Municipal Service Review and Sphere of Influence Study: King City

LAFCO of Monterey County _ LOCAL AGENCY FORMATION COMMISSION OF MONTEREY COUNTY 2025 Municipal Service Review and Sphere of Influence Study: King City Approved by the Commission on June 23, 2025 COMMISSIONERS Chair Ian Oglesby, City Member Vice-Chair Wendy Root Askew, County Member Mike Bikle, Alternate Public Member Kate Daniels, County Member Dennis Donohue, City Member Matt Gourley, Public Member David Kong, Alternate Special District Member Mary Ann Leffel, Special District Member Chad Lindley, Special District Member Chris Lopez, Alternate County Member Anna Velazquez, Alternate City Member STAFF Kate McKenna, AICP, Executive Officer Darren McBain, Principal Analyst Jonathan Brinkmann, Senior Analyst Francisco Estrada, Temporary Clerk to the Commission/Analyst COUNSEL Reed W. Gallogly, General Counsel LOCAL AGENCY FORMATION COMMISSION OF MONTEREY COUNTY 132 W. Gabilan Street, Suite 102, Salinas, CA 93901 P.O. Box 1369, Salinas, CA 93902 (831) 754-5838 www.monterey.lafco.ca.gov LAFCO of Monterey County 2 Table of Contents Executive Summary Study’s Scope…………………………………………………….............………4 Key Findings…………………………………………………….............……....4 Recommended LAFCO Actions………………………............….. 6 City Facilities and Services........................................................... 7 City Governance...............................................................................8 Financial Summary...........................................................................8 City Boundaries and Sphere of Influence..................................10 Disadvantaged Unincorporated communities (DUCs)........ 12 Determinations, as Required by State Law.............................. 12 Sources and Acknowledgements.................................................14 2025 MSR & Sphere Study King City Page 3 Executive Summary Study’s Scope This study provides information about the operations, services, and spheres of influence1 of King City. The study meets LAFCO’s requirements, under state law, for conducting periodic service reviews and sphere of influence studies. LAFCO’s studies are also intended to help inform the public about public agencies and the status of current efforts and challenges. King City – Overview Incorporated 1911 Land Area within City Limits (approx.) 3.9 square miles Current: 13,968 (as of 2023) Population Projected: 14,871 – 2030 14,938 – 2040 14,975 – 2050 (data source: AMBAG) Budgeted Revenues (FY 2025-26) $35.1 million City’s website www.kingcity.com Key Findings The following key findings highlight the study’s main observations and conclusions. 1. The City is an efficient and effective service provider. King City is reliably and consistently delivering public services to its residents in a responsive and accountable manner. The city is professionally administered and is guided by a duly elected city council. The need for reinvestment in the wastewater treatment system is a recognized issue that the city is actively addressing. The city monitors the capacity of public facilities and the adequacy of services through the adoption and implementation of its General Plan, annual budgets, and capital improvement programs. Where opportunities exist, the city partners with other public agencies to achieve efficiencies and economies of scale. 2. The City maintains a generally healthy fiscal outlook. The City is managing its financial resources responsibly. The overall financial trend is one of expenditures that are in line with revenues. Year-end fund balances have generally been increasing in recent years, and the City’s overall financial net position has been steadily growing. The City has described its recently approved two-year budget for Fiscal Years 2025-26 and 2026-27 as a minimalistic budget aimed at maintaining basic service levels and preventing layoffs. For FY 2025-26, the City has opted to use reserves to provide part of the funding for certain priority projects. However, the approved budget incorporates various savings and revenue enhancement measures to balance ongoing costs and revenues and minimize the use of reserves. 3. Modest population growth is projected through 2050. AMBAG’s current (September 20, 2024) draft Regional Growth Forecast anticipates that King City’s total population will increase from 13,968 in 2023 to 15,158 in 2050. Undeveloped sites within the existing city 1 A Sphere of Influence is defined by LAFCO of Monterey County as “A plan for the probable physical boundaries and service area of a local agency, as determined by LAFCO ([California Government Code] section 56076)… The area around a local agency eligible for annexation and extension of urban service within a twenty-year period.” LAFCO of Monterey County 4 Parcels proposed to be undesignated from the city’s sphere of influence (no longer city-owned; not needed for wastewater treatment plant) Wastewater treatment plant Proposed sphere of influence amendment (2025) KING CITY June 23, 2025: Recommended sphere of influence amendment Map prepared: June 13, 2025 2025 MSR & Sphere Study King City Page 5 limits – including a portion of the 216-acre site that was annexed in 2001 (Meyer and Mills Ranch Annexation) – are available to accommodate future population growth. 