A look at super city ‘case study’

Sun Region map couresy of OC LAFCO

Update—The super city case study will not be on the Dec. 14 Orange County LAFCO agenda. Other news media had reported that the case study supporting the super city proposal would be on the agenda of the Orange County Local Agency Formation Commission. However, Joyce Crosthwaite, executive officer for Orange County LAFCO, said the agency’s December agenda is full.

Orange County Supervisor John Moorlach told the Sun that if the item is on the agenda, it will most likely be a receive and file item. For background on the case study, see the story below.

As previously reported, the Orange County Local Agency Formation Commission has issued a report that says merging three Sun Region communities into a single city would save the public about $2.5 million.

However, the report does not mention any costs associated with combining three communities—Seal Beach, Rossmoor and Los Alamitos—into one. The report did say the combined debt of the super city would be approximately $48.5 million.

LAFCO is a county commission, mandated by state law, that oversees municipal and county border issues, annexations, community mergers and governance. Moorlach, in addition to being a member of the OC Board of Supervisors, is the current chairman of LAFCO. He is one of three supervisors who sits on LAFCO.

Seal Beach Mayor Michael Levitt said he had not seen the report and did not consider LAFCO to be unbiased when producing figures on the subject.

Seal Beach Councilwoman Ellery Deaton questioned who would actually save money under the merger.  “Which taxpayers?  Los Alamitos’?  Rossmoor’s?  The County’s?” Deaton asked.

“Seal Beach has managed its finances well and has so far weathered the storm others have not. Big government invariably costs more because of larger bureaucracies and less accountability.  Certainly the county suffers from being ‘Big Government’ compared to our little town.  We will not take on the county’s problems and make them ours,” Deaton said.

“The Orange County Local Agency Formation Commission (LAFCO) retained an independent consultant, GST Consulting (Orange County), to analyze the benefits of the Super-City idea for Seal Beach, Los Alamitos, and Rossmoor,” wrote Orange County Supervisor John Moorlach in a Thursday, Oct. 27 e-mail to his constituents.

“ As expected, there would be significant financial savings,” Moorlach said.

Moorlach has advocated creating a “Super City” from the three Sun Region communities since 2007.

A look at the report

According to the report, eliminating 16 full time positions in management and administration would save taxpayers $2.5 million.

“All data is from each agency’s Fiscal Year 2010/2011 budget, Fiscal Year 2009/2010 audited financial statements, and other public documents,” said the GST report. The document’s author was not identified by name. The report, “Shared Services Case Study,” an administrative draft fiscal analysis, was dated June 18.

“The financial savings depicted are based on the maximum potential savings found through a LAFCO consolidation and are likely to decrease if there were to be functional consolidation through contractual arrangements for shared services,” the GST report said.

The GST report said that the study assumed the debts of the three separate communities would be combined. According to the report, the combined debt and long term liabilities of the super city would be $48,488,269.

The report looked at General Fund revenues and expenses based on the 2010/2011 budgets for all three Sun Region communities. According GST Consulting, the combined revenues of the three communities would be $40,735,720. The combined expenses would be $37,979,265.

The report projected a net surplus for the super city of $2,756,455. GST Consulting said the surplus would be about $2.6 million higher than the combined cities and the Rossmoor Community Services District. The figures include county expenses for Rossmoor that are not part of the RCSD budget. The county revenues for Rossmoor are approximately $1.3 million. The county expenses for Rossmoor are more than $1.4 million.

“The revenue increase can be attributed to the Motor Vehicle License Fee (MVLF) allocation for the Rossmoor community if included under consolidation,” the report said.

The report also projected a $1.7 million decrease in salary and benefit costs if the two cities and one unincorporated community were combined.

The report did not mention any costs that might be associated with creating one city out of three.

“Constraints” against the super city were covered in one paragraph. “Analysis is needed to determine if any ‘meet and confer’ and/or other negotiations under each bargaining unit’s MOU [memorandum of understanding] will be required,” the report said. “Additionally, there are differences in salary and benefit packages between each city, the county and the RDSD. Additional analysis would be needed related to how the re-alignment of salaries and benefits might occur.”

Gary Thompson, of GST Consulting, said that logistical costs of municipal consolidation would only be looked at if the county and the three communities decided to go ahead with the merger.

Thompson said that most costs associated with consolidation were one-time only costs.

Thompson was not aware of any recent municipal consolidations in California.

Thompson said the intent of the study was to look at long-term savings. He pointed out that the report assumes there would be no changes at the staff level. “That was intended to be a snapshot,” he said.

He said a more detailed study would be required to look at savings at the staff level.

Background on the report

The media first reported on the GST Consulting report last week.

“The report was commissioned on March 31, 2011 and was finalized in late August or early September.  The total cost of the contract was $8,900.  GST Consulting has worked for LAFCO on the Rossmoor incorporation, the islands fiscal models and this project,” said Joyce Crosthwaite, executive officer for Orange County LAFCO.

Crosthwaite said the report was generated as part of the commission’s shared services program.

“It’s getting a lot of interest from cities,” Crosthwaite said.

She said that under the program, LAFCO provides listings services that cities and special districts can share those services.

As for the GST report, she said the some of the Local Agency Formation commissioners were interested.

“The chair was particularly interested,” she said.

Asked if she knew which commissioners were interested I the report, Crosthwaite said that all the commissioners were interested I the shared services program.

In August, the Sun Newspapers reviewed LAFCO’s meeting minutes for all of 2010 and from January to August 2011. There was no mention of hiring a consultant to analyze the financial issues of merging the three communities in any of those documents.

At the time, Moorlach explained the lack of references to the super city proposal in LAFCO minutes by saying “it hasn’t been a priority.”

On Monday, Oct. 31, Crosthwaite, said the report was not mentioned in the minutes of LAFCO meetings because she has been authorized to enter into contracts for less than $10,000.

The GST report is not yet available on the LAFCO Web site, according to Moorlach.

Supervisor Moorlach e-mailed a copy of the report to the Sun immediately after it was requested.