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Each Side in Secession Debate Puts Own Spin on 'Alimony'

Revenue: L.A. officials say Hollywood and the Valley would have to cut services or raise taxes. Breakup backers accuse the city of scare tactics.

June 03, 2002|PATRICK McGREEVY | TIMES STAFF WRITER

The money that the San Fernando Valley and Hollywood would have to pay Los Angeles to leave the city is dominating the secession debate, as both sides try to play the so-called alimony to their advantage.

Los Angeles officials say the annual payments--designed to compensate the city for tax revenues lost to secession--would result in decreased services and increased taxes in the Valley and Hollywood. They also contend the reparations would not cover all of Los Angeles' losses.

But secessionists dismiss those contentions as scare tactics. They say the alimony requirement is actually a compelling argument for secession--proof that Los Angeles takes more tax dollars out of the Valley and Hollywood than it returns in the form of city services.

The state law forcing some new municipalities to pay alimony is just 9 years old, and it has never been tested in a secession campaign. Where the rule has been applied--to smaller cities minted from unincorporated county territory--disputes have sometimes followed.

Los Angeles voters will decide Nov. 5 whether to approve the Valley secession plan. On Wednesday, the Local Agency Formation Commission is expected to place the Hollywood proposal on the same ballot.

LAFCO cannot put a secession measure on the ballot if it finds that a breakup would harm the city. The alimony payments are supposed to ensure that Los Angeles suffers no net loss in tax revenues.

For the Valley, the payments would start at $128 million annually, then gradually fall to zero in 20 years.

The Hollywood payment would begin at about $21 million and also fade out over two decades.

The first installment for each city would equal 11% of its budget. LAFCO determined, however, that both breakaway cities would remain financially healthy after making the payments.

Los Angeles officials scoff at that finding. And even as they demand higher and higher alimony payments, they say the new cities could not afford them without raising taxes or slashing services.

"When you get divorced, and I've been divorced, you forget about alimony and child support and all those extra costs," City Councilman Dennis Zine said. "You think you are going to have all kinds of money to buy a new car and a new Harley and take trips around the world. It isn't like that."

Mayor James K. Hahn says there is nothing inconsistent in the city's positions, including its stance that the Valley and Hollywood get a level of services on par with the taxes they pay.

As for the assertion that the alimony burden proves the secessionist areas are shortchanged, Hahn said, "It's not true."

The mayor said LAFCO's determination that Los Angeles spends $98 million a year less in the Valley than it takes out in taxes greatly underestimates the centralized costs of some services--costs that would continue after secession. Those include the 911 emergency system and downtown staffing for departments with citywide responsibilities.

"When you build a big house for a big family to live in, just because a third of the family moves out doesn't necessarily reduce your expenses of maintaining that house by one-third," Hahn said.

But the secessionists say Hahn's warnings of financial ruin are hollow because the alimony payments, at their peak, would equal less than 5% of Los Angeles' total budget, which would be about $3.5 billion if the Valley and Hollywood secede.

The secessionists say they will stress the alimony in the pro-independence campaign.

"It helps us in the Valley because that alimony payment is largely the amount we've been subsidizing the remainder of the city," said Richard Close, chairman of the secessionist group Valley VOTE. "It helps us south of Mulholland Drive because it is a sizable payment and it shows steps were taken to protect Los Angeles from financial harm."

Los Angeles would be the first city to receive alimony since the law was enacted, but several counties are getting the payments from recently incorporated municipalities.

Counties sought the alimony rule because each incorporation diverted a slice of property taxes and other revenues to the new city.

"Before 1993, the new cities got to keep all of the money generated in their territorial boundaries," LAFCO Executive Director Larry Calemine said. "The counties woke up and said, 'My God, we're going to go broke if all the unincorporated areas incorporate as cities.'"

So no matter how many happily married couples live in Goleta, Aliso Viejo and Laguna Woods, all the residents of those three cities are now paying a form of alimony.

In Goleta, which became a city in February, Mayor Margaret Connell said the annual payment to Santa Barbara County of roughly $3 million will force the new city to be frugal.

"What it means is we are not going to have a lot of money to spare," she said.

Aliso Viejo City Manager Bill Woollett said the $1.2 million his city must pay Orange County for seven years is "fair and equitable," even though it is more than 10% of the city's $11-million budget.

Laguna Woods is paying Orange County $405,000 annually for seven years, also about 10% of its $4-million budget.

"Most cities incorporate because they want to recapture that tax money they are losing, and then they have to continue to pay it," said Laguna Woods City Manager Leslie Keane. "It is very ironic."

In one case, a city reneged.

Shortly after Citrus Heights incorporated, the city's leaders refused to pay $5.6 million in alimony to Sacramento County. They contended the payment would eventually plunge Citrus Heights into bankruptcy.

The dispute ended up in court, but the two sides settled by agreeing on a smaller payment.

Calemine sought to protect Los Angeles against a Citrus Heights scenario.

He included in the secession proposals a requirement that all property and sales taxes collected by the county go to a third-party agent for disbursement to the cities. The agent also would make the alimony payment.

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