Tax Study Stokes Debate on Secession

Adding fuel to the San Fernando Valley secession debate, a state study released Friday concluded that the Valley generates more sales taxes than is commensurate with its share of the Los Angeles population.

But whether this supports the decades-old rallying cry of Valley secessionists--that Valley taxpayers pay more than their share and would be better off on their own--the study does not determine.

The city of Los Angeles received $249 million in sales taxes in 1996. The Valley, with 34% of the city’s population, generated $104 million, or 42% or those taxes, according to a study by the state Board of Equalization.

The study counted money collected in sales taxes by Valley businesses. It could not determine whether the customers who paid those taxes were from the Valley, or whether the businesses were paid, for instance, by shoppers from other parts of the city or other cities.

Supporters of the Valley secession movement quickly cited the study as proof the Valley could generate the necessary taxes to sustain a separate city.

“This is an important study in that it demonstrates our belief that the Valley will do very well economically as a separate city,” said Richard Close, co-founder of a group that is campaigning for a study of the viability of secession.

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But others, including a member of the state Board of Equalization, said the study does not provide enough information to reach such a conclusion.

John Chiang, an acting member of the board who released the study, said the numbers show the “San Fernando Valley is an economic powerhouse to be reckoned with.”

But Chiang cautioned that further studies--such as a tally of how much the Valley generates in property taxes and how much it would cost to operate a new city--are needed before any conclusions can be made.

“This is far from conclusive in the debate on this issue,” he said.

He said the study does not address the longtime secessionist claim that the Valley gets shortchanged on its share of city services, based on the amount of taxes residents pay.

Chiang said it would be difficult to quantify whether the Valley is getting its fair share of services because it is hard to measure what proportion of city facilities should be considered devoted to the Valley and how much time and effort city personnel put into exclusively Valley affairs.

“You probably can only get a rough estimate on the amount of services the Valley receives,” he said. “That is something that city elected officials should be examining.”

The study adds another chapter to a secession movement that has been brewing in the Valley for more than 20 years and gained momentum in October when Gov. Pete Wilson signed a bill that eliminated the City Council’s power to veto secession.

A group known as Valley Voters Organized Toward Empowerment, or Valley VOTE, plans to launch a drive in April to gather enough signatures on a petition that would require the Local Agency Formation Commission to study the viability of pulling the Valley out of Los Angeles to set up its own city.

If that LAFCO study shows secession would not be a financial burden on either the Valley or the rest of the city, voters citywide could be asked to vote on the issue in 2000.

The idea of quantifying the Valley’s contribution to the sales tax revenue stream originated with Rep. Brad Sherman (D-Sherman Oaks), a former member of the state Board of Equalization.

Speaking on a panel at an Encino Property Owners Assn. meeting in 1996, Sherman suggested the study as a way to partly address one of the most vexing aspects of the secession discussion: the dearth of hard data on what tax revenue the Valley generates and what services it receives.

Chiang, Sherman’s successor, went on to produce the study.

Said Chiang: “I am sure that these statistics on sales generated in the Valley will contribute to the debate on this issue, and ensure that an intelligent, informed choice is made on the secession issue.”

Reaction to the study was mixed.

“Wow,” said former Assemblywoman Paula L. Boland of Granada Hills, who wrote the first--unsuccessful--state law to ease secession. “This is great. . . . It certainly begins to substantiate what I’ve always said, that we’re contributing a disproportionate share than the services we get back. None of the perks come here. . . . It is going to be a vital part of the [secession] study.”

But opponents of Valley secession dismissed the study as meaningless.

Los Angeles City Council President John Ferraro, one of the most vocal opponents of secession, said it is unfair for any portion of the city to try to secede simply because it is generating more than its share of taxes.

“You have to look at the whole picture,” he said. “There was a time that most of the sale taxes were generated by downtown, and that has probably changed.

“Every time some area generates more taxes, do you break away a new city?”

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But David Fleming, head of a new foundation gathering data on Valley cityhood, said the new study substantiates what Valley leaders have long suspected.

“The Valley is a really strong generator of business,” Fleming said. “It also ties in with family income, which is substantially more here than in the rest of Los Angeles.”

Its ability to generate sales tax revenue alone shows the Valley would be an economically sound city, Fleming added.

But he still hasn’t given up on an effort to rewrite the city’s 72-year-old charter to give areas such as the Valley more local control, which if successful could reduce the pressure for Valley secession.

If that reform movement falters, however, “the Valley is certainly a viable separate city and would do very, very well,” he said.