Stephen G. Harding is city manager for the City of Jurupa Valley. He also serves as an adjunct professor in Northwestern University’s Master of Public Policy and Administration Program and in the University of La Verne’s Master of Public Administration Program. Harding can be reached at sharding@jurupavalley.org.

The City of Jurupa Valley has the notoriety of being the newest incorporated municipality in the State of California, due to the volition of its citizens. It may also gain the notoriety of being the shortest-lived — and even the last — incorporated city in California’s 162-year history, due to the volition of the state government. In an 11th-hour maneuver to balance its own books, the state eliminated the singularly most important source of revenue to newly incorporated cities. Senate Bill (SB) 89, unfettered by any policy committee review, was rushed through the Legislature and signed into law two days before Jurupa Valley’s official day of incorporation, rerouted some $140 million of annually dedicated Vehicle License Fees (VLF) from cities to the state. This was done ostensibly to fund law enforcement grants and the realignment of the state’s correctional system.

For the majority of the state’s 482 monetarily shell-shocked municipalities, this was just another hit that forced more belt-tightening for already battered local budgets. For the 140-plus cities that annexed inhabited areas since 2004, such as Fontana, Santa Clarita and Temecula, the hit was much worse. For the four newest local jurisdictions that incorporated post-2004, it portends potential insolvency. Even after the receipt of the purported public safety grants now funded through the recycled VLF, SB 89 actually reduced the amount of money available to Jurupa Valley, Eastvale, Wildomar and Menifee by $16.2 million. For Jurupa Valley alone it meant the loss of $6.7 million, or 47 percent of its expected first-year revenues. Of all the state’s municipalities only the City of Los Angeles had a larger annual dollar amount shifted to state government. Even the City of San Diego, the state’s second largest municipal government, surrendered less of its own actual dollars than Jurupa Valley. How can a city with more than 13 times the population lose less revenue than the state’s newest municipality? The answer is at best complicated and convoluted.

Background

Since 1986 and the passage of Prop. 47, the VLF has been a constitutionally protected local source of revenue. Even before 1935, individual cities actually included a vehicle assessment as a part of their local property taxes. The very essence of the VLF has historically been locally generated. To ease collection and promote uniformity, the California Legislature replaced the locally administered programs with the more familiar statewide coordinated billing process of today. Collected and distributed by the state on a per-capita basis back to cities, the VLF has been periodically subjected to politically driven reductions. Over the years, California car owners have seen their registration fees reduced from time to time as the state attempts to demonstrate frugality through tax reductions. However, lower car registration fees did not mean the cost of administration went down. The costs were just subsidized by the state through a different pot of money.

From 1998 through 2004 reductions in automobile registration fees — and the resultant loss of the VLF to local jurisdictions — was offset by a direct contribution from the state’s General Fund. In 2004 through legislative budget agreements and the passage of Prop. 1A the state allocated a compensating additional allocation of property tax in lieu of the reduced VLF. In essence, existing cities remained financially whole. What this “VLF for property tax swap” did not consider was future incorporations or the annexation of inhabited areas by existing cities. The post-Prop. 1A local jurisdictions yet to come would not get the same allocation of property tax in lieu of VLF provided to every other municipality in the state.

In 2006, AB 1602 was signed into law stipulating that a permanent enhanced share of VLF funds allocated among cities would be provided to new incorporations, thus creating equitable treatment among all municipalities. To provide the capitalization necessary to start a new city, the bill also provided an additional revenue “bump” for the first five years, replacing the former seven-year subsidy enjoyed by previously incorporated cities. Relying on this covenant the cities of Wildomar, Menifee, Eastvale and Jurupa Valley incorporated. SB 89, signed into law in the waning moments of June 2011, broke the promise of AB 1602.

Following the Rules But Penalized Nonetheless

Like its recently incorporated sister cities, the City of Jurupa Valley played by the state’s rules. Before becoming a city, it formed a citizens’ incorporation committee. It analyzed its ability to fund municipal services by commissioning a fiscal feasibility study as required by state law. It successfully negotiated the cost of transitioning services with the County of Riverside. It received the recommendation of the Riverside County Local Agency Formation Commission to place the issue of incorporation on the ballot. In March 2011 it received an affirmative majority vote by its residents to become the State of California’s newest local jurisdiction. Jurupa Valley incorporated to have more direct control over its own affairs, to provide a higher level of public safety and to have a greater say in its own destiny.

The city has been frugal to a fault. It has the second lowest per-capita expenditures of any city in Riverside County. It has postponed processing its state-mandated General Plan and employing permanent staff. By using a team of private-sector consultants, it has no costs associated with municipal employees and has avoided any pension or long-term health care obligations. It has even painfully reduced its contract amount with the Riverside County Sheriff’s Department to a service level that was evident prior to incorporation.

Yet Jurupa Valley has not sat idly by wallowing in its fiscal dilemma. The city and its consulting team have met with the governor’s staff, the State Department of Finance and multiple legislators. These efforts were spurred by the creation of SB 1566. Co-authored by Senators Gloria Negrete-McCleod and Bill Emmerson, this bipartisan-supported legislation would reinstate AB 1602’s provisions. Though it was affirmed by two separate senate committees, SB 1566 did not pass out of the third: the Senate Appropriations Committee. If SB 1566 is not acted upon, the City of Jurupa Valley will need to seriously consider disincorporation.

Broader and Disturbing Implications

Although the fiscal strain on all levels of government is evident, the injury to basic democratic principles may not be so clear. In essence, the very act of creating a city and its governmental construct is an implicit example of the “freedom of association” enjoyed by each citizen of the United States and enshrined in the Constitution. Although the Constitution was carefully constructed to protect and make clear the rights, relationship and responsibilities of states and the federal government, it is silent with regard to local government. Such lower levels of government exist at the pleasure and authority of their respective state Legislatures. The State of California has recently demonstrated this authority by eliminating local redevelopment agencies with the California Supreme Court’s affirmation of AB 26. But does the state have the power to obstruct the democratic ideal of freedom of association? It would be an interesting test best analyzed by constitutional scholars and the high courts.

Yet the pragmatic impacts of the State of California’s actions are tangible. The state has committed an act of omission, inadvertent or not. In a sea of zeros, it is easy for the state to dismiss four cities as collateral damage in a never-ending world of fiscal crisis. Yet there are times — and this is one — when the state just needs to do what’s right: Let these new cities, including Jurupa Valley, move forward. The state needs to demonstrate that good governance is not dead. The reinstatement of the revenue equivalent of the lost VLF would facilitate a notion of equality between municipalities. To continue the discriminatory effects of SB 89, even if they are unintended, contributes to the widening gap between the haves and have-nots. Jurupa Valley does not want to go into the record books as the last and shortest-lived city in state history, especially due to no fault of its own.

This article appears in the August 2012 issue of Western City
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