4. The City’s currently proposed sphere of influence amendment (addition of 190 acres for future wildfire prevention and recreational land uses; deletion of two parcels no longer needed for the wastewater treatment plant) is appropriate and in the public interest. The proposed sphere amendment is a step toward future annexation of the subject site, which consists mostly of the Salinas River and its floodplain. Annexation will help prevent recurrence of wildland fires that have threatened the nearby residents and businesses in recent years. Recommended LAFCO Actions Based on the facts and analysis in this study, the Executive Officer recommends adoption of a resolution to: 1. Find that, pursuant to Section 15306 of the California Environmental Quality Act (CEQA) Guidelines, the service review and sphere of influence study is categorically exempt, in that the study consists of basic data collection, research, management, and resource evaluation activities that will not result in a serious or major disturbance to an environmental resource, and pursuant to Section 15061(b)(3), because it can be seen with certainty that there is no possibility that this study may have a significant effect on the environment; 2. Adopt the study and its recommended determinations in accordance with Government Code sections 56430(a) and 56425(e); 3. Consider the mitigated negative declaration that the City adopted in 2025 for a Riverbed Wildfire Prevention Plan on the subject site of the proposed sphere of influence amendment; and 4. Approve the City’s proposed sphere of influence amendment. LAFCO of Monterey County 6 Municipal Service Review and Sphere of Influence Study City Facilities and Services Overview King City directly provides a range of public services and facilities, including fire protection and emergency medical services, law enforcement, parks and recreation programs, and many others. The City also serves as a Community Choice Aggregator for electrical energy service, and owns and operates a municipal airport and a nine-hole public golf course. Potable water is supplied to King City residents by the privately-owned California Water Service Company (Cal Water). For solid waste disposal and management, the city is a member agency of the Salinas Valley Solid Waste Authority (a joint powers authority, or JPA, that is not regulated by LAFCO). The King City Cemetery District owns and operates a cemetery within the city limits. Fire and Emergency Medical Response King City's fire station is located at 422 Bassett Street. The department is made up of approximately 30 volunteer firefighters. The firefighters typically train several times a month. In addition to fire protection and emergency medical services, the department provides fire prevention, weed abatement, disaster preparedness and other related public services. Department apparatus includes three type-1 fire engines, one reserve engine, and one “quint” fire truck with aerial (elevating ladder) capabilities. The department’s current fire protection insurance class rating is 4, on a scale of 1 to 10 (with one being the highest rating and 10 the lowest). Wastewater System and Rate Study The City’s Public Works Department maintains a wastewater collection and treatment system. According to the city, the system consists of approximately 32 miles of gravity sewer lines, two lift stations, associated force mains, and a wastewater treatment plant. The plant consists of a headworks, seven treatment ponds, an effluent disposal pump station and force main, and six spray irrigation fields for disposal of treated effluent. A future new, secondary treatment plant is under design to meet current State standards and future demand. The City anticipates completion of design drawings in June 2025. The total projected capital cost is $110 million. The city anticipates that the new plant’s more-advanced technology will also result in a substantially higher operational costs. Longer-term city plans include a tertiary treatment facility and recycled water distribution system. The City hired a professional firm to prepare a rate study to determine wastewater rates for the next five- year period. The study, which was completed in March 2025, identifies the rates needed to cover the costs of operating and maintaining the City’s overall wastewater collection and treatment system. The new, higher rates are proposed to be phased in gradually (about 9% per year, for five years) to reduce the impact to ratepayers. On May 13, 2025, the City held a public workshop and a Proposition 2018 public hearing on the wastewater rate increases. The city council approved