SADDLEBACK/SOUTH BEACH : LAGUNA HILLS : Judge May OK Bar to Area’s Annexation

An Orange County Superior Court judge said Tuesday she is leaning in favor of letting county government officials block the city’s attempt to annex North Laguna Hills while the city and county battle over the area’s sales tax revenue.

At a hearing in Santa Ana, Judge Eileen C. Moore told attorneys she tentatively planned to deny the city’s request for a resolution from the county that would permit the city to argue its annexation case before the Local Agency Formation Commission.

But after hearing arguments from the city’s attorney, Thomas F. Nixon, and Deputy County Counsel Benjamin P. de Mayo, Moore said she will make a ruling in the matter within 90 days.

At issue is the city’s attempt to annex the 722-acre area, whose 4,600 residents voted more than four years ago to be part of the new city of Laguna Hills. Because of objections from the county, LAFCO did not allow North Laguna Hills to be included when Laguna Hills incorporated in 1991.

The county has been blocking the annexation because it could lose a huge amount of revenue in the process. Based on fiscal 1993 figures from the county auditor, the area generates about $600,000 in property taxes and $2.3 million in sales and others taxes for the county while requiring about $540,000 in costs for law enforcement, planning, animal control and other services.

The area’s sales tax revenue is particularly lucrative because it includes numerous stores concentrated along a street commonly known as “furniture row.” The proposed annexation area is bounded by Interstate 5, Ridge Route Drive, Santa Maria Avenue, Moulton Parkway and the city of Irvine.

According to state law, the county and city must reach agreement on dividing up taxes in the targeted area before the city can argue its annexation case before LAFCO.

Contending that it is required to negotiate with the county only on property taxes, the Laguna Hills City Council last year offered to let the county have all the property tax revenue and set its sights on the remaining sales and other tax revenue.

The city contends that no further negotiations are required and that the Board of Supervisors must pass a resolution allowing the city to proceed with its application to LAFCO.

Nixon also asked the judge to rule that the city is correct in arguing that the property tax issue should be the only matter that should be negotiated.

“The county has used an inaccurate interpretation of the (law) to justify preventing LAFCO from considering our interpretation of the merits of the annexation,” Nixon said.

Deputy County Counsel De Mayo said the county believes it has the right to hold up the annexation attempt for two reasons: The city did not follow certain state-required procedures for filing an annexation application, and the county has the right to negotiate a share of revenue from sales and others taxes in the proposed annexation area.