Laguna Hills, Lake Forest Gain Cityhood : Incorporation: Today they become the 30th and 31st communities to gain independence from the Board of Supervisors.

Since voting overwhelmingly for cityhood in March, the residents of Laguna Hills and Lake Forest have been preparing for today when, with a brandishing of flags and musical fanfare, they will officially become the 30th and 31st cities in Orange County.

Historians will note that on this day their city councils were sworn in, mayors were picked from among their ranks and municipal codes were passed into law.

With these actions, the two South County bedroom communities, which have grown explosively in recent decades on opposite sides of Interstate 5, will declare their legal independence from the County Board of Supervisors that has until now guided their destinies.

The smaller of the two is Laguna Hills. With 22,666 mostly upper-income residents on five square miles of greenbelted neighborhoods and annual tax revenue of $10 million, it will become one of the richest cities in the county based on tax revenue per capita. This is due primarily to the millions of dollars in sales tax it reaps each year from its large regional shopping center, the Laguna Hills Mall.

Lake Forest, which is about twice as large in area as Laguna Hills and has nearly three times its population with 62,685 people, is expected to make do with the same approximate revenue, making its revenue per capita far less than its neighbor’s. Its 10.3 square miles consists of primarily middle-income housing tracts, strip malls and several shopping and business centers.

At the brink of cityhood, Lake Forest residents are still split about its chosen name. Voters in March decided by a slim margin to christen the city after the name of two chic residential developments that since the late 1960s have been built around man-made lakes in the heart of the community. But a close runner-up in the election was the name El Toro, which has been a part of the area’s history for longer than a century but lost favor because of its association with nearby El Toro Marine Corps Air Station.

Today’s events continue an incorporation boom in South County that has given birth to three other cities in last four years: Mission Viejo in 1988, Dana Point in 1989 and Laguna Niguel in 1990.

Yet another community, North Tustin, next month will argue its right to become a city before the Local Area Formation Commission, and Leisure World, the large retirement community adjacent to the new city of Laguna Hills, also is studying the economic feasibility of becoming a separate city.

The months since last spring’s election have been hectic for the two cities’ council members-elect. They have chosen city managers and the locations of city halls, taken crash courses in the Brown Act and served as advisers to the Orange County Planning Commission for developments proposed within the boundaries of the new cities.

The months ahead will be even busier. The new city managers will build their staff and the city councils will appoint planning commissions, begin developing general plans and take steps to address citizen demands for improved police protection, traffic control, parks, street maintenance and other services--the very issues that drove the cityhood campaigns.

Because of the depressed economy, the new cities will have to cope with shrinking revenue projections from retail sales taxes, hotel bed taxes, property taxes and building fees.

Nonetheless, LAFCO Executive Director Jim Colangelo said he believes that Laguna Hills and Lake Forest will avoid economic troubles because of their strong revenue sources.

Clearly, Laguna Hills has the least cause for concern. That city is expected to bring in so much tax revenue that LAFCO opposed its incorporation on the grounds that it would drain away wealth that previously was shared with the rest of the unincorporated county.

It is estimated that the incorporation of the two cities will cost the county $7.7 million in net revenue in the next fiscal year.

The pre-recession projection for Laguna Hills was $10 million in annual revenue and annual expenditures of $7 million; for Lake Forest, it was $10 million in annual revenue and $8 million in annual expenditures.

Another factor helping the new cities, Colangelo said, is that for the next six months all of their services will continue to be paid by the county, which will give the cities five years to reimburse the cost. During the cities’ first six months they will also be able to collect sales and other taxes and build a nest egg to use after July 1.

A final advantage for new cities in a recession is that they lack administrative fat. “They don’t have spending patterns to cut back,” Colangelo said.

MUNICIPAL DRAMA: B9