Cost of Secession Study Now Put at $8.1 Million

Studying the financial consequences of San Fernando Valley secession will be more costly and complex than previously thought, according to a county analysis of the issues that must be reviewed before a breakup of Los Angeles could take place.

Due to the “tremendous” volume of information that would have to be scrutinized to divide Los Angeles’ unwieldy mass of assets and liabilities, a fiscal study could cost as much as $8.1 million, and possibly more. That far exceeds the former $1-million to $2-million estimate, according to a draft report by the county and two consultants obtained by The Times.

The report--which examined not only Valley secession but also splinter movements in Eagle Rock, San Pedro and other parts of Los Angeles--also concluded that a study could take from one to two years to complete, and possibly longer. It will be reviewed Wednesday by the Local Agency Formation Commission, the panel that oversees the secession process.

Because state law requires a financial study before secession can go to voters, the costs and timeline outlined in the study are critical to the fate of the breakaway movement.

Valley VOTE, the group behind the secession drive, is expected to be asked to shoulder at least a portion of the tab--which the activists have repeatedly stated that they could not afford.

Local, state and federal politicians have proposed that government pay a portion of the costs, but to date the question of who will pay remains unanswered. Most observers expect the issue to wind up in court.

For Valley secession to make the ballot, the study must conclude that municipal divorce is economically possible without hurting either side financially.

For the study to take place, secession supporters must obtain valid signatures from 25% of the Valley’s registered voters--about 132,000 in all. Valley VOTE submitted 202,000 signatures to LAFCO last November, but a random sample found a high rate of duplicates, forcing county officials to examine all names on the petitions, a process which is expected to last into March.

As a result of the study and petition process, secession is not likely to wind up on the ballot before 2002, at the earliest.

Valley VOTE chairman Richard Close said the report underscored the need for government to pay the cost of analyzing secession.

As Close said, it is not Valley VOTE, but the three individuals who launched the secession petitions who are on the hook for all fees. Arguing the costs represented an unconstitutional hurdle to the ballot, Valley VOTE recently persuaded the county Board of Supervisors to pay the estimated $270,000 needed to check the petition signatures.

Close said the group is prepared to make the same argument for the significantly more expensive study.

“There is no question the process has to be thorough and comprehensive,” Close said. “No one wants a half-baked study.

“These cost estimates just reinforce our belief that these fees should be paid for by the various levels of government,” he added. “I think the law is clear: You cannot put large financial obstacles in front of the process. I think the size of these figures makes that case even [stronger].”

Among the main conclusions of the report, performed by the county’s chief administrative office and economists Beverly Burr and Bruce Smith, was that it made little sense to conduct separate studies for the various secession movements now underway in Los Angeles.

Besides the Valley, Eagle Rock and San Pedro-Wilmington, activists in Hollywood, Westchester and Playa del Rey, and Brentwood and Pacific Palisades are pondering secession. The report concludes that it would be more cost-effective to review the financial impact of all secession movements at once--even if some fizzle out.

All the areas, the reports note, have higher median home prices than the fragment of Los Angeles they would leave behind.

Overall, the report concludes:

“Revenues from over 100 sources would have to be divided geographically. Over 1,000 city properties, several thousand vehicles, and nearly a thousand computers would have to be cataloged, valued and divided. Dozens of different municipal services must be costed for geographic service areas . . . And over 30,000 workers must be allocated to the potential new cities.”

There are even more difficult issues to ponder, the report states. How, for example, does one divide the Department of Water and Power, the nation’s largest utility, which is saddled with debt and facing new challenges due to deregulation? Should a new city such as Westchester-Playa del Rey win ownership of Los Angeles International Airport because it is within its borders? Would San Pedro control its harbor?

The report breaks the unprecedented scope of the municipal divorce study into three steps: a basic research phase, costing from $2.1 to $3.1 million; an intermediate research phase, costing from $1.5 to $5 million for basic asset evaluation, and currently unknown costs for utility evaluation, and a final research phase, the costs of which are unknown.