The proposed annexation of the Rossmoor Shopping Village, otherwise known as the fourth corner, will probably come before the Los Alamitos City Council in 2 or 3 months. In this exclusive report, OC180NEWS provides some additional perspectives on the financial ramifications of the annexation.
In our previous report on this subject, see related articles below, we presented a limited analysis on the financial impact of the proposed annexation of the fourth corner. This article was prompted by a recent PBS broadcast of an Orange County news show which included a segment on the fourth corner.
There was not anything particularly new in the TV broadcast, but in a follow-up email, Orange County Supervisor and LAFCO Chairman John M.W. Moorlach indicated completing the annexation was his highest priority for next year. That’s not all Moorlach had to say. In another of his Moorlach Update emails, he reacted to our article. Thus, there is more to be written about the financial impact of the proposed annexation.
There are two kinds of taxes which will be impacted by the annexation – sales taxes and property taxes. Since the impact on these two taxes is very different, one explanation will not suffice for both. In fact, any suggestion that the answer to one, such as sales taxes, provides the entire picture of the annexation’s impact, is at best uninformative, and at worse, misleading.
From the Moorlach Update of 10/3/2011:
“Perhaps a journalist should ask deeper questions. Maybe a conversation like the following: Question – ‘If the County transfers the fourth corner to Los Alamitos, would they receive a windfall from the sales tax revenues generated at this location?’
Answer – ‘No. The County negotiates a tax sharing arrangement with cities which annex unincorporated areas. It is most likely that Los Alamitos would be required to use those revenues to continue the services currently being provided by the County.’ “
The fourth corner is said to generate a few hundred thousand dollars in sales tax revenue. Whatever the amount, at present, this revenue goes into the Orange County general fund. If the annexation goes through, OC will enter into an agreement with Los Alamitos to transfer a portion of this revenue to Los Alamitos. Otherwise, Los Alamitos would have no motivation to complete the annexation.
“Let’s say the County is right and it generates $200,000, I’ll take their word for it,” Los Alamitos City Manager Jeff Stewart told OC180NEWS. “The City is still going to make money on it. There’s no way that we’re going to provide $200,000 in police, planning, and building services to that corner. We already respond there a lot. Our cops are the first or second units that roll in on anything that happens there now.”
Of course, LAFCO, the county agency which will make the decision, understands all this. So, they will certainly ask Los Alamitos to provide something in return. This could be additional public services to all of Rossmoor, but according to Stewart, nothing definitive has been proposed to Los Alamitos yet.
OC180NEWS also put some related questions to Rick Francis, Chief of Staff for John Moorlach.
OC180NEWS: If a savings results from annexation of the corner, will that come at the expense of the rest of Rossmoor?
RF: No. Services to Rossmoor and all other unincorporated areas are not delivered based on how much sales tax revenue that particular community generates. In general, countywide revenues are pooled and services are delivered equitably across the board. Public Works staff do not perform more services for areas that produce greater revenues unless the area in question has entered into some form of an enhanced agreement. The same applies to Animal Care and law enforcement.
So much for sales tax. But, that’s not the end of the story. The maintenance of Rossmoor’s parks, trees, the recreational programs, street lighting, street sweeping, and the other services provided to the community by the Rossmoor Community Services District, are not funded by sales taxes. With some minor exceptions, these services are funded through property taxes.
Property taxes are distributed based on a complicated formula concocted in the aftermath of Proposition 13, passed in the previous millennium .
This formula essentially applies a consistent percentage to the property tax receipts. If receipts go up, or down, the revenue allocated to the RCSD fluctuates up or down proportionally.
Property taxes go up or down as assessed valuations change and as the tax base changes. Thus, if a section of property which generates property taxes is shifted outside of the service area of the RCSD, such as would be the situation if the fourth corner was annexed, the revenue to the RCSD will decrease accordingly.
In theory, the RCSD could also save money because, for example, they would no longer be responsible for providing tree maintenance to the area annexed. The problem is, of course, this potential cost reduction is at best minor, and at worse illusionary. The costs of taking care of the parks, for example, will not go down because the fourth corner is no longer within the service area of the RCSD.
Once again, to our exchange with Rick Francis.
OC180NEWS: Is there any justification for annexation of the corner other than it is “better governance because it’s more local?”
RF: Let me first say the “better governance because it’s more local” mantra more appropriately applies to annexation of the entire community. As for the corner specifically, we see it from the perspective of “why wouldn’t we do it?” If there are compelling reasons for not allowing that corner to be annexed, then we won’t go forward with it. So far, other than hearing that it would ruin chances for being annexed by Seal Beach (who already weighed in on this subject) or because it would close the door on possible incorporation efforts (and the community weighed in on that topic in 2008), we have not heard a compelling reason not to allow the annexation to go forward. Annexing this area serves to reduce the footprint of County islands. Although carving off such a small area is not the optimal result we were hoping for, it is a consistent step in the direction we’ve been going in to address islands as a whole. The city of Los Alamitos could further elaborate on why such a move makes sense for them as well.
Well, above we covered Los Alamitos City Manager Jeff Stewart’s perspective on why annexation makes sense for Los Al. As for why not do the annexation? In our editorial opinion, it’s very simple – the revenues coming to the RCSD will be negatively impacted and it’s very unlikely that a commensurate cost reduction would be possible without an adverse affect on the quality of life in Rossmoor.
Thus, again in our editorial opinion, we believe the question is not whether or not Los Alamitos would receive a windfall from the sales tax revenues generated at the fourth corner, but rather, how adversely impacted would the quality of life in Rossmoor be by the loss of property tax revenues to the RCSD?
As far as we know, none of this has actually been calculated, but it seems inevitable that annexation of the corner will reduce property tax revenue to the RCSD without a similar cost reduction and this is a compelling enough reason not to do it.
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About Dolores Barr, Publisher
Dolores Barr has lived in Rossmoor since 1992 and has created this site to provide local news for the people of Los Alamitos, Seal Beach, Rossmoor, Leisure World, Sunset Beach, and Surfside, California. My husband and I have had two students graduate from the Los Alamitos Unified School District and currently our Grandson, Ricky Apodaca, grade 3 at Weaver Elementary, is actively involved in youth baseball through LAYB and youth football through FNL.
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