LAGUNA HILLS : City Sues County Over Annexation

Saying that county officials are unfairly blocking its efforts to annex unincorporated North Laguna Hills, the city has gone to court in an attempt to force the Board of Supervisors into action.

In a lawsuit filed this week, the city claims that county officials have been holding the annexation effort hostage to negotiate for a share of the sales tax revenue the county would lose if Laguna Hills absorbs the unincorporated area.

The city wants a Superior Court judge to order the supervisors to pass a resolution to move the annexation process along.

“No city in the county of Orange has given their sales tax to the county,” said Don White, Laguna Hills’ administrative services director. “It would set a very dangerous precedent.”

City Atty. Lois E. Jeffrey said she expects a hearing on the lawsuit to be scheduled in the next two months.

In its court filing, the city maintains that the county is not complying with a state law that requires the city and county to divide up property tax revenue for the targeted area before the city’s application for annexation is considered by the Local Agency Formation Commission.

The city, which expects to gain more than $1.5 million in annual sales tax revenue from North Laguna Hills’ row of furniture stores and other businesses, offered in July to let the county have all of the area’s property tax revenue, which earlier this year was estimated at $1.4 million a year.

At first, county officials told the city they would be willing to go along with that offer and would wait to argue their case for a share of sales tax revenue before LAFCO.

But they changed their minds after state legislators voted two months ago to take a cut of the county’s property tax money to fund schools, and they have yet to bring the city’s offer before the supervisors for consideration.

Instead of the $1.3 million to $1.4 million the county expected to get each year from North Laguna Hills property taxes, the county now anticipates that it would receive about $600,000, said Nancy Liao, county manager for urban analysis. That amount falls far short of the $2 million the county estimates it costs to provide services to North Laguna Hills, Liao said.

County Administrative Officer Ernie Schneider, who said he had not yet seen the lawsuit, claimed that such a discrepancy makes consideration of Laguna Hills’ offer impossible.

“Now that the Legislature has basically taken 60% of our property tax revenue,” Schneider said, “we can’t afford to give away any more property tax money. . . . I don’t think we’re being unrealistic to ask for enough money out of that annexation to cover our costs.”

Also, Schneider said, he saw no need to meet a state requirement to respond to the city’s offer within 30 days since LAFCO has put consideration of annexation requests on hold until December, when the uncertain property tax picture may be clearer.

But White, the city’s administrative services director, said that whatever its argument, the county is exceeding legal bounds. Questions on dividing revenue from sales and other taxes are to be considered by LAFCO.

“It is our opinion that (the county’s action) is an abuse of discretionary power,” White said. “If we have offered them everything (in property taxes), then there is nothing to negotiate. They have put themselves in the role of LAFCO.”

The two sides have been battling ever since LAFCO commissioners refused to allow North Laguna Hills’ 722 acres and 4,700 residents to be included in Laguna Hills’ 1991 incorporation because of a similar dispute over the county’s loss of tax revenue.