NAPA -- The city and county governments of Napa today said they have begun to jointly develop an agreement to address concerns related to the city's potential future annexation of the planned commercial and residential development known as Napa Pipe, along with the sharing of tax revenue and service responsibilities at the site.

Mayor Jill Techel and Board of Supervisors Chairman Keith Caldwell together announced the plan to develop a memorandum of understanding that addresses the role for both governments in the  700- to 945-dwelling development. The Napa Pipe property sits in an unincorporated area outside of the city's sphere of influence, yet city officials have long argued that the proposed development is close enough to have a significant impact on city growth and demand for services.

Staff from both governing bodies have been directed to develop "a high-level statement of principles, addressing issues such as sphere of influence change and future annexation to the city, revenue sharing, land use standards, water service, traffic mitigation, how the county's housing allocations will be met and ways that the city's concerns can be addressed in the review of project-specific applications like development plans and design guidelines," according to the announcement.

"Our goal, from the county's perspective, is to see if we can wrap up a memorandum of understanding by the end of December and put it before the board of supervisors and the city council," said Larry Florin, Napa County's housing and intergovernmental affairs manager. Staff from both governing bodies have already held their first meeting on the subject.

Both the project developer and the county have expressed willingness to pursue a pathway for the annexation of the project. Napa Pipe could create a tax revenue windfall for the city of Napa, and a potential agreement would increase the level of influence that the city could exert over the 154-acre site.

By establishing a memorandum of understanding early, Mayor Techel said that the development would be able to proceed under standards that would allow a smooth transition in the event that the area is one day annexed into the city of Napa. Informal talks began as early as last summer, a time when involved parties expressed a willingness to look at possible annexation.

"We're at the exploratory stage of it. The good news is that both the city and county are interested," she said.

The county contends that the development of affordable housing at the site would count towards the affordable housing construction required by the state in Napa's unincorporated areas, and future annexation would not eliminate those credits, Mr. Florin said.

The Board of Supervisors is expected to vote on zoning changes crucial to the current plan on Jan. 15. The county Planning Commission in October approved the current proposal, which includes a Costco Wholesale store that would pay to about $4 million in annual taxes.

"People would love to see the city and county come to some agreement," Mayor Techel said.