Tax Bonus Law Boosts Cityhood Chances for Rancho Santa Fe

The debate over whether this posh estate community can afford to incorporate may be over, thanks to a new state law that extends the financial cushion that California provides for new cities.

Promoters of cityhood here have long insisted that they have the economic wherewithal to support home rule. But analysts with the Local Agency Formation Commission, which must approve incorporation bids before they go to the voters, have expressed skepticism because the wealthy enclave generates little sales tax revenue.

A successful Senate bill recently signed into law by Gov. George Deukmejian substantially improves the fiscal forecast in Rancho Santa Fe, LAFCO officials say. It was sponsored by Sen. Marian Bergeson (R-Newport Beach).

The law extends the duration of the bonus in the share of motor vehicle, cigarette and gasoline taxes received by California’s newly incorporated cities. Designed to give new cities a financial boost during early operating years, the bonus bases their portion of the taxes on three times their true population.

Formerly, the bonus was awarded until the next federal census--1990, in the case of Rancho Santa Fe. Under the Bergeson extension, however, new municipalities qualify for the windfall for eight years. For Rancho Santa Fe, that means collecting the bonus until 1995.

The change makes the community’s long-term fiscal picture considerably more rosy. Previously, LAFCO had expressed concerns that Rancho Santa Fe would have little margin of financial security after 1990, when the bonus funds were scheduled to end. That prospect threatened to dash the town’s hopes of winning the commission’s endorsement of its cityhood plan.

“This (bill) significantly improved the outlook for Rancho Santa Fe,” said Michael Ott, a LAFCO analyst who previously had expressed doubts about the town’s ability to afford home rule. “It substantially enhances their long-range fiscal security.”

Ed Foss, chairman of the citizens group backing the cityhood proposal, could not agree more.

“In our view, this puts the frosting on the cake,” Foss said. “We’re very pleased and do not visualize any problems winning LAFCO approval now.”

Foss said the extension of the bonus funds until 1995 is “great news” because “it gives us something to fall back on. At the end of eight years, we’ll have a nice healthy surplus in the bank and plenty of other sources of revenue to compensate” for termination of the bonus funds.

In addition to the windfall Rancho Santa Fe would receive under the Bergeson extension, the town stands to benefit by avoiding terms of a second law that abolishes a local perquisite formerly enjoyed by new cities.

This measure, by Assemblyman Bill Bradley (R-Escondido), ends counties’ longtime policy of providing services for free to new cities for one year after incorporation. But it only applies to communities that file applications for incorporation after Jan. 1, 1987.

Ott declined to say whether the boost from the Bergeson measure has influenced him to recommend approval of the incorporation proposal to the LAFCO board. A public hearing on the matter will be held Dec. 3.

Foss and other incorporation proponents say cityhood is imperative if Rancho Santa Fe is to maintain its rural ambiance and insulate itself from encroaching development.

Supporters of home rule say local government is needed to improve traffic enforcement and abort county plans to widen several roads that cut directly through the quiet village, home to roughly 4,000.

If the LAFCO board approves their proposal next month, cityhood boosters plan to bring the incorporation issue before voters in June.