Orange County’s 3 Newest Cities Manage to Buck the Fiscal Blues

There was no gloomy talk of recession, budget cuts or employee layoffs in Mike Eggers’ first speech as mayor of Dana Point.

Last year, “we learned how to jog. This year, we’ll learn how to soar,” an optimistic Eggers told the audience on June 25.

On that same night, the council of the 3-year-old city launched the Eggers Administration by approving a balanced, $10-million budget for the new fiscal year. The budget includes a $5.3-million reserve, $500,000 for a new City Hall and $5.6 million for street and drainage improvements, among other projects.

Dana Point is not the only South County city that has been awash in fiscal optimism lately. In nearby Mission Viejo, the City Council recently approved a balanced budget of $27.5 million and added nearly $8 million for capital improvements throughout the city. In Laguna Niguel, a $13.5-million budget has been approved, with $5.3 million set aside for a new senior center, parks and road improvements.

Their older, more established neighbors may be wilting under early summer budget pressures, but South County’s three newest cities are basking under a warm fiscal sun.

Compared to San Juan Capistrano and San Clemente, where budgets are coming up short and layoffs have been considered, the upstart cities of Dana Point, Laguna Niguel and Mission Viejo are paying their bills and putting money aside for the future.

All three city managers point to two common reasons for their upbeat situation. First is their more streamlined method of conducting city business--by contracting for vital services rather than providing them through a city bureaucracy.

“In the last 10 to 15 years, the privatization of government services has become an extraordinarily hot topic,” said Tim Casey, city manager of Laguna Niguel. “The beauty of this arrangement . . . is being able to pick and choose from a variety of options. And, ultimately, it benefits the taxpayer directly.”

Second, the cities are enjoying a new, improved relationship with their largest contractor, the county of Orange.

“Three years ago, in Mission Viejo, when dealing with the county, it was ‘our way or the highway,’ ” said Dana Point City Manager William O. Talley, a veteran of 36 years in city administrative work and the manager of Anaheim and Mission Viejo before moving to Dana Point when the city incorporated in January, 1989. “But there has been a 180-degree change in how (county officials) approach contract services. It’s been great.”

The reason, according to Talley, is that whereas county officials once grumbled about stationing county-paid cops, firefighters and other workers in the cities, they now see a pot of gold at the end of the South County rainbow. Revenue from the contracts is keeping county coffers afloat, services provided the cities are keeping them from larger expenditures, and the combination is keeping everybody happy.

“We’re running the city with about 25 full-time employees for a city of about 48,000,” Casey said. “In Redondo Beach, where I worked before coming here, we had about 525 employees in a city of 59,000 people.”

Similar situations exist in Mission Viejo and Dana Point, with populations of about 75,000 and 32,000, respectively. Mission Viejo operates with only 67 full-time employees, and Dana Point has 31.

In contrast, the city of San Juan Capistrano, with less than 30,000 residents, has almost 100 full-time employees. In San Clemente, a city of 41,000 residents, there are 277 full-time employees.

In Dana Point, Laguna Niguel and Mission Viejo, all of which have incorporated within the past five years, the county provides such costly services as police and fire protection and public works operations.

“I think the county really appreciates the value of its contracts now,” Talley said. “They appreciate the fact (that), thanks to the city contract system, they have a profit center here--they call it ‘overhead recovery’--(and that) if the contracts went away, the county deficit would be millions more.”

Mission Viejo City Manager Fred Sorsabal, who has been a city manager in El Segundo and Costa Mesa, agrees.

“We’re profitable to them,” Sorsabal said. “The county has begun to market themselves differently so they become more competitive.”

Indeed, a study initiated by County Supervisor Gaddi H. Vasquez and due to be released in the next few weeks shows that the county makes a profit from its contract cities, said William Hodge, executive director of the Orange County division of the League of California Cities.

“It is somewhat ironic,” Hodge said. “While supervisors . . . have beaten on the cities and suggested (that) incorporation in . . . South County is costing the county (tax revenue), the study clearly shows (that) the contract cities are profitable to the county. I think it dispels some myths about that.”

The county’s change in attitude toward contract cities began when Ernie Schneider took over the County Administrative Office about a year ago, said Murry Cable, the assistant county administrative officer.

“One of his top priorities was to improve relations with the cities,” Cable said, adding that the county immediately established an intergovernmental relations team. “I think the result is that relations have improved substantially. I think we’ve all come to realize we need to work together in today’s environment.”

Contract cities have been fairly commonplace since the late 1960s, when the concept was first put into effect in the city of Lakewood. The “Lakewood plan” has since become an established way of doing business in Los Angeles County, Sorsabal said. The key to making it work is having enough properly trained employees and county cooperation, he said.

“I don’t think we’ll look to increase our services, with the possible exception of a small maintenance group,” he said. “If you have good contract administrators in-house, there’s no need.”

Casey agrees.

“We have all been managers of much larger organizations with bigger budgets and hundreds, if not thousands, of city employees,” Casey said. “I don’t see any of us going out of our way to recommend the expansion of our bureaucracy. We’re all pretty satisfied with our ability to meet the needs of the community with the contract service and delivery system.”