VALLEY CITYHOOD VIABLE WITHOUT HARMING L.A. LAFCO REPORT LAYS OUT DETAILS.

Byline: Harrison Sheppard Staff Writer

In a major victory for the secession movement, a landmark study for the county agency overseeing breakup found Wednesday that an independent San Fernando Valley city would be financially viable and its creation would not harm the city of Los Angeles.

The study for the Local Agency Formation Commission smooths a path for secession advocates, who have argued for years that a Valley city of 1.3 million people - which would be the nation's sixth largest - would provide better services at the same cost to residents.

Water and power could be provided to a Valley city under contract from Los Angeles at the same rates residents of Los Angeles pay, the study said, while the new city could provide police, fire and most other services, and maintain a slight budget surplus even with transition costs.

Richard Close, chairman of cityhood group Valley Voters Organized Toward Empowerment, hailed the study's finding that the Valley does not get its fair share of city services - identifying a $68 million gap between revenue raised from the Valley and services provided to it.

``The report proves what we've said all along: The Valley is not getting its fair share of city services,'' he said. ``The Valley will be viable as a separate city without harming the remainder of Los Angeles. We will get local control.''

City officials led by Mayor Richard Riordan spoke out against secession, which is expected to go before voters in November 2002 with majorities needed in the city as a whole and in the Valley for passage.

``If the Valley secedes, why not Brentwood, Bel-Air, Pacific Palisades or Eagle Rock?'' Riordan said. ``That will just leave us with the poor in the city. I think that is immoral. It isn't right and I think, in the end, people will reject this.''

This study defuses that argument, often made by secession opponents, finding instead that breakup can be achieved without hurting either side - as state law requires.

The study's finding that the Valley does not get its fair share of city services was surprising only in that the amount was $68 million out of a $4 billion budget - a fact explained by increased services provided to the Valley by the Riordan administration.

By law, the secession proposal has to be ``revenue neutral,'' meaning it can't financially harm either the Valley or Los Angeles. That means the new Valley city might have to make $68 million in annual payments to Los Angeles as a sort of ``alimony'' for an indefinite period of time.

By the Valley paying that amount, the city of Los Angeles should be able to provide the same level of service to its residents, according to the study.

Some critics questioned such a payment, noting that if the Valley is underserved in the first place, it doesn't seem fair to make it continue paying that difference.

``We've paid it (already) by virtue of the fact that we paid for the services we didn't get,'' said J. Richard Leyner, chairman of the United Chambers of Commerce of the San Fernando Valley and a Valley VOTE board member. ``It's like double taxation.''

Still, even with those payments, the Valley city would have a $20 million budget surplus by 2005, the study found. The Valley's total budget would be about $1 billion and it would have 8,564 employees, about half providing police and fire services, out of the 34,607 now employed by Los Angeles.

The 370-page report suggests that some major assets, such as Van Nuys Airport, would remain under the control of Los Angeles, while other services, including utilities and technology and communications for police, would be provided on a contract basis by Los Angeles to the new city.

Those suggestions are not absolute, and Valley VOTE can propose other alternatives in the 45-day period it has to respond, but they remain the most likely path.

LAFCO hired Newport Beach-based Public Financial Management in March 2000 for $1.4 million to conduct this study and others. Reports on the Harbor area cityhood proposal should follow later this year, while LAFCO officials are still seeking funding for a Hollywood cityhood study.

Besides studying the feasibility of secession, the study represents the first time the city of Los Angeles has had such a comprehensive portrait of its assets and departments.

It contains a series of assumptions and plans for how secession would be achieved, without favoring either support or opposition. It is up to LAFCO to shape the final proposal and decide whether secession should be placed on the ballot, with a target date of November 2002.

Among the study's suggestions:

--If the Valley city contracts with the Department of Water and Power, Valley ratepayers would pay the same amount for electricity and water. But the excess revenue that the DWP transfers to the city would remain with Los Angeles.

That would avoid one of the most serious obstacles raised by opponents: how to divide up the massive infrastructure - underground pipes, reservoirs, water rights outside the city limits, electrical power plants - that the DWP owns.

That plan contradicts Valley VOTE's original vision, which was that the Valley and Los Angeles would initially create a joint-powers authority to run the DWP together, while negotiating to split up the assets proportionately.

--Van Nuys Airport should remain in the possession of Los Angeles World Airports.

This again contradicts Valley VOTE, which proposed a similar joint-powers agreement and negotiations for splitting assets.

But the study said transferring possession of the airport would require approval of the Federal Aviation Administration and the city Board of Airport Commissioners, and the study assumed for now that permission would not be granted.

