Plan Agency Votes Down Cityhood for North Tustin : Government: LAFCO bases rejection on would-be city’s need for new utility tax. Action means proposal won’t go on ballot.

Plans for a new city of North Tustin, a 9-square-mile area between Tustin and Orange, were killed Wednesday by a local planning agency.

On a 3-2 vote, the Local Agency Formation Commission said North Tustin would not be financially viable as a city because it would depend on a new utility tax of up to 11%. The tax would have been necessary for economic survival because the upscale area, which includes Cowan Heights and Lemon Heights, has virtually no sales tax revenue.

The commission’s vote means the proposal will not be placed on a ballot for voters in the incorporation area. If the commission had voted in favor, it would have been the first time in the state that voters were asked to approve a city contingent on a new tax, according to LAFCO Director James Colangelo.

Some of the 150 people who packed the hearing chambers said they would be willing to pay the tax in return for local control. Others argued that cityhood would bring higher taxes but no improvement in services.

“I don’t see where we come off pushing people into new taxes, and that’s what we’d be doing,” Commissioner David Boran said.

Commissioner Evelyn R. Hart, a Newport Beach councilwoman, said: “Novel, creative financing is really too risky these days, and I cannot support commingling the imposition of a new utility tax with incorporation.”

Commissioners Gaddi H. Vasquez and Don R. Roth, both county supervisors, said they favored putting incorporation to a vote of residents but requiring a two-thirds majority for approval. Generally, only a simple majority is required, but Vasquez said the unprecedented situation called for an unprecedented action.

“I believe in the right to vote, too,” said Commission Chairman James H. Flora, who cast the deciding vote. “But there are times you have to say no. . . . Cities that want to incorporate should be able to stand on their own feet.”

Some cityhood opponents, including Tustin officials, raised questions about the legality of the new tax, which would have generated up to half of the proposed city’s budget. Tustin Councilman Richard B. Edgar and others said the utility tax would be a “special” tax, requiring approval by two-thirds of the voters.

Even if voters had approved cityhood with the tax as a condition, it would have been up to the new city council to implement it, Colangelo said. And without the tax, the city could have had a deficit as early as its first year, he said.

“I urge LAFCO to look at reliable, known revenue sources, not theoretical sources which may never be implemented because of legal and political challenges,” Edgar said.

After the vote, commissioners unanimously rejected three competing annexation proposals by the city of Tustin, saying North Tustin residents should re-evaluate the situation and discuss the issues.

“I think we need to step back a bit . . . and have a cooling off period if you will,” Vasquez said.

The proposed annexations would have added more than 7,000 people, or 10% to Tustin’s population.

Tustin Councilman Edgar said his city would like to annex much of the unincorporated area north of the city but cannot do it all at once because the cost of providing services to so many new residents would be prohibitive.

Incorporation proponents have 30 days to appeal the commission’s decision to the commission, but would have to do so on the basis of new information, Colangelo said. Proponents also can resubmit the incorporation proposal in a year or present a legal challenge in court, he said.

“They can sue if they want, but I feel comfortable that everything the commission did was within the bounds of state law,” Colangelo said.

Marvin Rawitch, co-chairman of Citizens for More Local Control, the pro-cityhood group which brought the issue before LAFCO, said he is not certain what action the group will take.

“We’ll go back to the trenches,” he said. “We may just go back to the old scenario of battling down these proposed annexations.”

Rawitch and other cityhood proponents said they are upset that the commission did not let the community vote.

“I think we’ve had an expression of great paternalism on the part of some of the commissioners who are convinced that we’re not smart enough to make decisions for ourselves,” Rawitch said.

North Tustin at a Glance

Population: 31,027

Ethnic Composition:

White: 83%

Latino: 7

Black: 1%

Other: 9%

Households: 10,352

Housing Units: 10,635

Per-Capita Income: $34,193

Median Household Income: $78,820

Household Income Distribution:

Less than $25,000: 10%

$25,000-$49,999: 18%

$50,000-$74,999: 21%

$75,000-$99,999: 17%

$100,000 and more: 34%

Age Distribution

Male Female 17 and younger 2,954 2,751 18-24 1,804 1,454 25-34 3,296 3,062 35-44 1,696 2,137 45-54 2,062 2,561 55-64 2,004 2,066 65 and older 1,518 1,660 Median Age 33.7 38.0

Note: All information estimated for 1991

Source: National Planning Data Corp.