Is East L.A. Ready To Be A City?

A study commissioned to examine the unincorporated area’s financial base was released yesterday; hearings will soon follow.

By Gloria Angelina Castillo, EGP Staff Writer

The much-anticipated draft Comprehensive Fiscal Analysis (CFA)—a study that is key to determining whether Unincorporated East Los Angeles has sufficient financial resources to sustain itself financially as an independent city—was released yesterday, July 13.

The study is the result of an effort by local stakeholders and supporters to bring cityhood to unincorporated East Los Angeles, considered by many to be the heart of Hispanic culture and political power.

Three previous incorporation attempts, in 1961, 1963 and 1974 failed. The East Los Angeles Residents Association (ELARA) initiated this latest effort in 2007, and on April 29, 2009, submitted an application for incorporation accompanied by a sufficient number of signatures from registered voters in the impacted area. The start of the CFA, however, was delayed when ELARA’s fundraising efforts to pay for the study took longer than anticipated. The CFA is the first since the last incorporation effort in 1974.

Read this story IN SPANISH: ¿Esta el Este de Los Ángeles Listo Para Ser Una Ciudad?

View of East Los Angeles from City Terrace. According to the 2010 US Census, East Los Angeles has a total population of 126,496, 97.1 percent of the residents are Latino. (EGP photo by Elizabeth Hsing-Huei Chou)

Not wanting to show too much reaction, ELARA members for the most part remained expressionless as Richard Berkson of EPS Economic & Planning Systems Inc. (EPS), the independent consultants hired to do the study, ran through the report’s findings which shows the area is millions of dollars short of the revenues needed to provide services at today’s levels.

From time to time, however, it was evident they were uncomfortable with what they were hearing, huddling together to discuss one of the speaker’s points.

Supervisor Gloria Molina, who currently represents the area on the Board of Supervisors, asked several procedural questions, and for clarification of terms to ensure there is no confusion down the road.

Using Los Angeles County data for Fiscal Year 2009 to 2010, the CFA details revenue sources to cover the cost of providing services, such as Sheriff’s protection, sanitation, sewers, libraries and parks and recreation, planning and road repair in the 7.5 square-mile, mostly Hispanic community. There would be no change to fire service costs, as they would continue to be provided by the County.

The study includes a 7-year projection of revenue, and absent any increase in taxes, it shows the General Fund would be $11 million short initially, “then grows as Vehicle License Fee (VLF) revenues from the state decline,” as a result of the governor’s signing of SB 89, urgency legislation elimination VLF revenue to cities. Starting in year seven and following repayments to the County for “Initial Transition Year” services, the ongoing projected shortfall is $7.6 million.

Unincorporated East LA’s 7.5 miles are bordered by the City of Los Angeles (on the west), Montebello (to the east), Monterey Park (to the northeast), and Commerce (to the south). The East Los Angeles city boundaries correspond to all the unincorporated territory surrounded by the four cities. (Incorporation Boundary Map from the CFA)

Shortfalls during the city’s first years could be lessoned by reserves generated during the initial transition to cityhood, however these revenues would be exhausted by the 4th year, according to the report conclusions.

The revenue projection in year two is $34.4 million and $32.3 million in year seven, while expenditures are projected at $45.2 million in year two and $39.7 million in year seven. Those figures, however, are based on projections prior to the passing of SB 89, which could result in up to $9 million a year more in lost VLF revenues for East LA, Berkson said.

The CFA includes several options to substantially close the deficit, such as increasing the Utility User Tax (UUT) — a consumption tax collected by a utility as a part of its regular billing procedure and then remitted to the city. Increasing the tax on electricity, gas and telephone (wireless and landline) from 4.5 percent to 10 percent, and adopting new taxes for water and cable could bring in about $6.7 million a year.

This issue would require a majority vote of East LA residents, concurrent with the ELA cityhood vote.

Savings could also come from allowing the County to continue the operation and maintenance of Belvedere Park, the savings are estimated by EPS at $750,000 a year. Increasing the garbage collection franchise fee to 10 percent could yield $850,000 m ore, according to the study.

