Sunset will pay taxes

Huntington Beach has decided to levy a utility tax on the residents of Sunset Beach when they are annexed, an action previously thought to be unconstitutional without giving them a vote.

Taking a second look at the laws, the city has determined it must charge Sunset Beach its Utility Users Tax, in addition to all the other taxes Huntington Beach residents pay, said City Atty. Jennifer McGrath.

The city has determined that because it is changing its boundaries to include Sunset Beach, the community has an obligation to pay all the same fees as the rest of Huntington Beach, McGrath said.

The laws had been previously interpreted that the tax couldn't be imposed on the community without a vote of the people. A vote couldn't take place under the island annexation, which is for incorporated areas smaller than 150 acres and removes the communities' right to protest, so the tax couldn't be levied, it was previously believed.

The city took another look into the laws after a group of Huntington Beach residents, and a separate group of Sunset Beach residents, threatened litigation over the utility tax.

Huntington resident were upset Sunset Beach would receive all the services of Huntington Beach without having to pay the city's Utility Users Tax. The Sunset Beach residents had similar concerns, McGrath has said.

McGrath said it has now been determined that all taxes must be applied equally.

"It's an all-or-nothing approach," she said.

The lack of vote has been an issue for some of the residents, who feel like their constitutional right has been taken away.

Sunset Beach Community Assn. President Greg Griffin spoke against the change at Monday's council meeting. Griffin said he is not in favor of the annexation, but was willing to support it until he found out about the utility tax being levied — the afternoon of the meeting.

"If you're going to impose this tax, we're entitled to a vote," he said.

McGrath said her office had issues conveying the information to the community association.

Councilman Keith Bohr apologized for the information coming out like it did, but said it wasn't a "bait and switch," and other council members agreed.

"It was just confusing advice that we got in the beginning, and that's why we've had to make this decision now," said Mayor Pro Tem Jill Hardy.


Businesses outlawed

Huntington Beach also approved an agreement with Sunset Beach that keeps much of its identity intact while outlawing marijuana dispensaries and other undesirable businesses.

The city unanimously approved a memorandum of understanding with the Sunset Beach Community Assn. that outlines the city's promise to keep much of Sunset Beach the same while taking care of some of the community's concerns.

The city agreed to allow Sunset Beach to keep its identity through signage and street names, according to the memorandum. It will also maintain the community's greenbelt as open space, parking permit policy and beach hours.

The community has asked Huntington to specifically prohibit marijuana dispensaries, methadone-related businesses, or alcohol and drug rehabilitation houses in the community, according to the memorandum.

Although future businesses will not be allowed, any existing ones that were legally down under the county will be grandfathered in, McGrath said.

The city will also require Sunset Beach's short-term rentals to get conditional use and coastal development permits.


Tax exchange

The city also approved a property tax exchange with the county that will transfer about $550,000 to Surf City when Sunset Beach is annexed.

The exchange gives the city the majority of the 1% property tax levied on the small beach community and 100% of a fire and library tax.

The city will take possession of the funds, which are estimated to be $10,000 more than Huntington Beach originally thought, when the annexation is officially recorded, county officials have said.

The county approved its end of the exchange Nov. 9.

The exchange gives Huntington almost 56% of the community's property tax, which is estimated at about $116,000 a year.

Huntington will also take 100% of the funds from the Structural Fire Fund, a tax cities pay for using the Orange County Fire Authority's services, which is estimated to bring in about $378,000 annually.

The city will also get about $56,000 from the community's Library Fund.

The city also approved a pre-annexation agreement with the county that the county is expected to consider at its Nov. 23 meeting.

Huntington Beach voted in August to move forward with the annexation of the community, a little more than a year after it was put under Huntington's sphere of influence by the Orange County Local Agency Formation Commission, or LAFCO.

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

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