SECESSION ON 5-YEAR PAY PLAN? NEW VALLEY CITY COULD HOLD OFF COMPENSATING L.A. FOR SERVICES.

Byline: Harrison Sheppard Staff Writer

City officials expressed worries Thursday that a new San Fernando Valley city could withhold up to $750 million in payments to Los Angeles for services for up to five years, potentially devastating the city budget.

Under state law, if Los Angeles provides services to a new Valley city in its first year of incorporation, the new city would have up to five years to pay for those services. Chief Legislative Analyst Ron Deaton estimated that the amount delayed could be $500 million to $750 million.

``If it is paid over time, it would severely impact the city of Los Angeles,'' said Tim McOsker, chief of staff to Mayor James Hahn.

The discussion came in the second session of negotiations between city officials and secessionists from the Valley and Harbor area. The talks were conducted by the Local Agency Formation Commission, the public agency that is overseeing the cityhood studies. Supporters of a public vote on secession are calling for the election to be held in November 2002.

On Thursday, Valley secessionists proposed making payments to Los Angeles on a monthly basis to avoid having a five-year delay in payments. They said their intent is not to hurt the city of Los Angeles.

``We're saying you'll get paid,'' said Dan Miller, a consultant for Valley Voters Organized Toward Empowerment. ``You'll get that bottom line covered. The money will flow to the new city and we will compensate you.''

Deaton, however, said any agreement struck by Valley VOTE would not necessarily be binding on the new city because Valley VOTE has not been elected to represent the new city. And LAFCO, he said, might not have the power to enforce such an agreement, meaning the new Valley city's officials could decide to delay the payments despite any assurances from Valley VOTE and LAFCO.

The argument centered on the first year of a new Valley city, a transition period when Los Angeles would provide services to the Valley as the new city begins to get organized. The question debated was whether Los Angeles should collect revenue on behalf of the Valley and then retain its payments out of that money, or whether it should forward the payments to the Valley city, which would then make payments to Los Angeles at its discretion.

The intent of the five-year period allowed by law was to aid new, small cities that are formed from unincorporated parts of a county. In most cases, the smaller cities represent only a small fraction of the overall county budget, but the Valley represents at least a quarter of the budget of Los Angeles, meaning nonpayment would bring more severe consequences than in a typical incorporation.

Also, Valley VOTE proposed that the new city begin operation, on a limited basis, Dec. 16, 2002, a month after the proposed election. The transition period would last until June 30, 2003.

City officials didn't agree or disagree with that time line, but noted that it would give them a shorter period to negotiate the transfer of services. But it would also cut in half the amount of revenue that could be delayed for five years.