“The CFA projections already includes reduced staffing numbers and costs for services from the Los Angeles Sheriff’s Department (LASD), similar to those provided in contracts with other communities. It places the cost at $21.1 million compared to $31.2 million, plus $6.8 capital improvements for equipment and staff, as recommended by the Sheriff.”

Yovany Chacon (left), ELARA secretary, and other cityhood supporters put on brave faces after the CFA was released on July 13. Despite the large deficit revealed in the CFA, Chacon told EGP the study was definitely positive because it informs the community about the area’s economic state. (EGP photo by Gloria Angelina Castillo)

East LA’s sources of revenue currently include several taxes (UUT, sales tax, etc) and numerous fees (community development, Park and Recreation fees, Public Works fees, Fines, Penalties, etc.). Property taxes generate nearly half of the area’s revenue. If incorporated, East LA’s City General Fund expenditures would include legislative (city council), elections, a city manager, city attorney, administrative employees, police, animal control, community development, public works, parks and recreation, and other non-departmental expenditures.

Though initially taken aback by the numbers, particularly the loss of VLF revenue, cityhood supporters, or more specifically, ELARA members at the LAFCO meeting, were for the most part pleased to finally have the study completed.

Diana Tarango, ELARA vice president who was part of the last incorporation effort, said the study is a big step for the community. “This morning my thoughts were that it [the CFA] would be positive. SB89—we never know, something could always come out of the woodwork,” she said.

ELARA President Benjamin Cardenas called the CFA release a “ historic moment for East LA,” and asked people not to jump to conclusions about whether the area could sustain itself financially. The data still needs to be analyzed meticulously and other viable solutions can still be identified, he said, adding the suggestions to raise taxes are just examples of what can be done. There are many other options and solutions still to be analyzed, he said.

ELARA Treasurer Gustavo Camach said East LA residents should know this is not a final draft, it has been released so the public can review it and they can add to it. “While we might not show a favorable out come, it’s not a final draft. It’s very premature for us to be talking about increased taxes when there’s still a lot more to view,” he said.

Yovany Chacon, ELARA secretary, said the CFA release was definitely positive because it informs the community where it stands. He acknowledged an avalanche of negative responses could be generated, but echoing the comments of other ELARA member, said the entire document needs to be analyzed and discussed. “It’s not just about increasing taxes, we need to look at expenditures and address them …”

Several people noted efforts underway to challenge the VLF measure, which if successful would mean more revenue for the area.

Next Steps: Review Process
The public will have two opportunities to hear more about the study and ask questions at community meetings presented by LAFCO later this month.

The presentations will be similar to the information presented at yesterday’s meeting, where Richard Berkson of EPS outlined the study’s conclusions, said Paul Novak, LAFCO executive officer.

The community meetings will take place at Esteban E. Torres High School on Friday, July 29 from 6 to 8 p.m. and again on Saturday, July 30 from 10 a.m. to noon. The same information will be conveyed at each of the meetings, so residents should not be concerned if they can only attend one of the meetings, according to LAFCO. Spanish translation will be available.

Input and comments obtained during upcoming meetings will be recorded for the final CFA report, according to Novak.

The LAFCO commission is tentatively scheduled to take up the revised and final CFA report on Sept. 14, at which time a full public hearing on the report’s finding will be conducted. The commission, using the data’s findings and stakeholder input, could decide that day whether Unincorporated East Los Angeles has the financial wherewithal to provide residents with at least the same level of services they currently receive from the county as an incorporated city. They could also recommend continuing or stopping the incorporation process, Novak said.

Answering a question from Molina, John Krattli, LAFCO legal counsel, said if the commission rejects the proposal for incorporation, it would end the incorporation effort. The proponents could submit another proposal after one year, but said the hiatus could be waived if there are new findings.

Regardless of what decision the commission makes, public statute gives residents 30 days to request reconsideration of the commission’s vote; provided the request meets specific criteria and a fee is paid.
There is a separate process, however, for challenging the accuracy of the report. It includes soliciting a review by the State Controller, and also includes the paying of a fee.

If the commission finds that the area can sustain itself financially, LAFCO would then ask the County Board of Supervisors to place the issue of incorporation up for a vote on the June 2012 ballot.

“The state law that regulates LAFCOs requires the commission to determine that it is in fact economically viable for it to be put on the ballot,” Novak said.

