ANNEXATION COSTLY PAY OR STAY OUT, COUNCIL ADVISES.

Byline: Heather MacDonald Staff Writer

SANTA CLARITA - The City Council has unanimously adopted an annexation policy that seeks to end the drain on city resources created when new subdivisions join Santa Clarita without adding any revenue.

The policy, approved this week, recommends that an annexed community bring in at least as much tax revenue as it will cost to expand city services to serve the neighborhoods, while allowing the Santa Clarita City Council to review each potential annexation on a case-by-case basis.

``These are just guidelines, really,'' said Vince Bertoni, the city's planning manager. ``The policy gives the City Council enormous latitude.''

City officials can consider planning, economic, political and other concerns when deciding whether to allow an existing neighborhood to leave Los Angeles County and join Santa Clarita, according to the policy.

The policy maintains Santa Clarita's passive approach to annexations, which relies on residents of the community considering joining Santa Clarita to initiate the annexation.

The cost of providing basic city services in new neighborhoods has become a significant burden on the city's cash-strapped budget, officials said.

City government is facing a deficit of at least $500,000 next year because of the state's budget deficit, which is at least $26 billion and could be as much as $35 billion, according to Santa Clarita officials.

Even without the added pressure of the state's deficit, city government will face a $1 million shortfall in the 2007-08 fiscal year because of declining revenues and increasing expenses, according to a five-year financial forecast.

City Manager Ken Pulskamp said earlier this month that the council cannot afford to institute any new programs or projects without first finding the money to cover the costs.

Over the last year, the council has been looking for ways to increase revenues without raising taxes or fees and has primarily been focusing on encouraging business that generates sales tax revenue.

One percent of the state's 8.25 percent sales tax, which does not apply to groceries, goes to the city or county where the purchase was made.

Sales tax revenue makes up 41 percent of Santa Clarita's general fund, which city government uses to pay for most municipal services, including police and fire protection.

Property tax revenue provides a much smaller percentage of the general fund and does not even cover the cost of basic city services, officials said.