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Rancho Ortega Blog discusses matters of public interest in South Orange County, including the communities of San Juan Capistrano, Ladera Ranch and Rancho Mission Viejo.

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Visions of South County Cityhood Dancing in our Heads

Susan Wilson is the Chairwoman of the Orange County Local Agency Formation Commission.  What is LAFCO?  Well, if you’ve been reading our blog, you would know that when it comes to South County local governance and cityhood, LAFCO is the most important government agency you’ve never heard of.  Wilson has written a guest opinion piece, recently published in the Capistrano Dispatch, describing the challenges inherent in the South County local governance process.  You can read the whole article here, but we’ve excerpted and commented on some of the important points below.

Wilson begins by pointing out that the politics and economics of cityhood have changed significantly, and that cityhood may no longer be a viable option for unincorporated communities that lack the ability to generate significant tax revenue.

Unfortunately, in 2013, the answer is not that simple. From the state level, the way revenues are allocated to newly formed cities has changed dramatically, making the incorporation of a new city increasingly difficult. The newest city to incorporate in California in July 2011, the city of Jurupa Valley in Riverside County, may also gain the notoriety of being the shortest-lived—and maybe the last—incorporated city in California’s 162-year history, according to City Manager Stephen Harding in an article published in Western City magazine. A last minute maneuver to balance the state budget resulted in the elimination of the single most important source of revenue to newly incorporated revenues, vehicle license fees. Jurupa Valley is now considering filing for disincorporation unless the VLF funding issue is corrected by the state legislature. Simply stated, the city is running out of money to provide essential services.

If you look at Coto de Caza, Las Flores, Ladera Ranch and Sendero (Planning Area 1), they all have at least one striking thing in common: minimal tax revenue.  That means that they lack the car dealerships, hotels and large commercial shopping centers and big box retailers that generate the majority of the sales tax revenue.  We noticed a similar issue when we analyzed the preliminary plans for Rancho Mission Viejo’s Planning Area 2.  That essentially leaves Planning Area 3, albeit the largest “village” in the Ranch Plan, to generate sufficient tax revenue to support a future Rancho Mission Viejo city (one that might include Ladera, Las Flores and Coto).  When you consider the broad tax bases in Rancho Santa Margarita or Mission Viejo, and the neighborhood of car dealerships along the 5 in San Juan Capistrano, it is hard to imagine Planning Area 3 being able to keep up.  This concern is only heightened by the fact that a toll road through Rancho Mission Viejo now looks as unlikely as ever to be built.  Planning Area 3 may only be, at best, a local neighborhood retail hub.  Jurupa Valley’s future looks ominously prescient.

As for the immediate future, Wilson writes:

While incorporation may not be the short-term answer to the south County governance question, OC LAFCO has undertaken a deliberate and open “visioning” process to explore all viable long-term governance options for this area. The visioning process will likely be a multi-year, phased effort what will include the development of credible financial data and modeling and stakeholder discussions with local government and community leaders.

We’ve been critical of the Ladera Ranch Civic Council for trying to jump start this discussion.  See here, for example.  We’ve also had some complimentary things to say about the Civic Council’s efforts, such as here.  Our opinion has been this is all premature, and if the real politicking is going to start now, residents of Ladera Ranch are under-represented in this important effort.  It seems to us that Wilson agrees about this being premature.  Wilson has described the current status as “visioning” which in our opinion is a code word for talking about options without making any concrete decisions.  That strikes us as the right place to be.  At the end of the day, we won’t know whether unincorporated South County is a viable candidate for cityhood until Rancho Mission Viejo shows us its commercial plans for Planning Area 3.  Until then, all we can do is vision.

OC LAFCO’s web site is available here.  They have been promising a South Orange County Governance Webpage for the better part of a month, but as of today it is still “coming soon.”

3 comments to Visions of South County Cityhood Dancing in our Heads

  • Jim Reardon

    With the reduction in state funding to support incorporation, we see a continuation of a trend that began some time ago. Over the years, the minimum size of a financially viable city has grown. Smaller existing cities now face difficult financial pressures.

    This change seems to favor consolidation of existing cities and annexation of adjacent unincorporated areas as they develop. In the case of South County, the considerable areas of land set aside as open space preserve also encourage consolidation. These lands won’t be available for fill-in commercial or residential development. They will never directly contribute to the tax roll.

    Old assumptions about how things are organized must be reexamined. San Juan Capistrano, Mission Viejo and Rancho Santa Margarita are existing viable cities, though only one of them is truly a large city. Coto, Ladera, Las Flores, Sendero, and PA2 may well go the way of Talega and simply be consolidated into existing structures once development is complete. Our roads and schools are already regional, again favoring consolidation over incorporation.

    The financial viability of municipal government is of great importance to everyone in South County. Not merely those who live within a given city. We all share the roads, use the services, and rely on police, fire and other municipal services of our neighbors. The challenge is for us to preserve the unique qualities of individual communities and neighborhoods in the face of this inevitable trend.

  • Don Juan Ortega

    Thanks, Jim. It’s not a sexy as cityhood, but annexation is a very real possibility for unincorporated South County. We’ve mentioned it here: During the early 2000s when Aliso, Rancho and others were incorporating, there was a “super city” movement that tried to assemble them all into a single municipality that would become the South County counter-balance for Anaheim/Santa Ana in the north and Irvine in central county. We may see that idea rise in prominence again, and my bet for the super-city would Rancho Santa Margarita, although I could see San Juan biting off Planning Area 1 and San Clemente taking Planning Area 8. Of course, the problem with a Rancho annexation (or any annexation) is that it would be a net negative to the annexing city, in terms of tax revenue. While it is more profitable for a developer to build residential housing, it does not create fiscally independent and economically sustainable communities.

  • Jim Reardon

    DJO, I agree. The role of LAFCO is to assemble all the ideas and help with the reality-check. It may fall to the County itself to provide the necessary “encouragement” in the form of incentives, or discounts, or sanctions, but only if necessary. But it would be much better for local leaders to get with the program and work together. On that level, the voters can provide necessary inducements, where needed.

    Nobody wants to be disenfranchised by this process. For me, this is the central issue — keeping government responsive.

    The status quo simply won’t work after another 40,000 people move in.