--Police and fire crews transfer to the new Valley city, including 3,374 sworn and civilian police personnel and 1,078 firefighting personnel, in addition to the police and fire stations now located in the Valley. But the Valley city would contract with Los Angeles to provide the centralized dispatch and technology services that are too difficult to divide.

The study still leaves many questions unanswered, such as what happens if Los Angeles refuses to negotiate a contract with the new Valley city. LAFCO officials said they were still studying whether the commission has to power to force an agreement on the two cities.

Valley VOTE President Jeff Brain said the disagreements in the study will not derail their effort.

``They felt their scenario is the more appropriate approach,'' Brain said. ``We're not arguing with that. We knew all along that LAFCO had the final say on most of these issues.''

HIGHLIGHTS FROM THE LAFCO STUDY

--A Valley city would be financially viable.

--The rest of Los Angeles would suffer no financial harm.

--The Valley now pays $68 million more than it gets back in services and would have to continue paying its unfair share to Los Angeles after cityhood.

--The Valley would contract with Los Angeles for water and power at the same rates as residents pay.

--The Valley would contract with Los Angeles for police and fire services for up to three years while setting up its own departments.

--Police officers and firefighters would go to the Valley, but communication and technology functions would be contracted with Los Angeles.

--Secession supporters say the Valley would be run more efficiently and grow faster economically so services would improve without higher taxes.

WHAT'S NEXT

1 Valley VOTE has 45 days to respond to the LAFCO report and finalize its cityhood plan.

2 The city of Los Angeles then has 45 more days to analyze and respond to the Valley VOTE report and LAFCO study.

3 LAFCO will analyze both plans, then submit a final study.

4 LAFCO will decide whether to present the issue to voters and finalize the terms of detachment.

5 The Valley cityhood initiative likely would go before voters in November 2002, with the votes of a majority in both the city as a whole and in the Valley needed to pass.

LAYING THE FOUNDATION FOR A SPLIT

1970s

Mid-1970s

Valley community groups complain they don't get a fair share of city services and launch secession movement.

1977

Los Angeles city officials successfully push for state law giving City Council veto power over secession movement.

1990s

Jan. 23, 1996

Assemblywoman Paula Boland introduces bill to strip City Council of veto power over secession.

Aug. 22, 1996

Boland bill fails to pass state Senate by one vote.

Oct. 13, 1997

Gov. Pete Wilson signs into law a bill by Assemblyman Bob Hertzberg and Tom McClintock stripping City Council of secession veto power.

May 1998

Valley VOTE starts petition drive to get study of secession.

August 1998

Gov. Wilson signs bill giving Valley VOTE 90 extra days to complete petition drive.

March 1999

LAFCO certifies more than 25 percent of voters in the Valley signed petitions, meeting legal requirement for secession study.

June 1999

Seven-step process starts leading to a citywide vote on secession.

2000

March 2001

Initial study completed, finding a Valley city would be financially viable without harming the rest of Los Angeles.

REVENUES

-- The Valley pays $68 million more in taxes and fees than it receives in services. It may have to make annual payments of that amount to Los Angeles if it secedes.

-- Valley residents will continue to pay the same utility rates, under the LAFCO study's proposal, assuming the Valley city contracts with Los Angeles for water and power service.

-- Excess revenue that the city now transfers from the Department of Water and Power into the city's general fund will remain with Los Angeles.

Total city revenues generated in the Valley $1.1 billion

Utility revenues generated with Los Angeles $55 million

Revenue neutrality payment $68 million

Net revenue to new Valley city $976 million

Figures are rounded

SPLITTING UP SERVICES

The LAFCO study proposes that Los Angeles retain control of some services, signing a contract with the new Valley city to provide them at a given rate. The reason is that those services are considered the most difficult to divide. While police officers, firefighters and their Valley stations would transfer to the new Valley city, centralized functions, such as dispatching and communications would be provided on a contract basis. Water and power would be provided under a contract. Transportation would transfer to the Valley, expect for control of the automated signal system, which would be contracted.

CAPTION(S):

11 photos, 5 boxes

Photo: (1 -- color) no caption (San Fernando Valley)

Photo by John Lazar/Staff Photographer

(2) Boland

(3) Hertzberg

(4) McClintock

(5) Wilson

(6) POLICE

(7) FIRE

(8) TRANSPORTATION

(9 -- 10) WATER & POWER

(11) Richard Riordan, mayor of Los Angeles

Source: Daily News Research

Reuben J Stern/Staff Artist

Box: (1) HIGHLIGHTS FROM THE LAFCO STUDY (See text)

(2) WHAT'S NEXT (See text)

(3) LAYING THE FOUNDATION FOR A SPLIT (See text)

Source: Daily News research

Reuben J. Stern/Staff Artist

(4) REVENUES (See text)

(5) SPLITTING UP SERVICES (See text)