the increases. King City Community Power California voters approved AB 117 (Community Choice Aggregation, or CCA) in 2002. Under this law, it became possible for entities other than utilities to provide electricity to California residents and businesses. King City Community Power (KCCP) is a community-owned electric energy provider that offers all PG&E residential and commercial customers in King City special programming and clean electricity at competitive rates. KCCP is administered by the city council of King City. KCCP does not directly generate electricity. Instead, it acts as a purchasing agent that buys wholesale electricity from other suppliers, primarily using renewable sources like solar and wind. PG&E delivers the electricity to 2025 MSR & Sphere Study King City Page 7 customers over their existing power lines. Individual customers may choose to opt out and also receive their power directly from PG&E. PG&E continues to provide natural gas service. KCCP offers competitive rates. Any surplus revenues go to rate reductions and/or local energy related projects and programs designed to address local needs. Mesa Del Rey Airport The City owns and operates a 149-acre, single-runway municipal airport for general aviation operations. Mesa Del Rey Airport is located at 374 feet elevation. The main runway is 4,479 feet long by 100 feet wide. There is no control tower or commercial flights. The Public Works Director serves as the Airport Manager. Caltrans provides runway inspections. The facility includes fuel, parking, a pilot lounge, and public restrooms. The airport provides hangar rentals and land leases for privately owned hangars. City Governance King City is a charter city. The five-member City Council is elected by districts to four-year staggered terms. Volunteer boards and commissions are appointed by the City Council to provide recommendations to ensure important policy items reflect community input and interests. Following a public participation process, the city switched from at-large seats to district elections in 2016, becoming the second-smallest city in California, at the time, to do so (Bradbury, in Los Angeles County, is the smallest). The City Manager provides executive leadership. There are 44 full-time and 75 part-time budgeted staff positions. Most of the latter are in the Fire and Recreation departments. City council meetings are held at 6:00 PM on the second and fourth Tuesdays of the month. The meetings are open and accessible to the public, and meeting agendas are posted in compliance with the Brown Act. The city maintains an informative comprehensive website. The City adopts budgets and audits in a timely manner. Councilmembers and applicable staff file Form 700 statements and complete ethics and sexual harassment prevention training every two years in accordance with state laws. Financial Summary The city prepares and adopts budgets on a two-year cycle. The city has described its budget document as a work plan for the next two years based on the city council’s major goals and priorities. Among others, the city’s main goals and priorities include maintaining existing staffing and service levels for core priority services and maintaining the City’s reserve policy goal of 20% of the General Fund operational budget. On May 29, 2025, the city council held a budget workshop and directed staff to draft a resolution adopting at the June 10, 2025 meeting a biennial budget for Fiscal Years 2025-26 and 2026-27. Total budgeted revenues are about $35.1 million for FY 25-26 and about $28.3 million for FY 26-27. General Fund expenditures exceed revenues by about $1.4 million in FY 25-26 and by about $120,000 in FY 26-27. The City describes this gap as resulting from a combination of diminishing revenues (reduced sales tax projections), increasing costs outside the city’s control (including liability, workers’ compensation, property, and medical insurance; legal costs, emergency dispatch, and police overtime), and the proposed use of reserves for large and unique one-time expenditures (golf course renovation, completion of homelessness-reduction projects, sidewalk improvements, and others). If these one-time expenditures were taken out of the budget, the remaining ongoing operational revenues and expenditures are balanced. LAFCO of Monterey County 8 The city describes its general fund allocations as a “bare-bones budget aimed primarily at maintaining basic service levels while preventing layoffs.” The city’s budget incorporates various savings and revenue enhancement measures to balance ongoing costs and revenues and minimize the use of reserves. These measures include elimination of a vacant staff position; reductions of grant programs, consultant services, community promotion and event funding; and increases in city fees and lease rates. The tables below provide an overview of recent-year annual revenues, expenditures, and end-of-year total fund balances. The tables demonstrates