South County Area Could Ring in 2000 as Brand-New City

Rancho Santa Margarita cleared a major hurdle Tuesday toward becoming Orange County’s first new city of the next millennium when the Board of Supervisors approved a revenue-sharing agreement.

Supervisors approved a conceptual plan that would give the county $12 million from Rancho Santa Margarita over 14 years should the community follow through with a vote to make it the first new city of 2000.

“We’re elated by it,” said Mel Mercado, president of the Rancho Santa Margarita Cityhood Committee. “It’s the culmination of a couple months of negotiating with the county on the nuts and bolts of the revenue neutrality agreement. . . . It’s been a very painstaking process.”

State law requires newly incorporated cities to reimburse the county for lost future revenue under a plan called revenue neutrality, which means neither side benefits or suffers because of the separation.

“Revenue neutrality is a thorny topic because it’s sort of difficult to achieve,” said Peter Banning, project manager for Local Agency Formation Commission, which processes cityhood applications. “There’s not many dollars to go around in local government finance in California.”

The revenue-sharing agreement with the county is so critical that LAFCO must analyze it first to determine whether the new city can survive financially with the payments to the county.

LAFCO will determine the city’s viability at public hearings in May.

Under the agreement, the new city would pay $2.4 million from its general fund in each of the first two years and $480,000 from the general fund in each of the next five years. The remainder would be paid under a formula based on sales tax revenue.

“We still have to really look closely at boundaries and look at the outlying communities as to what’s going to be included,” said Dana Smith, LAFCO executive director. “Our job is . . . to create a healthy city. . . . We’re trying to make an inclusive city.”

LAFCO will consider including Robinson Ranch, Dove Canyon, Las Flores and the Trabuco Highlands, she said.

Cityhood proponents want only Rancho Santa Margarita in the city limits for now, leaving open the possibility of annexing areas in a few years. “We’ve got to make sure when we do annex this, we have the money to do so,” Mercado said.

Once LAFCO approves the proposal, county supervisors would place it on the November ballot. Voter approval would make Rancho Santa Margarita the county’s 33rd city Jan. 1.