State Auditors Review Impact of Secession

On the 11th floor of a high-rise office building in Culver City, a team of state auditors is poring over financial documents by the box load.

Their work could help determine whether Los Angeles continues to be the second-largest city in the United States, or is split into four smaller municipalities.

The auditors, at a cost of up to $6,600 per day, are figuring out whether a new city in the San Fernando Valley would operate with a $60-million surplus without harming what would be left of Los Angeles.

Mayor James K. Hahn says no. Valley secessionists--along with those in the Harbor area and Hollywood--say yes.

At issue is the key multimillion-dollar study by the Local Agency Formation Commission that will determine whether residents are allowed to decide the question for themselves.

At Hahn’s demand, state Controller Kathleen Connell is conducting the 45-day review. “The independent review by our office gives it a stamp of approval or disapproval,” she said.

“Expectations are very high, but we are very limited in what we can do,” she said. “I am not allowed to opine for or against secession. I am limited to determining whether the financial review is complete and accurate, and whether the methodology is valid.”

Connell said that what she has seen so far has not raised any red flags about fundamental flaws in the LAFCO report.

“We feel they have made an effort to look at everything in the report,” Connell said. But she said it is “premature” to say what her office will conclude on the specific questions raised by the city.

Opponents of municipal divorce look to Connell to raise questions about the financial analysis, forcing reconsideration by LAFCO.

“It’s unlikely she will come up with a finding saying you have not met the state requirements to put this on the ballot,” said Larry Levine, a founder of the anti-secession group One Los Angeles.

“What I hope she finds is that LAFCO’s conclusions are not justified by the data,” Levine said. “How can you cut services and say that is not harmful?”

Levine said the Connell review is critical, given that LAFCO’s executive director, Larry Calemine, was a founder of a former secession group three decades ago, and an alternate on its board is the chairman of Valley VOTE, the main secession group.

“It comes as no surprise, then, that every fact and finding is being twisted and distorted to support a preconceived determination that secession is viable and harmless,” Levine wrote in a letter last week.

Hahn authorized spending up to $300,000 on the study because he said the LAFCO study fails to consider that Los Angeles would be left with more than $300 million annually in costs without Valley tax revenue.

The mayor’s office submitted more than 1,000 pages of documents to Connell in an attempt to show that Los Angeles taxpayers would be forced to fund the same levels of police communications, library book catalogers and other functions even after the Valley, Harbor and Hollywood split away.

Some of the points of contention:

* That proposed alimony payments from the Valley to the rest of Los Angeles are too small because LAFCO underestimated the centralized costs Los Angeles would have to continue to pay. LAFCO said that as the Valley splits away, many centralized costs would be reduced.

* That projected reserves in the new Valley city are too low and will result in a decrease in services or increase in taxes. LAFCO found the reserves adequate.

* That LAFCO failed to adequately analyze the effects on the remainder of Los Angeles once the Valley stops contracting for services during a transition. LAFCO found the analysis adequate.

“It makes sense to spend a few hundred thousand dollars to get the information we need,” said Julie Wong, a spokeswoman for Hahn. “To have full confidence in the LAFCO analysis, we’d like to have another look at the numbers.”

In a familiar refrain, Jeff Brain, the president of Valley VOTE, accused the city of trying to muddy the waters with box loads of documents that do not make sense. He said it is not logical that city officials, including the City Council, will not be able to cut their spending after a third of the city breaks away, as the city claims.

When she ran for mayor last year, Connell was repeatedly described as opposed to secession. But this week, she said she is neutral. Brain thinks her professional review will determine that the city’s complaints lack validity.

“I think it’s going to vindicate LAFCO and say LAFCO did the right thing, that it’s a good study,” Brain predicted.

LAFCO’s Calemine, who has defended his financial studies, noted that he has broad discretion to act on Connell’s findings or not. He could simply attach her report to the one already done by LAFCO.

But he said he will likely give her findings scrutiny.

“If she has recommendations, we will look at them very seriously,” he said.