Growing Pains : Secession Talk by Valley, Others Shows L.A. Reform Is Overdue

If Los Angeles were a corporation, it would have been restructured long ago and might even be a candidate for breakup today.

That observation is pertinent right now because the San Fernando Valley is making noises about seceding from the city, as are San Pedro and Wilmington.

It’s doubly pertinent, because Los Angeles the city and the larger entity, Los Angeles County, are visibly broke.

The latest city budget came out last week, and it delivered the discouraging news that despite Southern California’s economic recovery, the city of Los Angeles continues to run a structural deficit of more than $100 million in an annual budget of $1.4 billion.

No hope is offered that such deficits will be reduced. If the city were a corporation, it would be in Chapter 11.

And Los Angeles County is no better off. Its budget, which came out Monday, relies on tapping pension funds and a wistful hope that the federal government will come through with fiscal support.

Budget Director Sally Reed, having tried to bring a sense of reality to the county, has resigned in disgust with the area’s politicians.

So into this fiscal mess steps the San Fernando Valley, attempting to get a ruling from Sacramento that would allow its 1.3 million residents to vote on secession from Los Angeles--which it joined in 1915, grateful for Owens Valley water to irrigate its crops.

Today’s Valley is a manufacturing, commercial and entrepreneurial beehive, a vast urban province that on its own would be the sixth-largest city in the United States, based on population.

As it is, the Valley is a highly important part of Los Angeles, with more than a third of the city’s population--and 14% of the county’s--relatively high income and a disproportionate share of the area’s retail sales. “It has a large middle class, an essential for any city to thrive,” said Mayor Richard Riordan last week.

But why is it thinking about seceding? Frustration and taxes. Its business people are tired of dealing with the city bureaucracy in downtown Los Angeles--there is no local City Hall annex in the Valley.

They are frustrated by “a City Council that is extremely hostile to business,” says Robert Scott, head of the Valley Industry and Commerce Assn.

And they feel cheated by the fact that a business in the Los Angeles part of the Valley must pay taxes and utility fees totaling $50,000 while next door in Burbank--also part of the Valley and home to Walt Disney and Warner Bros. studios--the same business pays $20,000.

Aside from business, Valley residents feel they’re being shortchanged--that more Valley taxes go downtown than come back in services and investment. “A survey taken back in the 1970s showed the Valley paying 40% of the city’s taxes but getting back only 20% of the city’s expenditure,” says Guy McCreary, head of the North Hollywood-Universal City Chamber of Commerce.

The trouble with those figures, however, is that they’re out of date, like so many other perceptions of Los Angeles and Southern California. The Valley 20 years ago was a still-expanding suburban region, benefiting from developers’ investments. Now it is a complex urban area with problems of crime and congestion as well as expanded educational, cultural and social institutions.

It probably gets back in government expenditure as much as it gives up in taxes, but nobody will know for sure until studies--only now being launched--of Valley tax and financial structures are completed.

In any event, the Valley won’t secede, whether or not it gets to vote. Secession is not feasible because the bill Valley residents would have to pay Los Angeles for infrastructure--streets, sewers, the water pipes that were laid down so long ago--would run into billions of dollars.

Yet the gripes of Valley businesses and residents are significant, as are similar gripes from San Pedro and Wilmington, the two Los Angeles communities down at the harbor. There too, says Councilman Rudy Svorinich, residents feel ignored and shortchanged by faraway City Hall.

Such feelings reflect a town that grew into a world city without modernizing its management. The City Council structure for running Los Angeles may have been OK 40 years ago, when one council member represented 15,000 constituents, but it is inadequate today, when each council member represents 250,000 residents.

As the city has grown, so have government staffing levels. But following the aerospace downturn and subsequent recession, revenue is not coming in to pay for those staffing levels. Yet talk of cutbacks arouses opposition.

So the city budget is being balanced with questionable assumptions. It’s assumed this year, for example, that the Department of Water and Power will contribute an additional $28 million to city coffers and that Municipal Court fines will rise $20 million. A city government that uses such gimmicks is living on borrowed time.

And Los Angeles County’s budget is worse, counting on federal funds when the clear trend--Sally Reed recently told the Metro Investment report newsletter--is for welfare and health-care reform to reduce federal support for localities.

What it all means is that Los Angeles, city and county--not to mention the rest of Southern California--must adapt to the fact that it’s now a world region.

Decentralized government would be one change that could make public agencies more responsive and offer opportunities for innovations in services, says David Fleming, head of the Economic Alliance for the San Fernando Valley.

Fleming, a lawyer at Latham & Watkins, suggests that Los Angeles study New York’s system of semiautonomous boroughs to achieve such decentralization.

Also, reform of the city charter is long overdue. “The Los Angeles City Charter is 480 pages of amendments and additions, while the U.S. Constitution is five pages,” Fleming observes.

Clearly, Los Angeles and its gangly adolescent, the San Fernando Valley, need to grow up, not break up.

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The Valley as a City

The 222-square-mile San Fernando Valley, which has made rumblings about secession from the city of Los Angeles, covers about the same area as Chicago. If it were a city, the Valley’s population would rank sixth in the country. Here’s a look at the region and how it fits into Los Angeles County’s economy:

HOW IT COMPARES TO L.A. COUNTY

Population

The Valley: 1.3 million (13.8% of L.A. County)

L.A. County: 9.2 million

Employment

The Valley: 627,000 (15.3% of L.A. County)

L.A. County: 4.1 million

Retail sales

The Valley: $12.0 billion (24% of L.A. County)

L.A. County: $49.8 billion

Personal income

The Valley: $27.2 billion (13.4% of L.A. County)

L.A. County: $203.0 billion

WHO LIVES THERE

* Asians and Pacific Islanders account for 9.5% of the population, and Latinos account for 36.3%.

* Household size is slightly above average, as is average income, with 43% of households earning more than $50,000 a year.

* A significant portion of the Valley’s households are very wealthy, with 5.1% earning more than $150,000 a year.

* The area has substantial employment in entertainment and recreation industries. Employment and entertainment has exploded, growing by 44.2% since 1987.

* The Valley has about 1.83 cars per household, even more than the county overall, where the average is about 1.5.

* There are nearly 60,000 businesses in the Valley, about 95% of which have fewer than 50 employees.

Note: All figures are for 1994, except for employment, which is taken from 1990 data. Valley figures are from a study area extending from Agoura Hills to the west to Burbank to the east.

Sources: Times reports, Valley Economic Development Council, Urban Decision Systems and Economic Research Associates

Researched by JENNIFER OLDHAM / Los Angeles Times