MONTEREY COUNTY INDEPENDENT SPECIAL DISTRICTS MANAGERS AD HOC COMMITTEE ON LAFCO REPRESENTATION April 6, 2001

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1 MONTEREY COUNTY INDEPENDENT SPECIAL DISTRICTS MANAGERS AD HOC COMMITTEE ON LAFCO REPRESENTATION April 6, 2001 TO: Monterey County Independent Special Districts SUBJECT: Implementation of New LAFCO Legislation RECOMMENDATIONS Receive this briefing report for use in considering adoption of a resolution requesting the Monterey County Local Agency Formation Commission ( LAFCO ) initiate proceedings for representation of independent special districts on the Commission. SUMMARY OF ISSUES A major overhaul (AB 2838) of the Cortese-Knox Local Government Reorganization Act of 1985 became effective on January 1, This Act defines standards and procedures for operations of LAFCOs, including formations, annexations, consolidations, detachments and dissolutions of cities, counties and special districts and the allocation of public services authority within special districts. Under the new legislation LAFCOs will become independent of county government on July 1, When this occurs, LAFCO budgets will be financed 50% by cities and 50% by counties. Alternatively, cities, counties and special districts will each contribute 33% if the Commission is expanded to include special district representation. There are three important policy issues that independent special district governing bodies may consider relating to this legislation: Should independent special districts, collectively, seek representation on LAFCO? If a majority of independent special districts support representation on LAFCO what guidelines or criteria should be used to select the two commissioners and one alternate commissioner who would represent special districts? What criteria or formula should be used to allocate independent special districts one-third share of the LAFCO budget?

2 Discussion of Policy Implications Enclosed with this memorandum is a variety of information to assist your district in understanding this new legislation and the issues that it raises for special districts. The Act provides important new legislative direction to LAFCOs regarding the planning of local governmental services. Potentially, the new legislation could significantly impact special districts and the organization of local government throughout Monterey County. The legislation gives LAFCO new planning mandates in the allocation of public services, types of governmental organizations that are created, and their operational spheres. In other words, the new law insures that LAFCO will have a more important role in shaping the future of how, when and where local public services will be delivered. An important policy implication for special Districts --- particularly those with independent governing boards --- is whether they will be formally represented as LAFCO carries out its expanded role? For example, if service areas were to be increased and/or districts eliminated (through consolidation) to maximize service delivery and cost efficiencies, would your district want to be represented by special district commissioners when those decisions were being debated? The establishment of special districts representation on the Monterey County LAFCO would result in increasing membership of the Commission from five to seven commissioners. Two representatives (directors) from special districts would be added to the current composition of two commissioners (council members) representing cities, two supervisors representing the county and one public member appointed by the other commissioners. It is suggested that each district consider how the independent LAFCO, operating under this new legislation, might impact your district s planning, financing and future services, and whether those impacts would justify the collective participation of independent special districts in the shaping of future LAFCO policies. In thinking about how your district may be impacted by new LAFCO policies, a suggested beginning point is to consider what implications LAFCO s analysis of services, ---which will be required as part of the process of updating each agency s sphere of influence, ---will have insofar as your district would be concerned. For example, under the new law LAFCO will be required to evaluate such factors as the following (included in new Government Code Section 56430): financing constraints and opportunities ; cost avoidance opportunities ; opportunities for rate restructuring ; opportunities for shared facilities ; government structure options, including advantages and disadvantages of consolidation or reorganization of service providers ; evaluation of management efficiencies ; and local accountability and governance. Also, the LAFCO policies will be influenced by the State through the role of the Governor s Office of Planning and Research ( OPR ), as the new law instructs OPR to prepare guidelines to be used by LAFCOs in evaluating the factors noted above which

3 will be used to update spheres of influence for special districts. Some observers believe that over time state guidelines may ultimately become legislated mandates that could give LAFCOs an even more significant role in the organization of local public services. While independent special districts will continue to be stakeholders in the implementation of LAFCO policies, their interests and requirements are not always knowledgably reflected in governmental planning discussions between city and county representatives. Currently, special districts in Monterey County have no representation on LAFCO nor are they eligible for membership in this area s regional governmental planning agency, the Association of Monterey Bay Area Governments, whose membership is limited to cities and counties. Procedure and Costs In December 2000 the Monterey County LAFCO Executive Officer sent a letter to all eligible independent special districts (Enclosure No. 8), which indicated that independent special districts might initiate the process of securing representation on the LAFCO by adopting a resolution proposing such representation. Enclosure No. 1 is a sample resolution that may be used for this purpose. If the Commission receives resolutions from a majority of independent special districts within one year of the first resolution submitted, it must initiate proceedings for representation of independent special districts on the LAFCO. The one-year time line began the same month (December 2000), when the first independent special district board resolved to seek representation for special districts on the LAFCO. Since that time an ad hoc group of managers and fire chiefs from a number of independent districts have met to develop a process to facilitate discussion on this important issue. Within the next few months it will be advisable for all independent special districts to consider the LAFCO representation question. If and when the Commission receives resolutions from a majority of independent special districts, it will then organize a meeting of the Special Districts Selection Committee. All independent special district boards will be represented on the Special Districts Selection Committee, either by their Board President or by another director designated by each Board. When it meets, the primary business of the Special Districts Selection Committee will be to select two commissioners and one alternate commissioner to represent special districts on the LAFCO. The Committee may also decide to negotiate a formula for sharing one-third of the costs of the LAFCO budget. The current LAFCO staff estimates the costs of operating an independent Monterey County Commission will be in the range of $600,000 for fiscal year , beginning July 1 st, when the LAFCO becomes independent of County government. Thereafter, if special districts were to be represented on the Commission their share of the LAFCO budget would be about $200,000, or one-third of the total. This figure could increase or decrease after the Commission has become independent.

