A long awaited report released this week showed that a proposed independent City of East L.A. would not be financially feasible unless taxes were raised. East L.A. resident C.J. Salgado ponders what this means for the cityhood effort.
By C.J. Salgado
As the giant bells of the campanile at the Cathedral of Our Lady of the Angels rang, across the street at the county Hall of Administration, the Local Agency Formation Commission of Los Angeles County began its meeting this past Wednesday morning. One could say it was a rather historic event, as the Commission prepared to release a report to assess the fiscal feasibility of incorporating East Los Angeles into an independent city.
Oddly, not many community members were present in the audience, maybe a dozen or two. Soon, the words reverberated throughout the downtown Los Angeles hearing room: the proposed city “does not generate sufficient revenues to cover projected operating costs unless anticipated revenues are augmented…”
This was not what the proponents of incorporation, the East Los Angeles Residents Association (ELARA), came to hear after four years of political action and some $134,000 it paid for the Comprehensive Fiscal Analysis. While the financial challenges that would face a new city were presented in the hearing room, outside the room a wall plaque with a list of the county’s 88 incorporated cities seemed to taunt cityhood supporters. The city of Calabasas, incorporated in 1991, holds the last “slot” on that plaque. That coveted “next” slot now seems even further out of reach of East L.A. as the hard data of the fiscal report puts many questions to rest and puts the proponents on the defensive.
The group has moved to retain a CPA and attorney to tackle the fallout and look for ways to augment revenues, re-cast their marketing plan, and negotiate with the county in order to resuscitate the incorporation proposal or at least extend its life.
So what does it take to make it to that wall plaque of incorporated cities? It’s really not a mystery. Success is viable only with sustainable positive cash flow, period. The cold sobering fact is that nowadays, becoming a city and staying healthy is not easy! The bar has been raised due to the economic, fiscal, administrative, and legal hurdles that communities are required to surmount to become a city. Consider that six of the last seven cities incorporated in Los Angeles County have median household incomes above $80, 000. The median household income in ELA is estimated at below $30,000. That may not seem fair, but it does illustrate the difficulties encountered. An article in the Harvard Latino Law Review (Sarah Ihn, 2010) states:
The process of incorporation in California–particularly its costs and significant dependence on a community’s revenue-generating capabilities– makes it difficult for low-income communities with low property values and limited revenue sources to successfully incorporate…The current [incorporation] process favors affluent communities.
Yet, the duty of the Commission, known as LAFCO, in considering this week’s financial report is to determine if it is fiscally viable for ELA to incorporate. During the recent LAFCO meeting, Gloria Molina, County Supervisor for ELA and a LAFCO Commissioner, posed the question during the meeting that there appears to be “no viability whatsoever” to incorporate ELA given the CFA results, to which Paul Novak, the Executive Officer for LAFCO, replied, “that is correct.” The proponents for incorporation, however, hope to miraculously find “solutions to the issues raised.”
One of the toughest issues that arises from the CFA is how to generate “additional revenues” to make up the projected shortfall in the proposed city’s General Fund, estimated at initially about $20 million (Year 2) and about $14 million in later years, after adjusting for recent changes in state law (SB89) which cut Vehicle License Fee revenues to cities. That is not chump change.
Inevitably, the prospects of increased taxes for the proposed city has snuck back into the picture as a likely mandatory solution, when the incorporation proponents, ELARA, have been touting since 2007 that “cityhood is economically viable without a tax increase.” One additional tax source would be to raise the Utility User Tax in ELA from the existing 4.5% to 10%, for example. Of course, this would “require a vote of ELA residents, concurrent with the ELA cityhood vote.” That’s no easy sell given the economic recession, which has hit ELA particularly hard.
As Supervisor Gloria Molina stated during the meeting, “trying to find fiscal viability…is a huge leap.” That could entail finding legislative remedies, negotiating remedies, reducing the level of service in the new city to cut expenditures, giving up Belvedere Park to the county, etc., and, of course, raising taxes. In the end the proposed new city may need to be a kept “ward” of the county, not exactly the state of self-governance desired, if incorporation is to be pursued at all costs for the sake of political correctness.
Which brings up some points worth pondering… how badly do we residents of ELA want to incorporate and for what reasons? Is it to “preserve the culture and history of ELA” as the proponents claim? Or is it to move us forward into the future, well poised and committed to tackle our local issues? Are we willing and able to pay extra for the opportunity, or perhaps privilege, of exercising local self-control?
Those are serious questions about a serious issue, whether to incorporate our community. Fortunately, the answers begin with the simple act of participating in the upcoming community meetings in late July to be hosted by LAFCO (www.lalafco.org) and becoming informed about the proposal, the CFA, the issues, and options before us so as to make an informed decision. If we do this together, then the rest will follow rightly.
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