Laguna Hills, El Toro to Vote on Cityhood

The Orange County Board of Supervisors on Wednesday reluctantly approved cityhood elections in Laguna Hills and El Toro but vowed to fight future incorporations for fear that they will further divert vital revenue from county government.

If the March 5 referendums pass, voters in the two districts would create Orange County’s 30th and 31st cities, with 23,000 residents in Laguna Hills and 58,000 in El Toro. That would continue a trend that began in the late 1980s, when the rapidly growing South County areas of Mission Viejo, Dana Point and Laguna Niguel decided that breaking away from the county would give residents greater local control.

“We are extremely grateful and satisfied after 3 1/2 years of walking down a very rocky course here,” said Melody Carruth, founder of the Citizens to Save Laguna Hills. “It’s been a long journey with a lot of bumps.”

Residents in North Tustin, Lake Forest and Portola Hills, meanwhile, have also expressed strong interest in cityhood.

But on Wednesday, supervisors warned that the rush of new cities is bleeding county coffers by millions of dollars in lost property and sales tax revenue at a time when the financially strapped county can ill afford it. Supervisors had to overcome a $46-million revenue shortfall in preparing the budget during the summer, and financial projections are that next year will be even bleaker.

Supervisor Harriett M. Wieder complained that under current state law the board has no authority to block a vote on cityhood once it has been approved by the Local Agency Formation Commission (LAFCO). Wieder, whose comments were echoed by other supervisors, said she will ask legislators to amend the law so counties can refuse incorporation proposals.

But cityhood supporters who watched the largely perfunctory vote, said they should not be held responsible for a budget crisis that would exist even if the cities are not created.

“We do not feel those problems should be solved--or can be solved--at the expense of local control,” Ellen Martin, co-chairwoman of Citizens to Save Laguna Hills, said later.

The Laguna Hills panel’s co-chairman, Joel Lautenschleger, added: “Now it’s out of the whims of the county and in the hands of the voters, and I feel so much better about that.”

And El Toro resident Ann Van Haun cheered for local control, saying that instead of having just one representative on the Board of Supervisors, residents would have five representatives on a city council.

“We are looking for equity in treatment, and the unincorporated areas have been inequitably treated in the past,” said John Davis, chairman of the Community Coalition for Incorporation in El Toro.

After a three-year struggle and previous failed attempts to create cities in both South County areas, residents said they are grateful to have another opportunity to vote on the issue March 5. Organizers are optimistic that the measures will pass.

Creating El Toro and Laguna Hills municipalities would be expected to cost the county $7.7 million annually in lost taxes and fees, which residents would begin paying to the new cities.

The county is already suffering a $10-million yearly net revenue loss from the incorporations in Dana Point, Laguna Niguel and Mission Viejo, county officials have estimated.

LAFCO and county staff members recommended against the incorporations because of the effect on the county’s revenue stream, particularly in Laguna Hills, where citizens would keep a disproportionate share of sales tax revenue now distributed throughout the county.

One staff study showed that sales tax revenues from Laguna Hills Mall and other businesses in Laguna Hills make up more than one-fourth of the county’s total sales tax revenue in the unincorporated areas; residents there make up just 5% of the unincorporated population.

“Every dollar that we lose,” Wieder said, “translates into reductions in health care, social services as well as public safety services that affect all the residents of Orange County . . . not just those few who might reside in newly incorporated areas.”

Supervisors Chairman Don R. Roth, one of two supervisors who serves on LAFCO, opposed the cityhood initiatives when they came before that panel last month. He noted that as a member of the board he had no authority to vote down the initiative once it was approved by LAFCO, which it was by a 3-1 vote.

But Roth was clearly unhappy about having to cast his yes vote Wednesday.

“We’re saying we don’t have the money to open a jail, and at the same time we’re going to give away the same amount of money to annexations,” Roth said.

Supervisor Roger R. Stanton also protested that new cities, unable to provide basic services, turn around and contract with the county for fire, law enforcement, animal control and other services.

“It’s much like cutting the umbilical cord to offspring,” Stanton said. “If they truly want to be on their own, then you want to make sure they’re able to deal in the world and cope in the world and (are) meeting their own responsibilities.

“We’re having these situations where we’re forming these new cities, and they’re coming right back to the county and saying, ‘Gosh, thanks. I’m glad we got our city . . . but we want your services.’ ”

But Laguna Hills residents took issue with that criticism because their studies have shown that the city will have enough cash to pay for its own services, if need be.

Carruth, of the Laguna Hills cityhood drive, said the city would contract for services from the county partly because county officials made that one of the conditions for cityhood.

Also, by being able to contract for exactly the level of service that the city wants, Laguna Hills could use spare revenue to increase the number of law-enforcement patrols through its neighborhoods, she added.

Supervisor Gaddi H. Vasquez, a member of Gov.-elect Pete Wilson’s transition team, said that Orange County is not alone in its concern over incorporations and that the transition team has already discussed legislation to give all county boards of supervisors more say in whether cityhood initiatives are placed on ballots.

Changes in state law are unlikely to happen in time to affect a cityhood application by North Tustin residents, who are expected to file in about two weeks.

However, an official with the petition-gathering campaign, Marvin Rawitch, said the county may welcome--rather than discourage--incorporation by North Tustin’s 28,000 residents because it would not drain much in sales-tax revenue.

“We have virtually no sales tax at all, we have no commercial area,” Rawitch said, adding that by contracting for county services, the area might actually become a source of new county revenue.

POSSIBLE INCORPORATED AREAS

Laguna Hills Population: 23,000 Located: West of Mission Viejo and north of Laguna Niguel, west of Interstate 5. Size: 5 square miles. Cost to county: $6.5 million for the first year in lost revenues, to be offset by $2.5 million paid by the city back to the county for basic services--a net revenue loss of $4 million.

El Toro Population: 58,000 Located: Between Irvine and Mission Viejo north and east of Interstate 5. Size: 15 square miles. Cost to county: $7.7 million the first year in lost revenues that would be offset by $4 million paid by the city back to the county to provide basic services, for a net revenue loss of $3.7 million.