a consistent trend of expenditures that are in line with revenues, positive year-end net incomes, and a stable and generally increasing fund balance. Audited Financial Information Business-Type Activities Governmental Funds (Sewer Service and K.C. Community Power) Operating Operating Expense Revenues Revenue and Non- Fiscal Over/(Under) (Charges Operating Year Revenues Expenditures Expenditures for Service) Revenue Net Income 2019-2020 $10,883,675 $11,046,294 $ (162,219) $5,633,224 $4,230,293 $1,402,931 2020-2021 $12,401,229 $10,563,201 $1,838,028 $5,499,981 $4,632,434 $ 867,547 2021-2022 $18,286,210 $14,270,180 $4,016,030 $5,537,901 $4,234,611 $1,213,290 2022-2023 $17,198,186 $15,893,606 $1,304,580 $8,161,249 $6,018,546 $2,142,793 Restricted for debt service, Net Position as of Net investment capital projects, notes receivable, Total Net Fiscal Year End in capital assets specific projects and programs Unrestricted Position As of June 30, 2020 $16,290,810 $ 5,143,690 $ 4,129,999 $25,564,499 As of June 30, 2021 $15,543,688 $ 5,626,808 $ 7,334,016 $28,504,512 As of June 30, 2022 $17,132,971 $ 7,898,485 $10,324,152 $35,355,608 As of June 30, 2023 $23,305,040 $10,163,184 $ 6,814,252 $40,282,476 Not-Yet-Audited Financial Information Total Revenues Total End-of-Year Fund Fiscal Year (all sources) Expenditures Balance 2023-2024 $20,238,131 $27,719,877* TBD, pending audit 2024-2025 $20,009,852 $18,741,318 $20,301,858** 2025-2026 (budgeted) $35,059,905^ $37,527, 198 $17,834,565 (est.) 2026-2027 (budgeted) $28,289,684 $27,416,501 $18,707,748 (est.) *Atypical expenditures included American Rescue Plan Act (ARPA) projects and sewer operations projects. ** Estimated/projected as of May 2025, per the approved FY 2025-26 budget ^ Planned, atypical FY 2025-26 revenues and expenses are summarized in the main text, above. 2025 MSR & Sphere Study King City Page 9 City Boundaries and Sphere of Influence Background LAFCO designated the City’s existing sphere of influence in 1979. In December of that year, the Commission approved a proposed annexation of the Pine Canyon unincorporated community, southwest of the city limits. However, the Pine Canyon residents voted against the subsequent confirmation election, terminating the annexation. A second Pine Canyon annexation effort in 1985 was similarly approved by the Commission but subsequently defeated by voters. The City currently has no plans to pursue annexation of Pine Canyon. However, City representatives have not expressed interest in removing this area from the City’s sphere. Pine Canyon In 2001, the Commission approved the 216-acre Meyer and Mills Ranch sphere amendment and Meyers & Mills Ranch annexation annexation, to the north of the city. This area is now largely built out with residential development. Collegeville farmworker housing (2017 LAFCO approval of extraterritorial city sewer service) In 2017, the LAFCO Executive Officer administratively approved an out-of-agency extension of city sewer services to the existing Collegeville farmworker housing site, located just outside the existing city limits and sphere. Per state law and the Commission’s adopted policies, this approval did not require a sphere amendment, in that the site’s existing contaminated private well constituted a public and health and safety threat. In 2020, the Commission approved a sphere amendment and an out-of-agency extension of city sewer service to facilitate development of a farmworker housing project across Lonoak Road from the Collegeville site. The project has not yet been built. 2020 sphere of influence amendment LAFCO of Monterey County 10 Current (2025) Proposed Sphere of Influence Amendment In April 2025, city staff – at the direction of the city council – submitted a proposed to add approximately 190 acres to the city’s sphere of influence. The subject area is located south of the Broadway Street exit from the 101 freeway (APN 245-081- 031; a portion of the parcel is already within the designated sphere). The parcel is undeveloped and consists of riverbed and floodplain of the Salinas River. There is no farmland on the site. In March 2025, the city completed environmental review (mitigated negative declaration) and approved a Riverbed Wildfire Prevention Plan on the site. This specific parcel has been the site of three wildfires since 2020, with a fourth fire nearby in 2024. The 2022 King Fire in particular, which resulted in one death and was determined to be caused by arson, underscores the need for effective wildfire prevention strategies such as vegetation removal and a planned 100- foot fuel break. No substantial development on the site is anticipated. Following annexation, the city’s goals are to maintain the riparian corridor, implement wildfire prevention measures, exercise law enforcement and code enforcement jurisdiction, and pursue potential open space opportunities such as a recreational trail. If approved, the proposed sphere amendment is a step toward eventual