NORTH TUSTIN : Report Links Utility Tax to Incorporation

It would be legal to simultaneously incorporate North Tustin and impose a utility users tax to fund the new city, according to a report by a county attorney.

Such an action would set a precedent in the state but is necessary because the proposed city has virtually no sales tax revenue with only one restaurant and no stores, officials and residents agree.

The Local Agency Formation Commission does not have the authority to impose a utility tax, but the City Council of the new city would have discretion to do so, Deputy County Counsel Benjamin P. de Mayo wrote in a recent report to the commission. His report did not address the amount of the tax, which cityhood proponents say would be about $73 a year per household.

The utility tax, which anti-cityhood forces say would be much higher, is one of many controversial issues surrounding the proposed incorporation or annexation of North Tustin.

The Local Agency Formation Commission was scheduled to tackle the issues last month but postponed the discussion until August because the state controller’s office had not finished analyzing a financial report on the proposed city. The state is studying a financial report funded by cityhood advocates that said the new city would be financially viable with a utility users tax. Anti-cityhood forces challenged many figures in the report, and Tustin officials requested and agreed to pay for a state review.

That analysis is still not available, and unless it is completed by July 19, a public hearing will probably be postponed again until October, said Jim Colangelo, the agency’s executive director.

While a decision might still be months away, county officials have proposed some conditions of incorporation, six of which are related to transportation issues.

Cityhood advocates have argued that incorporation would give them more control over the roads in the semi-rural area. But the proposed conditions would hold the new city to county plans, including widening some roads.

“The proposed county conditions completely invalidate the claims being made by proponents” that becoming a city would give them complete control, said Phyllis Spivey, a critic of the cityhood movement.

But other North Tustin residents favoring incorporation said they see no problem with the proposed conditions.

“Those are certainly conditions that are understandable and acceptable,” said Bruce Nestande, a leader of the cityhood movement. “But the bottom line is you would have more control locally because now you would be on the bodies that are controlling these issues. We are going to have more control about roads and anything else in life.”

For example, the new city would be required to enter an agreement establishing the county as the lead agency for expanding portions of Newport and Irvine boulevards and declaring those roads to be county highways during the construction.