Planning — January 2012

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Annexations, Incorporations, and Reorganizations

Here's how we do it in California. How does your state do it?

By Robert Aldrich and Orange County LAFCO Staff

"If it ain't broke, don't fix it! Just leave us the way we are."

"Your community is 50 years old. ... It's time to grow up and start paying your own rent."

So went the war of words over the proposed incorporation of Rossmoor, California, a close-knit residential community (pop. 11,000) with tree-lined streets, immaculately landscaped homes, little sales tax revenue, and municipal services primarily provided and funded by Orange County.

Initiated by a local community services district in 2008, the proposed Rossmoor cityhood effort deeply divided residents. Many saw incorporation as a step toward independence from county control, a pro-active move to protect the community's identity and avert unwanted annexation attempts from adjacent cities. Others viewed incorporation as financially risky and pointed to the need for a user utility tax to balance the proposed city's budget.

Although 70 percent of Rossmoor voters ultimately rejected the cityhood proposal, the controversy succeeded in highlighting a little-known boundary agency in Orange County called the Local Agency Formation Commission, or LAFCO.

In fact, all boundary changes in California's 468 cities and 3,000 special districts go through LAFCOs. These agencies can dissolve or reorganize special districts by a simple majority vote. They can form a new city or add municipal powers to a special district's current operations. And they control annexations or detachments of territory involving most municipal agencies throughout the state.

Who's minding the store?

After World War II, California experienced a dramatic growth in population and economic development, increasing the demand for housing and public services. Along with this came an unprecedented land speculation and a development boom. Seemingly overnight, prime agricultural and ranch lands were converted into sprawling residential tracts.

Developers tried to find the fastest and cheapest means of providing basic municipal services such as water, roads, fire protection and sewers. Numerous special districts were formed, many of them overlapping and seemingly unconcerned about future development, land use, and long-range services. Cities, too, began annexing territory to increase their revenue base, often haphazardly, leading to premature, unplanned development and irregular city boundaries.

"In the late 1950s and early 1960s, no one was watching the store. California cities were grabbing land right and left, and special districts were forming all over the place," says Bill Chiat, executive director of the statewide California Association of LAFCOs (CALAFCO). "Did it matter how all these changes were impacting municipal service delivery to residents? Not really: It was all about 'me.' No one was seeing the big picture. LAFCOs came on board just in the nick of time."

By the late 1950s, California's cities began looking to the state for help. In 1958, Gov. Edmund Brown, Sr. appointed a blue-ribbon commission to evaluate the growing concerns over competing local governments and illogical agency boundaries. The result was the California State Boundary Commission, a short-lived state agency that reviewed and commented on the boundaries of cities and districts but had no enforcement power.

Principles and practice

During 1961 and 1962, the State Assembly Committee on Municipal and County Government regrouped and held several lengthy hearings. The members agreed on three key principles:

  • Boundary issues needed to be addressed at the local county level;
  • Whatever agency was formed needed to have decisive regulatory power; and
  • Local answers to problems of urban sprawl and growth of local agencies required equal participation by the county and the cities to arrive at practical, workable solutions.

These principles formed the basis of three sets of laws enacted in 1963, which created a Local Agency Formation Commission (LAFCO) in each of the state's 58 counties to battle urban sprawl and encourage orderly growth and development of public agencies. From 1963 through 1985, LAFCOs operated under a complicated set of laws that were later consolidated into a single act.

LAFCOs are often referred to as the legislature's watchdog over the boundaries of cities and special districts. LAFCO's determinations involving the boundaries of cities and special districts can range from simple to complex actions. The power of LAFCOs to regulate local boundaries includes a menu of nine types of boundary changes:

  • Annexations (adding territory to a city or special district)
  • Detachments (removing territory from a city or special district)
  • Disincorporations (terminating the existence of a city)
  • Dissolutions (terminating a special district)
  • Formations (creating a new special district)
  • Incorporations (creating a new city)
  • Mergers (terminating a special district and merging its responsibilities with a city)
  • Consolidations (joining two or more cities or special districts into a single agency)
  • Reorganizations (two or more changes of organization in a single proposal)

LAFCOs certainly offer this full menu, with a wide array of options. Some Californians say there are too many choices on that menu. Here is one resident's view: "My primary concern with LAFCOs is that they take away the right of residents to decide their own future. It's un-American. If you live in an unincorporated community that's under 150 acres, and LAFCO says you're annexed to a city, it's a done deal. No vote, no right to protest, no nothing. LAFCOs rip away the fabric of communities. It's just not right."

