Communities Consider Opting Out of Tax Program : $4 Million at Stake After Funds for Services Cut

Times Staff Writer

Faced with a projected shortfall of $2.6 million in the next fiscal year, unincorporated communities in the county designated as service areas are searching for ways to balance their budgets after being cut off from a post-Proposition 13 bail-out fund by the Board of Supervisors.

The board decided in February that, as of July 1, 1986, money taken from county property tax revenues and placed in a Special District Augmentation Fund could no longer pay for non-countywide services.

As a result, the service areas cannot use this tax money to support local programs, even though taxpayers in each of these areas are required to contribute to the augmentation fund for countywide needs.

To compensate for these lost revenues, each service area--including Laguna Niguel, Laguna Hills, South Laguna, Leisure World, North Tustin, El Toro, Mission Viejo, Agean Hills, La Mirada, La Habra, Rossmoor, East Yorba Linda and Aliso Viejo--has the option of levying new fees to pay for services. Or, the service area can change the legal status of its community and thereby exempt itself from making contributions to the special district fund.


Without taking either of these steps, the county’s service areas will contribute close to $4 million to the countywide fund next year but not get a cent of it back.

Changes Planned

Four service areas--Mission Viejo, Laguna Niguel, Rossmoor and East Yorba Linda--are planning such changes. East Yorba Linda, for example, which would lose about $1,000 if it remains a county service area next year, is seeking annexation by the City of Yorba Linda, according to Terry Kelch, special districts analyst for the county.

Mission Viejo, which stands to lose close to $1.7 million in tax revenues, has a measure on Tuesday’s ballot that would change the area into a self-governing community services district. If the proposal passes, the community would no longer be making contributions to the augmentation fund for countywide programs. Laguna Niguel and Rossmoor are also moving toward forming such special districts.


The remaining county service areas plan to make up their projected deficits by charging taxpayers for services. These annual fees are expected to range from $5 to $105 per dwelling, county officials said.

In fiscal year 1985-1986, the county’s fire department, library district and flood control district will receive the lion’s share--more than $43 million--of allocations from the $46.2-million augmentation fund. Another $750,000 will go to harbors, beaches and parks, and $700,000 will be allocated to two other library districts.

Allocations Could Diminish

Those allocations could diminish, however, if service areas begin dropping out of the countywide tax fund. If Mission Viejo becomes a community services district, for example, that move alone would remove its nearly $1.7 million from the augmentation fund, Kelch said.


Should Laguna Niguel take the same action, it would mean the loss of another $1 million. If all the community service areas took such action, the countywide fund would lose close to $4 million, officials said.

Agencies dependent on augmentation-fund revenues could not make up for such lost revenues by increasing taxes, since their tax rates are fixed by law to 1979 levels, Kelch said. Those agencies would simply have to make do with a smaller pool of revenues, she said.

The move by communities to become special districts and thus drop out of the augmentation-fund pool “was never considered when the (post-Proposition 13) special districts law was passed,” Kelch said. “I think the state is going to have to take a look at this--someone has to stop it.”

Times staff writer Robert Schwartz contributed to this story.