annexation of the parcel. The city plans to annex the parcel within approximately five years. Annexation, when proposed, will involve a separate LAFCO application, public hearing, and consideration by the Commission. City staff has consulted with the County of Monterey regarding the proposed sphere amendment in accordance with requirements of state law. The County has not expressed any concerns or plans that would conflict with the city’s future goals for the subject area. Area within the proposed sphere addition 2025 MSR & Sphere Study King City Page 11 The proposed sphere of influence update also includes removal of two parcels (APNs 245-111-035 and 245-111-048) from the city’s existing sphere of influence, as shown in the map on page 5. The parcels are about 80 and 55 acres in area, respectively. These parcels, located adjacent to the wastewater treatment plant northwest of the city, are no longer owned by the city and are not needed for the treatment plant. The city sold the parcels to private agricultural landowners in 2017-2018. The parcels are state-designated farmland and are anticipated to remain in agricultural production indefinitely. LAFCO staff recommends that the City’s proposed sphere amendment is consistent with the Commission’s adopted policies and is in the public interest. Disadvantaged Unincorporated Communities (DUCs) LAFCOs are required to identify disadvantaged unincorporated communities as part of this service review. Under state law, a DUC is defined as any area with 12 or more registered voters, or as determined by commission policy, where the median household income is less than 80 percent of the statewide annual median. In 2023 (the most recent year for which complete data is available), the median household income in California was $95,521, according to the U.S. Census Bureau. Eighty percent of this dollar amount is $76,417. The Collegeville farmworker housing site on the north side of Lonoak Road east of 1st Street, adjacent to the city limits and sphere of influence, potentially meets the definition of a DUC. This site already receives city sewer services as noted above. Under state law, if an annexation of greater than 10 acres contiguous to a DUC is proposed, then LAFCO cannot approve the annexation until a proposal to annex the DUC is also proposed. It appears unlikely that a future city annexation would be proposed adjacent to – but excluding – the Collegeville site. However, if such a proposal occurs in the future, LAFCO will reexamine whether Collegeville qualifies as a DUC based on current conditions and the applicable requirements of state law and local policies. Determinations Municipal Service Review Determinations , Per Government Code Section 56430(a) This section contains recommended Municipal Services determinations for King City, as required by state law. 1. Growth and population projections for the affected area No significant population growth is currently projected for King City. The current Association of Monterey Bay Area Governments (AMBAG) Regional Growth Forecast projects that the city’s population will grow from 13,968 in 2023 to 15,158 in 2025. 2. Location and characteristics of any disadvantaged unincorporated communities (DUCs) within or contiguous to the sphere of influence State law defines DUCs as communities with an annual median household income of less than 80% of the statewide annual median household income and with 12 more registered voters (or as otherwise determined by Commission policy). The Collegeville farmworker housing site, on the north side of Lonoak Road east of 1st Street, adjacent to the city’s existing designated sphere, potentially meets the definition of a DUC. This site receives city sewer service pursuant to an out-of-agency service extension administratively approved by LAFCO in 2017. LAFCO of Monterey County 12 3. Present and planned capacity of public facilities, adequacy of public services, and infrastructure needs and deficiencies (including needs or deficiencies related to sewers, municipal and industrial water, and structural fire protection in any DUCs within, or contiguous to, the sphere of influence) The city efficiently provides a wide range of municipal services and has the capacity to serve both current and future residents. The city maintains and upgrades public facilities and infrastructure to meet residents' needs. The City’s General Plan outlines current and future capacity of public facilities and services, and the city council periodically reviews infrastructure needs and addresses deficiencies through capital and operating budgets. Notably, the city is currently engaged in significantly upgrading its wastewater treatment plant and updating its sewer rates. There are no identified DUCs, within or contiguous to the city’s sphere of influence, that are unserved or underserved with regard to municipal services. Collegeville (a potential DUC) receives city sewer service. Water service by a private utility (Cal Water) is available to both the city and unincorporated residents in the area. The area surrounding King City is within the jurisdictional boundaries and service area of a fire protection district (South Monterey County FPD). 