However, others believe LAFCOs' powers should be expanded. One of the most common views heard when discussing those powers concerns the difference in the LAFCOs' authority over city boundaries versus special district boundaries.

LAFCOs have more power over the boundaries of special districts than over cities' boundaries. LAFCOs can initiate the consolidation, dissolution, merger, or reorganization of special districts as well as the formation of a subsidiary district. However, LAFCOs do not have the authority to initiate any change (i.e. incorporation, disincorporation, consolidation, or detachment) of city boundaries without the city's agreement.

As California cities become financially weaker, some people have asked if LAFCOs should be granted more authority over city boundaries. Many believe that if a neutral agency like LAFCO were more involved in initiating cities' boundary changes, the result would be more logical and efficient delivery of municipal services. On the flip side, others argue that LAFCOs' authority in this area is intrusive to cities and simply a bad idea. Many people say it would just be another layer of bureaucracy that would play out like a bad political soap opera.

The composition of LAFCOs varies by county. With the exception of the public member, LAFCO commissioners must be elected officials and usually include representatives from the county board of supervisors, the cities, the public, and, in some counties, special districts such as water, sewer, and library districts.

"LAFCOs offer one of the most politically well-balanced commissions in local government," says John Withers, one of two special district representatives on the Orange County LAFCO. "Many issues that cities or special districts won't raise on their own for political or other reasons can find a voice through LAFCO. It's one our strengths."

For a typical LAFCO (with county, city, and special district representation), the cost of operations is equally divided between the three groups: one-third county, one-third cities, and one-third special districts. LAFCOs do not depend on the state for funding.

Which hat do commissioners wear?

LAFCOs are composed of elected representatives (always challenging) with competing interests and different agendas. How do LAFCOs prevent one group — the board of supervisors or the city representatives, for example — from dominating LAFCO agendas? First, there is a strong culture among all LAFCOs in favor of commissioners representing the entire county, not just their own group. While the peer pressure is subtle, it is strong. When new commissioners come on board, the training by staff includes a "Put on your LAFCO hat" briefing.

The government code supports this indirectly: Commissioners do not have to recuse themselves from voting on an item that affects their home agency. Special district commissioners can vote on the consolidation of two special districts. However, to avoid the appearance of a conflict, most commissioners abstain from voting on items directly affecting their home agency.

The California Association of LAFCOs, the statewide umbrella organization, provides training, conferences, workshops, and legislative advocacy to support and advance the work of individual LAFCOs. Some groups of LAFCOs have also formed regional organizations that focus on issues specific to their geographic area. One example is the California Coalition of LAFCOs, which provides additional support and legislative advocacy for six LAFCOs in the Southern California area (Orange, Riverside, Imperial, Los Angeles, San Bernardino, and San Diego counties).

Blessing or curse?

LAFCO actions can have different impacts on different groups. A county may want to approve the annexation of a small residential community to a neighboring city to increase efficiency and reduce costs, but the city may have reservations about taking on additional service responsibilities and residents may prefer remaining outside a city's jurisdiction. Incorporation proposals, like Rossmoor's, are often contentious, pitting neighbor against neighbor, each wanting the best for their community but each also seeing independence from county rule as either a blessing or a curse.

LAFCOs' dissolution of special districts in the name of improving "efficiency and effectiveness" can irk many residents who value the special districts as a source of identity and governance. LAFCOs, for better or worse, are positioned to play the judge and jury to decide whether these (or a variety of other complex agency reorganizations) ever see the light of day. LAFCO's role has never been easy, but historically, the agencies have a proven track record of implementing change that has improved the efficiency and effectiveness of California's local governments.

Tell us what you think

Please take some time to tell us what you think. Is California's approach to managing local boundaries unique? How do other states approve municipal boundary changes? We would like to know. You can access a user-friendly questionnaire on Survey Monkey at www.surveymonkey.com/s/F5SHSB7. Please respond and we will report back the results in a future edition.

Robert Aldrich is a special projects consultant to the Orange County LAFCO. LAFCO's five-member staff consists of an executive officer, assistant executive officer, two analysts, and a commission clerk.