ORANGE COUNTY VOICES : Joint Powers Authority May Beat Cityhood for Some Communities

Governments must balance economics and politics. How can operating costs be reduced? Should surplus taxes be spent or returned to the public? Who should have the authority to make these decisions?

Residents of Orange County are raising these issues through cityhood reorganization applications, including competing applications for the community of Foothill Ranch. Rancho Santa Margarita, Leisure World, Foothill Ranch and North Tustin soon may select their preferred local government. This represents significant reorganization activity compared with three cities that have incorporated in California since 1992.

Reasons for incorporating include increased services, local control, preserving local identity and local revenue retention. The cost of increasing services may be pitted against the opportunity to increase local control.

Consider a large region divided into different areas, one with 1.5 million voters and another with a million voters. A single coalition could reduce government costs through economies of scale.

However, Group A has more influence on the consensus position of the coalition as a group, which could create a binding policy that is undesirable to Group B. Without the coalition, Group B is not bound by this undesirable policy.

Government can provide the public with the best of both worlds--local control plus economics of scale. Two or more public agencies may form a joint powers authority (JPA). JPAs may collectively provide services such as law enforcement. This allows public agencies to create economies of scale without merging.

Fire protection services in South County are provided through such an authority. Because members elect to join, JPAs represent a win-win option for all members.

If there is no consensus, partnerships will not be forced upon members. If authority members disagree, each is free to seek out compatible partners. A consensus can be formed on an issue-by-issue basis by creating multiple authorities.

Compared with annexation, JPAs are a more efficient and equitable process for creating economies of scale. Most communities would benefit from providing selected services in this manner.

Foothill Ranch and Portola Hills may choose between creating a new city or becoming part of Lake Forest. Lake Forest predicts that annexation of Foothill Ranch will increase revenue for Lake Forest by $8.5 million over the first three years. Lake Forest also predicts that providing services to Foothill Ranch will cost $6.4 million over three years.

Economies of scale are partially responsible for a surplus of $2.1 million. However, Lake Forest fails to identify the political cost of economies of scale. The ability of the Foothill Ranch community to make a decision regarding the expenditure of any surplus is diluted by a City Council that may be elected by blocs of voters from Lake Forest.

Can the Lake Forest City Council, property owners and residents agree on the best use of a surplus? In one meeting, the city of Lake Forest indicated to me that there was no surplus and that Lake Forest would need to subsidize Foothill Ranch. To the contrary, Lake Forest provided me with a fiscal analysis that states a $2.1-million surplus will help recover $1.2 million in lost state funding. Property owners and residents of Foothill Ranch and Portola Hills may feel the best use of a surplus is to reduce existing tax burdens or provide a library and park.

Lake Forest also estimates that Foothill Ranch incorporating independently from Lake Forest will generate $11.5 million of tax revenue over the first three years--$3 million more than annexation. Should the community turn away $3 million in funding in return for creating economies of scale through annexation? Should the community incorporate, keep the $3 million in extra revenue and create economies of scale through JPAs?

Residents and property owners may wish to create a new city of Foothill Ranch/Portola Hills to maximize revenue and local control and participate in one or more JPAs to minimize the cost of government. This provides residents and property owners in Foothill Ranch and Portola Hills the opportunity to have a pure form of local government--a City Council representing one community.

As the cost of services is reduced by adding members to the JPA, all participants will benefit. This also provides Foothill Ranch/Portola Hills the opportunity to “shop” for public services--work with Lake Forest, Rancho Santa Margarita, Irvine, Mission Viejo and others to minimize costs of government. Foothill Ranch, Portola Hills, Lake Forest and other participants would generate a surplus by reducing costs. Residents and property owners will maintain local control.

I urge the community to consider all the possibilities before making a commitment to a new city government, incorporation or annexation.