Study Shows Laguna Niguel Needs Coast to Be Viable

If Laguna Niguel cannot win back a 1.5-mile strip of tax-rich coastline, it will not have enough money to become a financially viable city, a private consultant concluded Wednesday.

Preliminary findings from the Oceanside consulting firm of Christensen & Wallace indicated that Laguna Niguel would only marginally be able to provide such essential services as street repair and fire protection if it incorporated without the strip of coastline that county officials recently included in a rival cityhood proposal along with Dana Point and Capistrano Beach.

The grim financial picture was revealed in a meeting Wednesday before the county’s Local Agency Formation Commission, which is considering Laguna Niguel’s cityhood petition.

LAFCO postponed the matter indefinitely at the request of the Laguna Niguel Citizens Task Force for Incorporation, which wanted to wait for the completed consultant’s report. The report is expected to be finished in two months.

Could Collapse After Just 3 Years

The preliminary report found that without the coastal strip--which includes the 400-room Ritz-Carlton hotel and a planned 1,100-room Hyatt-Regency hotel--a city of Laguna Niguel could collapse financially after just three years of existence, cityhood activists said.

Together, the two hotels would account for about $7.5 million in lost tax revenues from Laguna Niguel, which claimed historical rights to the coastal strip when it was sought in the Dana Point incorporation last year.

Instead, Laguna Niguel would have to rely almost solely on its residential property tax base for revenues, said Mike Bannan, an associate in the consulting firm.

“With inland being mostly residential, it becomes less feasible to become a city,” Bannan said. “Not infeasible, but they will be hurting.”

In studying the matter in recent months, the consulting firm has not yet compiled exact figures but sent a letter to cityhood officials this week advising them that the revenue loss far exceeds reduction in service costs to the coastal strip.

Bannan said the impact can best be described by looking at a city of Laguna Niguel’s projected first-year budget surplus with and without the coastal strip. With the strip, he said the surplus would amount to about 50% of the city’s revenues. Without the strip, he said, the surplus would be only about 25% of the budget.

For a city to start out on firm financial footing, Bannan said it should have a surplus of at least 30%.

The surplus is needed to build in flexibility for unexpected emergencies, such as street repairs, he said.

Traffic Lights and Upkeep

Without the strip, Bruce Rasner, chairman of the Laguna Niguel citizens’ group, predicted, the city would not be able to install traffic lights or provide a satisfactory level of upkeep for parks and greenbelts.

Police and fire services, he added, would also be financially strapped.

As Laguna Niguel builds out from its present population of 25,000 to a projected population of 50,000 by 1995, Rasner said city services would become even more hard pressed.

“The picture doesn’t get better, it gets worse,” Rasner said. “I think it’s rather ominous for the ability of Laguna Niguel to be a financially viable community.”

Laguna Niguel cityhood activists filed suit in April against LAFCO, demanding that the 1,400 acres of coastal land be returned back to their sphere of control. A hearing date on the suit is scheduled for Sept. 12 in Orange County Superior Court.

Overwhelming Vote

LAFCO, after a series of bitter and divisive hearings, in January turned the strip over to Dana Point for inclusion in its June 7 incorporation election. Residents in Dana Point, Capistrano Beach and the disputed strip voted overwhelmingly to incorporate as the city of Dana Point, effective Jan. 1, 1989, becoming the county’s 28th municipality.

The Laguna Niguel citizens committee contends in its suit that the county illegally included the coastal strip in Dana Point’s election by failing to consider hours of testimony provided by Laguna Niguel cityhood proponents during the public hearings and by calling an advisory election of affected coastal residents in November, 1987, without including other residents of Laguna Niguel in the non-binding vote.

The 1,379 voters in that strip voted 3 to 2 to join Dana Point rather than Laguna Niguel in any cityhood petitions.

County officials have steadfastly denied the Laguna Niguel group’s allegations. Jim Colangelo, executive officer of LAFCO, maintained again Wednesday that Laguna Niguel had been dealt with fairly. LAFCO members did not discuss Laguna Niguel’s precarious financial situation.

Consultant’s Analysis

When the separate Laguna Niguel and Dana Point cityhood petitions were first introduced to LAFCO in the spring of 1987, Rasner said Laguna Niguel submitted a “home-cooked” financial analysis of its proposed city, while Dana Point retained a professional consultant to prepare its analysis.

Later, the Laguna Niguel group retained its consultant, who warned LAFCO not to make a decision on the coastal strip because the financial effect on Laguna Niguel had not yet been fully ascertained.

Rasner said state law requires that such an analysis be conducted before a planning agency makes a decision that could hurt an adjoining community, such as Laguna Niguel.