Opinion: Disincorporation is not the worst thing for a cash-strapped city

When a Santa Barbara County grand jury urged the small Central Coast city of Guadalupe to end its financial “shell game” and disincorporate in a report released Friday, city officials were pretty dismissive of the recommendation.

Guadalupe City Administrator Andrew Carter brushed it off, saying the grand jury hadn’t taken into account everything the city was doing to shore up the treasury, L.A. Times reporter Matt Hamilton wrote. At a meeting Tuesday, Councilwoman Virginia Ponce said that “Guadalupe is a little engine that can,” the Santa Maria Times reported. Her evidence? A new Subway in town.

I don’t how many roasted turkey breast sandwiches the shop will have to sell each year to bring in the tax revenue the city needs to pay its bill, but I’m guessing it won’t be enough. The grand jury doesn’t think there’s an easy solution either, noting in the report that there’s no “bridge to solvency” for the city.

Things have been bad for Guadalupe for a while. Five years ago, the city considered changing its name to Guadalupe Beach to attract more tourism. This community of 7,000, mostly working-class residents, was staring down the barrel of disincorporation long before the grand jury recommendation. In fact, it was the warning that city officials used to get three tax increases passed in November. Even with those new sources of revenue, however, the grand jury concluded that the city still can’t pay its future bills and will fall short about $300,000.

Sound familiar? It did to me; I’ve been reading about cities juggling their financial obligations since before the Great Recession, which has only made the game tougher. The economy might be on the upswing, but cities are still struggling with structural deficits compounded by long-term financial commitments that just keep growing. Los Angeles, for example, has an ongoing structural deficit, projected at $242 million this fiscal year, caused by expenditures outpacing revenue.

Is Guadalupe just a municipal aberration? Or could it be a canary in the coal mine for local government?

No California city has pulled the plug on cityhood in more than 40 years. But a few have considered it. A handful, Stockton, Vallejo and San Bernardino, have faced financial realities so difficult that they filed for bankruptcy.

But disincorporation isn’t so bad. In fact, lots of California communities have chosen to remain unincorporated. While it doesn’t erase financial problems, it does turn assets and liabilities over to the county, which has many more taxpaying people to absorb the fiscal ups and downs.

For Guadalupe residents, that means sharing their financial burden with folks better off than themselves, such as those in the unincorporated community of Montecito, where the median home value is $2.9 million, according to Zillow.

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