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Brand-New City Considers Municipal Suicide

Larry Sokoloff on
Jan 6, 2014

A Riverside County city will take the first steps to disincorporate itself in January, with the blame being pointed at Sacramento and state government decisions about how new cities are financed. Several other cities in the Inland Empire have discussed disincorporation, but no others appear to be close to taking such an action.  

The city, named Jurupa Valley, could be any city in California. But most observers say the disincorporation is due to the fact that it was the last city to incorporate before state laws changed in 2011.

Located north of the City of Riverside, Jurupa Valley has 95,000 people and encompasses 44 square miles a jumble of homes, apartments, some manufacturing and commercial uses. For many years it was an unincorporated community, with voters only approving incorporation in 2011. 

Those same city voters may soon have the final word on the city's disincorporation in an election. But first, the city has to jump through several hoops to actually disincorporate.  Jurupa Valley's City Council votes on January 16 to begin a study on disincorporation. That action may force the hand of Sacramento legislators and Governor Jerry Brown, since one outcome is that state legislators could vote to provide long-sought fiscal relief.  

The city has about two years to complete disincorporation before it runs out of cash, according to recent press reports. 

"Nobody connected with the city wants to disincorporate," said Mayor Verne Lauritzen. "We realize we have to take this action to meet the legal timeline."

Jurupa Valley appears to be the only city in the state headed towards disincorporation. Two years ago, three other Riverside County cities were claiming they too would have to disincorporate, but all have backed away from that action. At the same time, other cities in San Bernardino County have also discussed the option. The last time cities disincorporated in California was in the early 1970s when two small cities did so. 

Jurupa Valley's woes stem from passage of SB 89, a 2011 last-minute state legislative deal that diverted vehicle license fee money from city budgets, sending it instead to prison realignment. Its brunt was felt on new cities that had incorporated under a previous law that had sent VLF money to them to help jump-start their newly formed governments. Jurupa Valley lost nearly half the money it counted on for its new budget, and things have been tight ever since. 

The other newly formed  Riverside County cities which felt the effects of  SB 89 and warned that they, too, might disincorporate were Eastvale, Wildomar and Menifee. 

Carol Jacobs, city manager of Eastvale said her city is no longer considering disincorporation. It incorporated in 2010.

"We got one payment of Vehicle License Fees of $3.2 million, just barely enough to get us over the fence,"she said. Jacobs explained that Jurupa Valley never got that early VLF money, and it is a bigger city than hers. 

Wildomar is also not planning to disincorporate, said city manager Gary Nordquist. 

"Disincorporation for the city is not forecasted, but a recovery to wanted municipal service levels is years away with the taking of revenues by the state," he said in an email.  Nordquist said police services have been cut in his city. 

Menifee also is not planning on disincorporating due to significant commercial development, said George Spiliotis, executive officer for Riverside County's LAFCO.

In San Bernardino County, Kathleen Rollings-McDonald, head of that county's LAFCO, has also spoken to local groups interested in disincorporation. Rollings-McDonald said she made a presentation about the topic to the city council of Grand Terrace, a city of 12,000. Rollings-McDonald also said that several cities in the northern part of the county have informally asked about it, but she declined to name them.  

Grand Terrace, she said, is dealing with the end  of redevelopment and a long-ago failure to pass a utility tax. The city incorporated in 1978, making it a seasoned player compared to the newly incorporated Riverside County cities. 

Rollings-McDonald said she made a presentation on disincorporation for San Berrnardino to a private civic group in that city, after that city went into bankruptcy in 2012.  

Rollings-McDonald said disincorporation doesn't allow cities to walk away from obligations on things like bonds. Instead, cities lose their ability to renegotiate contracts under disincorporation. That's a major contrast to filing for bankruptcy, which allows such tactics.  

"You negotiate through a bankruptcy process,"she said. "Disincorporation simply does away with an entity."  

Another Riverside County city, Desert Hot Springs, has also recently discussed filing for bankruptcy after facing a budget gap of $4 million. 

Dan Carrigg, legislative director for California League of Cities, said Jurupa Valley's case may preclude future incorporations of cities, a situation he laments. 

"Incorporation is an example of local democracy in action," he said, noting it begins with local citizens who are concerned about government services and land use issues.

"Incorporation is a really good form of growth management," he said, noting that cities are the most urbanized areas of the state and "densify over time." 

Without incorporation, he said, "I don't know how that meshes with state goals of carbon reduction and preserving farmland and open space."

Carrigg traces the problems of Jurupa Valley to the passage of SB 89, which took money from new cities. In a case of bad timing, Jurupa Valley was incorporated two days after the law went into effect. An attempt to fix the situation came via AB 1098 in 2012, which passed the legislature, but was then vetoed by Brown. 

In the current legislative session, SB 56 is attempting to make the same legislative fix to VLF funding. The bill is sponsored by Sen. Richard Roth, D-Riverside.

"I anticipate another effort to pass SB 56 in January," Carrigg said. 

If SB 56 passes, Jurupa Valley will be saved.  But if it doesn't, a process begins in January that that will require votes on disincorporation by both LAFCO and the County Board of Supervisors, and then city's voters, said Mayor Lauritzen. 

What happens if Jurupa Valley voters turn down disincorporation?

"Nobody in the state has an answer to that one," said Lauritzen.

Spiliotis of Riverside County LAFCO answers differently. "If city voters vote no, it's up to city council to make a go of it with what they have," he said. 

Most of the city's money goes to a contract with the Riverside County Sheriff for police services, Spiliotis noted.  "Public safety levels would be reduced," he said. 

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