(a)

1. (1) If the proposal includes the incorporation of a city, as defined in Section 56043, the commission shall determine the amount of property tax revenue to be exchanged by the affected local agency pursuant to this section and Section 56815.
2. (2) If the proposal includes the formation of a district, as defined in Section 2215 of the Revenue and Taxation Code, and if the applicant is seeking a share of the 1 percent ad valorem property taxes, the commission shall determine the amount of property tax to be exchanged by the affected local agency pursuant to this section.

(c) If the proposal would not transfer all of an affected agency’s service responsibilities to the proposed city or district, the commission and the county auditor shall do all of the following:

1. (1) The county auditor shall determine the proportion that the amount of property tax revenue derived by each affected local agency pursuant to subdivision (b) of Section 93 of the Revenue and Taxation Code bears to the total amount of revenue from all sources, available for general purposes, received by each affected local agency in the prior fiscal year. For purposes of making this determination and the determination required by paragraph (3), “total amount of revenue from all sources available for general purposes” means the total amount of revenue which an affected local agency may use on a discretionary basis for any purpose and does not include any of the following:

   1. (A) Revenue which, by statute, is required to be used for a specific purpose.
   2. (B) Revenue from fees, charges, or assessments which are levied to specifically offset the cost of particular services and do not exceed the cost reasonably borne in providing these services.
   3. (C) Revenue received from the federal government which is required to be used for a specific purpose.
2. (2) The commission shall determine, based on information submitted by each affected local agency, an amount equal to the total net cost to each affected local agency during the prior fiscal year of providing those services which the new jurisdiction will assume within the area subject to the proposal. For purposes of this paragraph, “total net cost” means the total direct and indirect costs that were funded by general purpose revenues of the affected local agency and excludes any portion of the total cost that was funded by any revenues of that agency that are specified in subparagraphs (A), (B), and (C) of paragraph (1).
3. (3) The commission shall multiply the amount determined pursuant to paragraph (2) for each affected local agency by the corresponding proportion determined pursuant to paragraph (1) to derive the amount of property tax revenue used to provide services by each affected local agency during the prior fiscal year within the area subject to the proposal. The county auditor shall adjust the amount described in the previous sentence by the annual tax increment according to the procedures set forth in Chapter 6 (commencing with Section 95) of Part 0.5 of Division 1 of the Revenue and Taxation Code, to the fiscal year in which the new city or district receives its initial allocation of property taxes.

4. (4) For purposes of this subdivision, in any county in which, prior to the adoption of Article XIII A of the California Constitution, and continuing thereafter, a separate fund or funds were established consisting of revenues derived from the unincorporated area of the county and from which fund or funds services rendered in the unincorporated area have been paid, the amount of property tax revenues derived pursuant to paragraph (3), may, at the discretion of the commission, be transferred to the proposed city over a period not to exceed 12 fiscal years following its incorporation. In determining whether the transfer of the amount of property tax revenues determined pursuant to paragraph (3) shall occur entirely within the fiscal year immediately following the incorporation of the proposed city or shall be phased in over a period not to exceed 12 full fiscal years following the incorporation, the commission shall consider each of the following:

   1. (A) The total amount of revenue from all sources available to the proposed city.
   2. (B) The fiscal impact of the proposed transfer on the transferring agency.

   3. (C) Any other relevant facts which interested parties to the exchange may present to the commission in written form.

      The decision of the commission shall be supported by written findings setting forth the basis for its decision.