4 The new law requires that independent special districts costs be apportioned in proportion to each agency s total revenues, as a percentage of combined revenues of the respective independent special districts within the county. Enclosure No. 7 is a listing of the 44 Monterey County independent special districts that are believed to be eligible to participate in the LAFCO representation process. The enclosure includes calculations of proportionate revenues, based on the latest State Controller s Financial Report on California special districts. The information may not be completely accurate, and is intended only to provide an idea of what each district s proportionate LAFCO costs would be, if the costs were to be apportioned on the basis of the allocation criteria included in the new law. However, of particular importance to special districts, --- which do vary significantly in size, services, revenue, and ability to pay --- the law also allows districts to negotiate an alternative method of sharing costs, if approved by a majority of districts representing a majority of their combined populations. This option gives special districts the flexibility to ultimately negotiate amongst themselves a cost sharing formula that may be more equitable to both large and small entities. Conclusions There are potential tangible benefits to be derived by independent special districts if they are represented on the new, independent LAFCO. The new legislation could have significant long-term impacts on districts plans for new or expanded services and service areas, as well as the organization of local government throughout the County. Over time, it appears that LAFCOs will operate under new planning mandates in allocating public service responsibilities, approving the types of governmental organizations that are created and in establishing their operational spheres. While, statewide, the California Special Districts Association ( CSDA ) has taken a formal position recommending special districts seek representation on LAFCOs (Enclosure No.10), there does not appear to be any proactive local efforts to encourage special districts in Monterey County to seek representation on the LAFCO by the Commission itself, or by the County or cities. If independent special districts in Monterey County wish to consider being represented on the Commission it appears they will have to take the initiative to meet and confer among themselves and to share information that may be used by the various governing boards to make informed decisions on this issue. The general managers and fire chiefs of independent special districts who are collaborating in the preparation and dissemination of information to eligible independent special districts plan to organize two forums in the near future to assist district managers and directors better understand this issue. The first meeting will be held on April 24, 2001 at 11:30 a.m. at the Hullaballoo Restaurant, 228 So. Main St., Salinas. This meeting will be oriented primarily toward general managers, fire chiefs or others who serve as principal management persons in independent special districts. The price of lunch will be $15.00.

5 Please contact Paula Carina, Executive Assistant, Marina Coast Water District, by April 20 th at to reserve a place at this no host lunch meeting. Taking into consideration input received during the April 24 th meeting, a second meeting is planned, which will be oriented toward district directors. Tentatively, that meeting will be held in May in the evening, at a place and time in Salinas yet to be determined. Thank you for reviewing and considering the enclosed information. If you have any questions or wish to discuss any of the issues involved in this matter prior to the meetings noted above please feel free to contact any of the individuals listed below. We look forward to seeing your general manager, fire chief or equivalent on April 24 th. Respectfully submitted: Joseph D. Donofrio, General Manager, Monterey Peninsula Regional Park District Chair Pro Tem, Managers Ad Hoc Committee Michael Armstrong, General Manager, Marina Coast Water District Vice Chair Pro Tem, Managers Ad Hoc Committee Richard Andrews, General Manager, Pebble Beach Community Services District Mark Pereira, Fire Chief, North County Fire Protection District Steve Negro, Fire Chief, Salinas Rural Fire Protection District Enclosures: (13) See Index C: Nicholas E. Chiulos, Executive Officer, Monterey County LAFCO Patrick McCormick, Executive Officer, Santa Cruz County LAFCO

6 INDEX OF ENCLOSURES Report of Monterey County Independent Special Districts Managers Ad Hoc Committee on LAFCO Representation Enclosure No. 1: Resolution Proposing LAFCO Representation (SAMPLE) Enclosure No. 2: A Brief Overview of LAFCOs, California Association of LAFCOs Enclosure No. 3: LAFCO Under Cortese-Knox-Hertzberg: Frequently Asked Questions, California Special Districts Association, December 2000 Enclosure No. 4: California Senate Rules Committee Analysis of AB 2838, September 19, 2000 Enclosure No. 5: Growth Within Bounds: Executive Summary & Chapter 5, Report of the Commission on Local Governance for the 21 st Century, January 2000 Enclosure No. 6: Special Districts: Relics of the Past or Resources for the Future?, Executive Summary, Report of the California Little Hoover Commission on Efficiency and Economy in Government, May 2000 Enclosure No. 7: Listing of Monterey County Independent Special Districts & Proportionate Revenue Estimates, PBCSD, March 13, 2001 Enclosure No. 8: Letter w/attachments from LAFCO Executive Officer to all Monterey County independent special districts, December 19, 2000 Enclosure No. 9: Letters w/attachments from LAFCO Executive Officer to Members of LAFCO regarding administrative support for independent LAFCO, January 2 and March 26, 2001 Enclosure No. 10: CSDA Policy Statement regarding LAFCO representation Enclosure No. 11: Names and addresses of Monterey County Independent Special Districts Enclosure No. 12: Glossary of Common LAFCO and Planning Terms, San Diego Local Agency Formation Commission