Frequently Asked Questions - Incorporation
QUESTION: What is incorporation?
Incorporation is the process of forming an entirely new city. This is what Santa Clarita did in 1987.
QUESTION: I've heard that the Westside communities of Sunset Point, Stevenson Ranch, Westridge, and Castaic are considering incorporating into a
No. The residents of theses communities have not been asked about incorporation. However, Supervisor Antonovich has given the West Ranch and Castaic Area Town Councils $25,000 to prepare a study about incorporation (Click here to learn more about the Town Councils). This Initial Feasibility Assessment (IFA) is very generalized and will only indicate whether there is adequate tax revenue to form a separate city, not the true feasibility of a
QUESTION: If the IFA indicates that there is adequate tax revenue, can we form a
Not necessarily. The IFA is very generalized in nature. It will only evaluate existing conditions. i.e., how much tax revenue there is and how much our current service levels cost.
What is the point of incorporating if we have the same level of municipal services as we do now? One of the primary reasons to incorporate is to increase services. However, the IFA will not evaluate increased levels of services or what increased levels will cost. It will also not evaluate the huge start-up costs of a
Also, the IFA will not evaluate the impact of Revenue Neutrality.
QUESTION: What is Revenue Neutrality?
"Revenue Neutrality" is a state law that became effective in 1992. It says that a County cannot be adversely fiscally impacted by an incorporation, that an incorporation cannot result in less money for the County. In other words, the County is required to give to the newly incorporated city only the amount that it was paying to provide services to that area. If the County was collecting more tax revenue than it was paying to provide services to the incorporating area, it gets to keep the surplus.
In late 2006, Applied Economics prepared a report that concluded that the County is collecting about $42 million in property tax, sales tax, the Utility Users Tax and other taxes/fees from the unincorporated areas of the SCV, including us. The report found that we are getting back only about $20 million worth of services. The County is keeping over 50% ($22 million) of the tax revenue generated in our communities and spending it on programs and services elsewhere in the County that do not benefit us.
Because of Revenue Neutrality, if the west side communities incorporate, the County can keep this surplus $22 million forever! Annexation, on the other hand, is not subject to Revenue Neutrality. With an annexation, the City gets the sales tax and a portion of the property tax. The City spends 100% of the taxes it collects locally, improving our community. By annexing, we would ensure that our tax dollars are spent locally to improve our quality of life.
This is why Supervisor Antonovich is willing to pay $25,000 to support incorporation: with incorporation the County gets to keep our taxes!
Click here to read why incorporation is good for the County but bad for us.
QUESTION: How have other cities in the County incorporated recently?
None have. The provisions of Revenue Neutrality are so onerous that in the 15 years since it became law in 1992, not a single incorporation has occurred in
Santa Clarita incorporated before Revenue Neutrality became law. It is unlikely that Santa Clarita would have succeeded otherwise.
QUESTION: How long does incorporation take?
An incorporation can take many years, usually 3-5 years.
An annexation can take a little as 1 year.
QUESTION: Are there other impediments to incorporation?
Yes. Incorporation is a long, expensive, and difficult process that has no guarantee of success. For instance,
- To begin the incorporation process with LAFCO, 25% of the registered voters of the area proposing to incorporate must sign a petition in favor. The westside communities have a population of about 48,000 people. About 60%, or about 30,000 are registered voters. That means that signatures are needed from about 7,500 people just to get the process started. There will be only 6 months to collect these signatures. If the signatures are not collected the incorporation fails.
- Next a comprehensive fiscal analysis must be prepared by LAFCO. The residents of the incorporating area have to pay for this. The cost runs about $150,000. If the study determines there aren't sufficient funds for a
- Next, the County and City have to negotiate how much tax revenue the
- Finally, a general election must be held and the voters decide if the incorporation succeeds or fails.
There are other factors too.
QUESTION: Does annexation face the same impediments as incorporation?
No. Annexation is faster, free to us, and more likely to succeed. Annexation does not cost the residents anything; the City pays for it all. LAFCO does not require the collection of any signatures. The City prepares the fiscal analysis. Annexation is not subject to Revenue Neutrality so there is no negotiation over sales tax with the County. Santa Clarita is already established and fully staffed so there are no start up costs. Also, there are no hidden fees or taxes with annexation that we may have to pay with incorporation.
Santa Clarita has successfully completed 100% of the annexations that it has pursued.
QUESTION: I've heard that a second city in the Santa Clarita Valley would create competition. Isn't competition healthy?
Competition is healthy for a market economy. Because businesses and manufacturers are competing against one another to sell their products and services, the goods and services they provide tend to cost less and be of higher quality.
However, the services that cities provide are not in competition with one another. For instance, the City of
The competition that does occur between cities is unhealthy competition and can actually decrease the level of services provided to residents and/or increase the costs to provide the services in both cities. This frequently happens. For instance, if a large retailer wants to locate in the area, one of the cities may provide an incentive to draw the retailer, hoping to get the tax revenue from that retailer. The other city may then provide better incentives to the retailer, such as tax breaks, if the retailer locates in their city. The other city may then offer greater tax breaks and so on and so on until the retailer pays little or no taxes. Little or no taxes means no revenue is available to provide the additional services, such as police, road maintenance, etc. that the new retailer will require. This in turn results in lower levels of service to the existing residents and businesses. Developers often use this unhealthy competition to increase their profits.
Multiple cities in the SCV will create unhealthy competition. The residents are the ones who will suffer.
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