Board Supports Bill Establishing Standards for Cities That Go Belly-up

By City News Service

The Board of Supervisors on Tuesday approved a resolution in favor of a Riverside County lawmaker’s effort to rewrite state law to make cities that go broke follow certain rules to ensure they don’t leave other entities on the hook for their unpaid bills and protect residents’ interests.

The board joined Orange and San Bernardino counties in endorsing Assembly Bill 851, authored by Assemblyman Chad Mayes, R-La Quinta.

The bill, which goes before the Assembly Committee on Appropriations Wednesday, lays out specific steps that municipalities must take before they can apply for disincorporation, the act of ending cityhood and returning to a county’s control.

“The statutes addressing disincorporation have not been updated since ... 1963,” Mayes said in an introduction to his bill.

“Under existing law, the intended procedure for dispensing with debt and unfunded liabilities is not in compliance with Propositions 13 and 218. This could result in a county being responsible for the debts and unfunded liabilities of a city that has disincorporated.”

According to the State Legislative Analyst’s Office, only two cities have disincorporated in the last 50 years -- Cabazon in 1973, and the Northern California town of Hornitos in 1972.

In the last three years, the city of Jurupa Valley, just north of Riverside, has signaled that disincorporation may be in its future.

Jurupa Valley, which gained cityhood in July 2011, suffered a major financial blow when days before its official incorporation, the Legislature redirected millions of dollars in vehicle license fee revenue away from Jurupa Valley and into a law enforcement services account as part of the governor’s public safety realignment strategy.

Gov. Jerry Brown has vetoed legislatively approved fixes that would put Jurupa Valley on secure financial ground in the last two years. In 2014, the city informed the Riverside County Local Agency Formation Commission -- LAFCO -- that disincorporation may occur within two years.

Mayes’ bill would require any city pondering disincorporation to:

• file a financial report with a county’s LAFCO certifying its level of indebtedness, the amount of money in the local treasury, the amount of uncollected taxes owed the city, and the amount of current and future liabilities;
• submit a plan indicating how public safety, waste collection and other services will continue in the event of disincorporation;
• put the county and other affected parties on notice of pending disincorporation; and
• provide a fiscal analysis showing why disincorporation is necessary.

The bill would prohibit a LAFCO from approving dinsincorporation until it’s certain that dissolution is the only alternative and that the county absorbing the broke municipality’s residents is assured of receiving property tax receipts.

Mayes noted that AB 851 seeks to codify a process that’s structured like an incorporation, only in reverse, and spares a county from having to update its general plan and zoning regulations in a rushed manner.