However, there is some wiggle room, according to June Savala, LAFCO deputy executive officer. She said since the CFA has a 10-year projection of revenues and expenses, should there be a slight margin where the revenues are less than the municipal costs, the LAFCO commissioners could give that some consideration and allow the measure to be placed on the ballot.

If Incorporation Goes Up For A Vote
If, as supporters have long hoped, the question of cityhood for East LA is placed on the ballot, voters will also be asked to choose city council members to represent them should the vote for incorporation pass.

This process would be run just like other County elections, and the general public would be given the opportunity to collect signatures and nominate themselves or others to be on the ballot, according to Novak.

So, voters will be asked: First, do you want to become a city? And second, if you do, who do you want to represent you?

The LAFCO Commission includes two LA County Supervisors, three council members from local cities (Los Angeles, La Cañada Flintridge and Duarte), two members of local water districts, a member of the public, and a representative for the San Fernando Valley.

Addressing an EGP question about possible conflict of interest, Novak said Supervisor Gloria Molina, who currently represents the area, is just one of 9 LAFCO votes, and added that all county supervisors who serve as LAFCO commissioners are exempt from conflict of interest consideration, because the reality is all LAFCO actions involve the county.

In addition, LAFCO is an independent state agency that reports to the nine-member commission that represents different political bodies from the greater Los Angeles area, said Novak.

“We don’t work for the city, don’t work for the county. We don’t work for an applicant. We are here to look at this objectively, and results that will be in the CFA will be an independent objective analysis by LAFCO and EPS,” he said, emphasizing that LAFCO is a neutral body.

The same holds true for any concerns that ELARA, which paid for the study, might have had too much influence on the study results.

“Although ELARA pays for it, it was LAFCO who hires the consultant and LAFCO that gives the consultant direction. The consultant does not have any contact with ELARA,” Savala added.

If cityhood fails in the popular vote, the applicant must wait one year before it can ask for the matter to be placed on the ballot again, Savala said.

Copies of the CFA were not available at the hearing yesterday, but are posted online for download at lalafco.org; two copies will also become available at the East LA Civic Center Library.

The report’s release comes following a month-long delay caused by a lag in the receipt of information by a utility company.

* Updated July 15  to clarify costs related to services provided by the Los Angeles County Sheriff’s Department.

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July 14, 2011  Copyright © 2012 Eastern Group Publications, Inc.

Comments

3 Responses to “Is East L.A. Ready To Be A City?”

  1. Carl Boyer, former Mayor of Santa Clarita on July 14th, 2011 1:27 pm

    The public should not be frightened by this report. It does not show many sources of federal and state funds which flow to cities during normal times. When we incorporated Santa Clarita the income was much higher than we anticipated and we had $50 million in the bank before we learned how to spend any of it.

  2. East LA Resident on July 17th, 2011 9:17 am

    Mr. Boyer,

    Thank you for the words of encouragement. However, the Santa Clarita incorporation was not like the current ELA proposal. Santa Clarita has a median household income of $84,000, a very low unemployment rate, a very low poverty rate, etc., a very different situation from the one in ELA. Santa Clarita is NOT a comparable community. One really need to come down to the other side of the spectrum and start tendering solutions at that end to get a feel for the size and scope of the problem.

  3. makeabetterfuture on July 21st, 2011 1:51 pm

    I actually think East Los Angeles (even northeatern), Antelope Valley and San Gabriel Valley (even all Foothill areas, Antelope Valley and Pomona Valley) should separated from city of Los Angeles. If East L.A gets secede from Los Angeles then I will support it being a city because ELA always been a step-child of L.A.

    SGV (including Foothill areas) seems more part of Inland Empire areas then L.A anyways.

    Then the schools (Elementary, Middle and High Schools) in ELA could be taken out of the control and owner of the mis-management LAUSD and a different school district for ELA (even northeastern neighborhoods) should have their own school district and make the schools in ELA better.

    The Metro bus routes in all eastside in LA (even SGV areas as well) should be privatized and operated by a different company.

    Time for this change…for East L.A and all of San Gabriel Valley.

    I will support East L.A being a city even SGV as well if it secede from Los Angeles, but if does not happen then there’s no point for it being a city if it doesn’t separate from city of L.A.

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