The end of Half Moon Bay?

By Julia Scott
San Mateo County Times

Posted: 08/27/2010 11:00:00 PM PDT

Updated: 08/28/2010 07:52:51 AM PDT

HALF MOON BAY -- Between budget losses and lawsuit payments, Half Moon Bay's financials have become so dire that if a local sales tax measure doesn't pass this November, officials say they may have to disincorporate.

City leaders have been using the "D" word for a few weeks now as they try to persuade voters to pass Measure K, a one-cent sales tax increase that would help the city balance its budget with an extra infusion of $1.4 million per year for the next seven years.

Dissolving Half Moon Bay -- handing the city's budget, operations and services to San Mateo County -- would be an absolute last resort, but the city may not have many other options left, City Councilman John Muller said.
"The council has done everything in its power to keep the city whole," Muller said. "If it doesn't pass, we could seriously not be in business much longer."
At first glance, disincorporation could save taxpayers some money: no more city administration to support. Police services would be contracted out, and the county would cover planning, building and public works projects from its offices in Redwood City.
On the other hand, county officials said there is a chance that locals would end up paying more than they do now for fewer services.
City Manager Michael Dolder admits disincorporation is one of the options on the table now. The City Council already cut $900,000 from the current budget -- including half its employees -- and imposed
furloughs on those who remain. Some of the cuts were needed to pay for the Beachwood lawsuit settlement, a $15 million burden the city will shoulder in bond payments for the next 20 years. Despite those efforts, the city will finish the current fiscal year with a deficit north of $500,000. And tourist dollars, the city's economic mainstay, aren't likely to flow in anytime soon.
"We're digging ourselves into a hole and the hole keeps getting deeper regardless of whether the sales tax comes in," Dolder warned.

Too much to lose

Across the state, cities are struggling to provide the services residents have come to expect with fewer revenues and staff. People are looking for a way out, according to Bill Chiat, executive director of the California Association of Local Agency Formation Commissions.

"There certainly have been cities in this economic climate that have inquired about disincorporation," said Chiat. "But once people who talk about it actually find out what happens in disincorporation, they generally don't want to pursue that path."
Dolder ticks off the drawbacks of disincorporation: a county-controlled police department; sporadic road maintenance; no City Council to whom to complain; and no recreation department to offer yoga classes or soccer workshops.
"The majority of residents in San Mateo County choose to be in a city because they get better service. If the county provided better service, more people would choose to be in the county," asserted Dolder.
Ironically, Half Moon Bay chose to incorporate in 1959 in large part because residents wanted a local police force and local control of street maintenance.
Councilman Muller was born in Half Moon Bay. For him, disincorporation would be more than a question of losing face -- it would be a loss of identity.
"Do you have pride in the city? Do you want keep it as Half Moon Bay? Do you want to have local control over your government?" he asked. "Over the hill, nobody knows you."

Debt would remain

Disincorporation is so rare in California that it's almost without precedent. The last city to do it, Cabazon in Riverside County, had fewer than 2,000 residents and no functional government to speak of when it voted to give up cityhood.

The process is so complicated that county officials said they don't know what kinds of services the Board of Supervisors would choose to provide or how much they would cost.
Although the law lays out a clear procedure for disincorporation, including public meetings and a final majority vote by residents, it's unclear how it could work from a practical standpoint, said Martha Poyatos, executive director of the San Mateo County Local Agency Formation Commission.
"We're in uncharted territory," she said.
One thing is certain: disincorporation is not a bailout. The county would lay claim to revenues, including Half Moon Bay's property taxes, sales taxes and hotel taxes, but not its liabilities. Today's Half Moon Bay residents would be required to assume the debt burden of Beachwood bond payments, which would likely be added as a lien on their properties, according to Assistant County Controller Bob Adler.
The county currently takes in 21.7 percent of all property taxes that don't go to the state. The county cannot unilaterally raise taxes to make up for a loss. So service cutbacks are a possibility, Adler said.
"The costs don't go away just because the cities go away. You still need to provide the services. You still have the same problems out there," he said.
The rural city of Isleton, in the Sacramento-San Joaquin Delta, toyed with disincorporation in 2008 when it faced a budget deficit of $1.12 million (the city only has a $1.35 million budget). In the end, officials decided to sell bonds to pay off its debts. Now, it is struggling to make bond payments.
"I've cut everything I can cut and we're right up against the wall," Isleton City Manager Bruce Pope said. "We're not (facing disincorporation) now, but we could go there at any time."

Contact Julia Scott at 650-348-4340.

Disincorporation: how would it work?

A City Council, school district, special district or group of residents can initiate disincorporation with the Local Agency Formation Commission, or LAFCo, by presenting a petition signed by 25 percent of voters.
LAFCo would then hold public hearings and choose whether to affirm the proposal with conditions or deny it.
A special election would be held, in which a majority of voters have to approve the terms of disincorporation.
The county Board of Supervisors would work with LAFCo and the city on disposition of the city's assets.
Note: Disincorporation proceedings can be subject to legal challenges.

Sources: LAFCo; California Government Code

Disincorporation: what half moon bay loses

Local police force
City Council
Street maintenance
Recreation department

Submitted by Jim Alex