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Solimar Research

Public finance lifeline may be forming for new towns like Jurupa Valley

Larry Sokoloff on
Jun 25, 2014

    California's youngest city, which has fought for survival since its formation, is still in critical condition, but lately there are signs it has moved off life support.

    Jurupa Valley, a Riverside County city of 95,000, was expecting death by disincorporation earlier this year because it could not replace a lost source of funding for new towns. But the city has been able to postpone plans to disincorporate for another year due to increased tax revenue and budgetary changes. And hopes have emerged for its longer-term future via state-level efforts.

    The City Council voted to disincorporate in January 2014, with the expectation that within two years they would complete the first official unmaking of a California city since the 1970s. (See prior CP&DR coverage in the December monthly issue and online at http://www.cp-dr.com/articles/node-3427.) But now, city officials are saying they have enough money to last until the third quarter of 2016, when the city's payments for services are due to Riverside County.

    The city is still looking to Sacramento for its longer-term salvation, hoping state legislators will approve a key bill and that Governor Jerry Brown will sign it into law. Local efforts to win Brown over have begun, including organizing schoolchildren to write to the Governor's dog.

    What does all this mean for other California communities that want to incorporate? It means that the state hasn't completely righted itself following financial troubles that hit hard in 2011, and while something may be done for existing new towns, there is still not enough funding to help new cities get started.

    "There's no mechanism to incorporate unless residents want to vote to immediately tax themselves," said Jurupa Valley City Councilwoman Laura Roughton.

    In the halcyon days of old, cities could count on state Vehicle License Fees (VLF) to help pay some of their initial costs as they were created, before they developed their own tax bases to fund services. Those funds were wiped out for new towns in 2011 when Brown had the money diverted to prison realignment via that session's SB 89.

    Jurupa Valley was hit hardest in 2011. The effective date of its referendum vote for incorporation fell two days after SB 89 went into effect, taking away expected revenue. "The rules were changed midgame, and it's amazing that it all happened," said Roughton. "The other three cities all got at least one payment. We didn't get any."

    If the current appeal to Sacramento feels like deja vu, there are good reasons. It's similar to an earlier legislative dance involving the Governor. Jurupa Valley and other new towns also sought state rescue money in 2012 under AB 1098, which Brown vetoed. A further attempt via SB 56 died in the Legislature in 2013. Nothing is certain this year either but the current proposal comes out of a different financial picture and is limited to aiding a few existing new towns -- factors that may give it a better chance of becoming law.

    Roughton said cityhood has been good for Jurupa Valley, despite all the financial hurdles. The city controls local land use, and its streets are cleaner, she noted.

    Formation of cities helps the state meet other goals, such as providing affordable housing and creating density, said Dan Carrigg, legislative director of the League of California Cities. Incorporated cities also provide public safety improvements and planned communities, said Chuck Dalldorf, spokesman for Sen. Richard Roth, D-Riverside. Roth sponsored SB 56 and is the sponsor of the current bill to aid new towns, SB 69.

    "If there's not a solution (to funding new cities), it's unlikely there will be incorporation again in California," Carrigg said. 

    Four cities in Riverside County, including Jurupa Valley, incorporated around the time when VLF funding was cut off in 2011. They were left with huge debts, and had to cut services deeply. The other three cities, Eastvale, Menifee, and Wildomar, have also been active in the last few years' efforts to recover money from the state that they planned on using for incorporation.

    This year the state's fiscal health has improved, and passage of Proposition 30 in 2012 injected $6 billion into the state's budget annually. Government leaders in Riverside County pointed to those events as reasons they might get state money to help them out of their financial mess.

    A related reason has to do with reduced competition for funds.

    In 2011, SB 89 created new claims on the VLF money by taking it away from new cities and giving it to counties to handle prison realignment, where state prisoners were returned to county jails as a way to decrease overcrowding. So when the AB 1098 proposal in 2012 sought to transfer VLF revenue back to new cities, it created competition for the same money that counties needed for realignment. Groups such as the California State Association of Counties opposed the bill. "We were concerned about undermining realignment revenues," said Jean Hurst, a lobbyist for CSAC.

    But as of the November 2012 election, Proposition 30 wrote into law that the VLF money would go to counties, Hurst said. The ballot measure allocated VLF funds to "public safety services" including realignment, so any fresh effort to help new cities had to be made separately from the use of VLF funds. SB 69 proposes to help the new cities out of the state's General Fund, and CSAC is among its supporters.

    Another key change between SB 69 and AB 1098 is that it provides money only to cities that incorporated before 2012. The bill would divide about $15 million in start-up costs among Jurupa Valley and the other three newly incorporated Riverside County cities.

    As initially conceived, Roth's bill, SB 69, was written to provide funds for all newly incorporated cities that would formerly have been entitled to draw on vehicle license fees for their initial costs. That would have given all future new cities in California the same claims on VLF-substitute funding as the newest Riverside County cities. But recent negotiations narrowed the bill to apply only to cities that incorporated before 2012.

    "It was strictly a cost issue," said Roth spokesman Dalldorf. "We'll have to do that after the four-cities bill."

    Roughton said Jurupa Valley expects to have more revenue because sales tax projections are higher, and new residences are selling again in the city. Among other things, a new Walmart opened in the city in June.

    The city is also taking tentative steps that show it might be around for a while. A new budget adopted in June adds $2 million in new spending for what Roughton describes as "things... cities are required to do."

    New spending has been approved for studies the city is required to perform on developer fees, an interim general plan, and examining whether the city should hire its own staff (until now, all city employees have been contractors). The city also plans to increase spending on traffic officers, following several recent local traffic fatalities.

    Jurupa Valley received a two-year extension from the state Office of Planning and Research on its general plan, which was due on at the end of 2013. The city is now funding what is being called an interim general plan. It should direct growth for three or four years, according to Roughton. The interim general plan needs to be completed at the end of 2015.

    Despite the Jurupa Valley City Council vote to start disincorporation in January,  there has been little followup on the process, other than a few meetings with Riverside County officials, Roughton said.

    Hurst of CSAC said Riverside County officials have been helpful to the new cities. "They're essentially floating them while this gets resolved in the legislature," she said.

    Roughton said the city has not been able to secure a meeting with Governor Brown, but Brown did acknowledge the four newly incorporated cities' dilemma when he visited the county earlier in the year. He asked his staff to look into the concerns.

    In the meantime, Roughton is trying to raise the Governor's awareness of Jurupa Valley issues by getting local school children to write to his dog. "It's all very positive," she said. "We've tried a 'Letters to Sutter Brown' campaign to Governor Brown's dog."
The letters "invited Sutter to come and visit. We have a dog park."

     Roughton said unlike other cities in the state, Jurupa Valley can't declare bankruptcy. "We don't have any unfunded pensions. We don't have any debts that can be unstructured."

    SB 69 will next be heard in the Assembly's Local Government Committee on June 25.

Links:

  • CP&DR on Jurupa Valley's 2011 incorporation: http://www.cp-dr.com/articles/node-2901
  • SB 89, passed 2011: http://bit.ly/1nuB1i6
  • AB 1098, vetoed September 2012: http://bit.ly/1lJNoKl
  • League of CA Cities response with link to Gov. Brown's veto message: http://bit.ly/1ps1r5m
  • Prop 30, passed November 2012: http://voterguide.sos.ca.gov/past/2012/general/propositions/30/analysis.htm
  • SB 56, died in Legislature, 2013: http://bit.ly/1p6N6Q3
  • SB 69, currently pending: http://bit.ly/1lhtBAX
  • SB 1521, currently pending: http://bit.ly/1qCEuQQ