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Mayor: Jurupa Valley Facing Insolvency, Dissolution by Fall 2013
Monday, July 23rd, 2012
Issue 30, Volume 16.
"We played by the rules and met all the requirements, and now, through no fault of our own, we face what I call the 'D Word' -- disincorporation," Jurupa Valley Mayor Laura Roughton told City News Service.
"Our budget is bare bones. The only employees we have are the city council members. Everyone else is contracted ... We haven't even had time to make any bad fiscal decisions," she said.
Roughton noted that, unlike what the nearby city of San Bernardino is now doing, Jurupa Valley cannot resort to Chapter 9 municipal bankruptcy reorganization to preserve itself because it hasn't been in existence long enough.
"I think there is little to learn from San Bernardino's situation other than how not to operate a city," she said.
Jurupa Valley officially incorporated on July 1, 2011, after a majority of voters in the communities that unified to become one municipality -- Belltown, Glen Avon, Indian Hills, Jurupa, Mira Loma, Pedley and Sunnyslope -- approved cityhood.
The move to de-couple from Riverside County and become a self-governing locality followed more than four years of work, according to Roughton.
She told CNS that under the incorporation plan, cityhood advocates anticipated receiving a certain level of vehicle-license-fee-in-lieu-of- property-tax revenue, but disaster struck just a few days before Jurupa Valley's first birthday, when Gov. Jerry Brown signed Senate Bill 89 into law.
SB 89 overrode earlier legislation that assured newly incorporated cities would receive a "bump" in VLF receipts for up to five years to help sustain them as they matured to become fully self-supporting. Previous law guaranteed extra funds for all cities that incorporated after 2004 and cities that annexed inhabited areas. Only four cities incorporated in California after 2004, all of them in Riverside County -- Eastvale, Jurupa Valley, Menifee and Wildomar.
More than $15 million that would have gone to those localities instead went into a "Law Enforcement Services Account" established under SB 89 to assist public safety agencies statewide with "realignment," part of the governor's strategy to shift more state responsibilities onto counties and cities, including incarcerating "low-level" criminal offenders and prosecuting parole violators.
"Our reserve would have been approximately $11 million at the end of the last fiscal year (ending June 30, 2012) if the VLF had not been taken by the state," Jurupa Valley City Manager Steve Harding toldCNS. "Our budget would have been balanced for 2012-13 and all ongoing years. The diversion of this revenue by the state cripples the city's ability to provide even a minimal level of service to its constituents."
The city has 30 mostly part-time employees, and all of them are under contract from private staffing agencies. Jurupa Valley's general fund balance stands at $3.4 million, but that money is needed to pay for contracts with the county sheriff's and fire departments, as well as animal control and some road services provided by the county, according to Harding.
He said the funding loss from SB 89 represented a nearly 50 percent hit to the nascent city's budget.
"It cannot be stressed enough that the state itself is responsible for this situation," he said.
Eastvale, Menifee and Wildomar are also financially distressed. Like Jurupa Valley, the latter two municipalities have missed reimbursement obligations to the county for covering transition-year costs because they simply didn't have the money.
Jurupa Valley is the only city to announce a projected disincorporation date -- Sept. 30, 2013, the point at which "revenue intake will not meet expenditure requirements outflow," Harding said.
Earlier this year, a financial rescue measure, SB 1556, was introduced by Sen. Gloria Negrete McLeod, D-Fontana. McLeod's district lost $800,000 under the realignment legislation, and she and Sen. Bill Emmerson, R-Hemet, authored SB 1556 with the goal of redirecting $18 million in administrative fees collected by the Department of Motor Vehicles and Franchise Tax Board to the newly incorporated cities and cities that made annexations.
The bill was held up and died last month in the Senate Appropriations Committee, chaired by Sen. Christine Kehoe, D-San Diego. Her chief of staff, Tim Shelley, could not confirm to CNS why the bill failed to gain traction, saying only that it missed the state deadline for passage in the current legislative session.
McLeod's chief of staff, Brett Williams, suggested that the state's $16 billion structural budget deficit deterred lawmaker support for SB 1556.
McLeod vowed to "look for opportunities to correct (the) inequity" resulting from the shift in VLF funds away from newborn cities.
The governor's office declined to comment on McLeod's bill or say whether he supports a rescue plan for cities negatively impacted by SB 89.
"We know finances are very tight across California," Gareth Lacy, a spokesman for Brown, told CNS. "The state definitely needs additional revenues."
He reiterated the governor's hopes that voters will back proposed tax hikes on the November ballot. Under Proposition 30, sales taxes would go up a quarter percent, and people earning more than $250,000 a year would pay a minimum of 10.3 percent in state income taxes.
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