4. Financial ability of agencies to provide services King City has the benefit of professional administrative and financial oversight. The City prepares, reviews, and adopts a biennial budget. Timely audits of the city’s finances are conducted. The city’s approved FY 2025-26 budget uses reserves to cover a portion of its anticipated general fund expenditures. However, the City anticipates that the end-of-year fund balance will continue to meet the city’s adopted reserve policy level (20% of the General Fund operational expenses). 5. Status of, and Opportunities for, Shared Facilities The city participates in several joint powers authorities (JPAs), including the Salinas Valley Solid Waste Authority and the Transportation Agency for Monterey County. Fire protection services are dispatched through the County 9-1-1 system and supported by mutual and automatic aid agreements. Medical transportation is provided by the countywide ambulance contract, funded in part by a countywide parcel tax administered by the County of Monterey (County Service Area 74). The City is collaborating with the County on a trail system that will lead to San Lorenzo Regional Park and surrounding areas. 6. Accountability for community service needs, including government structure and operational efficiencies King City provides services and conducts city business in compliance with state law, with no areas of non- compliance identified. The city maintains an informative website and adheres to applicable transparency, accountability, and ethics standards. 7. Any Other Matter Related to Effective or Efficient Service Delivery, As Required by Commission Policy LAFCO staff has reviewed locally adopted LAFCO policies and noted no additional matters. Sphere of Influence Determinations, Per Government Code Section 56425(e) This section provides recommended sphere of influence determinations for King City, as required by state law. 1. Present and planned land uses in the area, including agricultural and open-space lands Lands surrounding the city are generally prime farmland in ongoing agricultural production. However, no farmland or agricultural resources are involved in the city’s proposed 190-acre sphere of influence amendment. 2025 MSR & Sphere Study King City Page 13 2. Present and probable need for public facilities and services in the area Projected future population growth in King City through 2050 is relatively modest. Although the Meyers- Mills lands that were annexed in 2001 are now mostly built out, undeveloped sites that are designated or planned for development still appear to provide a degree of growth capacity within the existing city boundaries. Any necessary improvements to accommodate future growth will be guided by the city’s adopted general plan, environmental and development review processes, and capital improvement programs. 3. Present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide In general, the present capacity of public facilities and services within King City adequately meets the needs of city residents. The City is preparing to comprehensively upgrade its wastewater treatment plant. The city monitors the capacity of public facilities and the adequacy of public services through the adoption and implementation of a general plan, budgets, and capital improvement programs. Where opportunities exist, the city partners with other agencies and regional service providers such as special districts and JPAs to achieve efficiencies and economies of scale.. 4. The existence of any social or economic communities of interest in the area, if the commission determines that they are relevant to the agency As discussed under MSR determinations #2 and #3, the existing Collegeville farmworker housing site, located just outside the city, appears to potentially meet the definition of a Disadvantaged Unincorporated Community (DUC) as defined in Government Code. This site currently receives city sewer services. There are no proposed or recommended changes to the existing services or boundaries. 5. For an update of a sphere of influence of a city or special district that provides public facilities or services related to sewers, municipal and industrial water, or structural fire protection, the present and probable need for those public facilities and services of any DUCs within the existing sphere of influence. There are no DUCs within the city’s existing or proposed sphere. Sources and Acknowledgements Information that LAFCO received from City staff and from the City’s website was of key importance in developing this study. LAFCO’s earlier Municipal Service Review and Sphere of Influence Studies provided additional background information about the city. LAFCO of Monterey County 14