Secession, Enron-Style

In its eagerness to get the proposed secession of three parts of Los Angeles before voters, the commission overseeing the process is relying on analyses that have all the clarity of an Enron audit.

The private consulting firm hired to analyze secession proposals gave a thumbs up Wednesday to a breakaway Hollywood, just as it had earlier to San Fernando Valley and harbor cities. It is increasingly likely that all three will be on the November ballot. Yet eight months away from votes that could cost Los Angeles almost half its population and more than half its territory, no one adequately understands what secession would really do for the breakaway cities and how it would affect what would be left of Los Angeles.

To put secession on the ballot, the Local Agency Formation Commission, which controls the process, must find that a breakaway city would be “fiscally viable” and that breakup would not harm what would be left of Los Angeles.

The Newport Beach-based consulting firm that the commission hired to make the determination came up with a streamlined plan calling for Los Angeles to continue owning all assets and providing all services to the breakaway cities, which would spend virtually all their revenues paying for these services. Such a plan would be fiscally sound, it said, since Los Angeles provides those services now.

Well, duh. Hollywood secessionists, being no dummies, hired the same consulting firm, which came up with the same plan, for a breakaway Hollywood to continue contracting with Los Angeles for services.

L.A. officials found plenty of holes in even this simplified approach and rightly asked for an audit by the state controller. They were as usual denounced as obstructionists by the secessionists. But the city is right. Errors or obfuscation in the plans today means financial trouble for someone down the road.

The larger problem is that secession advocates are already bypassing the current plan and looking for ways to divide city assets--buildings, equipment and employees. They might form their own service departments. Or maybe contract with Los Angeles County instead. All this in as little as 18 months.

No one has analyzed whether the new cities would be fiscally viable under these circumstances or asked what would happen to Los Angeles if the contracts were dropped and it suddenly had to eliminate departments and jobs. But not to worry: Commission members and secessionists (some of whom are one and the same, but that’s another story) remain tenaciously optimistic about their grand plans and their fuzzy accounting. So, of course, was Enron.