TO: Board of Supervisors
FROM: Ryan J. Alsop, Chief Executive Officer
REPORT BY: Andrew M. Mize, Legislative & Policy Analyst
SUBJECT: Proposed City of American Canyon Annexations
RECOMMENDATION
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Approve and authorize three agreements related to the proposed annexation by the City of American Canyon of the Paoli-Watson Affected Territory and Hess-Laird Affected Territory that would effectively extend the City’s border north to a portion of South Kelly Rd: (1) Agreement No. 260377B, an Urban Limit Line and Regional Housing Needs Allocation Agreement with the City of American Canyon; (2) Agreement No. 260379B, a Tax Sharing Agreement with the City of American Canyon and the American Canyon Fire Protection District for the Hess-Laird Affected Territory; and Agreement No. 260378B, a Tax Sharing Agreement with the City of American Canyon for the Paoli-Watson Lane Affected Territory. (No Fiscal Impact.)
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BACKGROUND
The City of American Canyon (“American Canyon”) proposes to annex two territories, known respectively as the Paoli-Watson Lane Affected Territory (“Paoli-Watson”) and the Hess-Laird Affected Territory (“Hess-Laird”). Approval of three agreements by the American Canyon City Council, the American Canyon Fire Protection District (“ACFPD”), and this Board, is required prior to the Napa County Local Agency Formation Commission (LAFCo)’s consideration of the annexation applications, which is scheduled for June 1, 2026.
The agreements consist of:
(1) An Urban Limit Line (“ULL”) and Regional Housing Needs Allocation (“RHNA”) Agreement (Agreement No. 260377B) between the County and American Canyon, which would transfer a portion of the County’s future RHNA obligations to American Canyon beginning in 2031 in exchange for the County’s consent to American Canyon’s expansion of its current ULL to include the Hess-Laird properties and American Canyon’s annexation of those properties.
(2) Two property tax revenue sharing agreements, one for each territory:
(A) A property tax revenue sharing agreement (Agreement No. 260378B) for Paoli-Watson between American Canyon and Napa County [1] that retains for Napa County 50% of the County’s existing share of the one percent (1%) property tax rate increment (“County Tax Increment”) for the territory and allocates the remaining 50% of the County Tax Increment to American Canyon; and
(B) A property tax revenue sharing agreement (Agreement No. 260379B) for Hess-Laird between American Canyon, ACFPD, and Napa County that retains for Napa County 47.5% of the County Tax Increment for the territory and allocates 47.5% of the County Tax Increment to American Canyon and the remaining 5% to ACFPD.
Upon transfer in 2031 of a specified portion of Napa County’s RHNA allocation to American Canyon in accordance with the ULL/RHNA Agreement, the property tax allocations under both agreements will shift. American Canyon will thereafter receive 75% of the County Tax Increment for Paoli-Watson and Napa County will receive 25%. Similarly, American Canyon will receive 70% of the County Tax Increment for the Hess-Laird property and Napa County will receive 25%; ACFPD will maintain its existing 5% share. [2]
The American Canyon City Council approved the three agreements on April 21, 2026; the ACFPD approved the Hess-Laird Tax Sharing Agreement on April 28, 2026. Should this Board approve the agreements today, the annexation applications could be considered by LAFCo at its June 1, 2026 meeting.
Requested Actions:
1. Approve the ULL and RHNA Agreement (Agreement No. 260377B) between the County and American Canyon;
2. Approve the property tax revenue sharing Agreement (Agreement No. 260378B) between the City of American Canyon and Napa County for Paoli-Watson; and
3. Approve the property tax revenue sharing Agreement (Agreement No. 260379B) between the City of American Canyon, the American Canyon Fire Protection District, and Napa County for Hess-Laird.
Notes:
[1] Paoli-Watson is already within ACFPD’s boundary, and ACFPD is therefore not a party to the Paoli-Watson revenue sharing agreement.
[2] Should future RHNA transfers not occur for any reason following the initial 2031 RHNA transfer, including due to future statutory or regulatory changes, property tax shares will revert under the Tax Sharing Agreements to their initial allocations of 50% / 50% for Paoli-Watson and 47.5% / 47.5% / 5% for Hess-Laird.
FISCAL IMPACT
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Is there a Fiscal Impact? |
No |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
Approval of the agreements will provide mutual benefit to Napa County, the City of American Canyon, and residents of the affected territories. |
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Future fiscal impact: |
The future fiscal impact, should the annexations occur, will be a reduction in the County’s share of the property tax revenues for the affected areas, offset in whole or in part by reduced costs associated with reductions in the County’s RHNA obligations. |
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Consequences if not approved: |
The proposed annexations will not proceed. |
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Additional Information |
Strategic Initiative: Build Healthy, Connected Communities. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.