come in early January.

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