Lake Gregory Cityhood Group Finds Flaw in Previous Study - Mountain News : News

Lake Gregory Cityhood Group Finds Flaw in Previous Study

Story and photos by Christian Shepherd, Reporter | Posted: Wednesday, April 3, 2019 9:29 am

Incorporate Lake Gregory announced that they have discovered an error in a 2015 financial feasibility study that, once corrected, would make the incorporation of the Lake Gregory area more financially feasible than previously calculated. 

The announcement was made during a meeting hosted by Incorporate Lake Gregory, the organization behind the recent incorporation efforts, on 1 p.m. Saturday at the Lake Gregory Community Church in Crestline to an audience of more than 70 people. 

The original study was conducted in 2015 by the Rosenow Spevacek Group, a company founded in 1979 that provides information and analyses to local governments and private entities, according to their website. 

The study assessed the feasibility of cityhood for a group of mountain areas referred to as the “Rim of the World” communities—the findings signaled a lack of sufficient revenue, which was a factor in the collapse of previous cityhood efforts.

Kathleen Rollings-McDonald, a consultant hired by Incorporate Lake Gregory, said RSG made an error when reporting a share of funds that would be transferred from the county to a newly incorporated city.

“I will at this point tell you that the RSG study was wrong,” Rollings-McDonald said at the meeting. “The RSG study used 11.7488 percent. However, when doing the background research to get the public record data for the RSG study, we found the letter from the auditor-controller to LAFCO that said that the ratio was 62.31 percent. That is a significant difference.”

The RSG study reported that the County of San Bernardino would transfer 11.7488 percent of the total amount of money spent on specific services to the newly incorporated city. But according to a letter from Larry Walker, auditor-controller for San Bernardino County, dated March 2, 2015, the county would have actually provided 62.31 percent.

Those services include land use administration planning, code enforcement, building and safety, land development, animal control, public works response, law enforcement and fire hazard abatement.

Based on the $3,939,044 estimation of service costs provided by Rollings-McDonald, the 62.31 percent share would have been $2,454,418, which is close to $2 million more than the $463,815 figure from the 11.7748 percent share originally reported by RSG.

“If that study had used the 62.31 percent, we would probably all be talking about incorporating Rim of the World, and you would be considered West Lake Arrowhead … because it would have been feasible,” Rollings-McDonald said at the meeting. 

Rollings-McDonald was the Executive Director of the Local Agency Formation Commission, the organization responsible for accepting or denying incorporation proposals, when the erroneous RSG study from 2015 was submitted for review. 

“I was the executive officer of LAFCO at the time … Do I have an explanation? No I don’t,” Rollings-McDonald said at the meeting. “I have reached out to RSG, but they have not responded.”

“As the executive officer, I was in charge of LAFCO, that material was sent to me and my staff was directed to pass it on,” Rollings-McDonald said at a later interview. 

Rollings-McDonald said that she believes this was the only error in the RSG study. 

The discovery of the error makes the incorporation of the Lake Gregory area significantly more financially feasible due to the increase in funding available to the proposed city.

“I will be honest with you, absent that discovery, I would not be here presenting this information other than to tell you that you are not feasible, you do not have the resources,” Rollings-McDonald said. 

RSG declined to comment or provide any further information on their 2015 report.  

Incorporate Lake Gregory aims to have the issue of Lake Gregory cityhood on the ballot during the 2020 election. 

According to Incorporate Lake Gregory’s preliminary financial feasibility study, the proposed city’s first full year of operation in 2022 will bring in $12,239,957 in total revenue and cost a total of $12,427,513 in expenses, which comes out to a deficit of $187,555. A deficit is also expected during the years 2023 and 2024 of $150,282 and $36,358 respectively. 

Rollings-McDonald said the plan is to pay off those deficits with unspent funds from 2021, which will be considered a transitional year for the proposed city. During this year the newly incorporated city will bring in $2,337,610 in revenue while paying $673,319 in expenses. This leaves a total of $1,664,291 in unspent funds, according to the preliminary financial feasibility study.

According to the study, the city is projected to see its first surplus of $170,493 in 2025. These projections take into consideration only current existing streams of revenue and do not reflect revenue streams in the future, such as the Assembly Bill 818, which would establish a separate vehicle license fee adjustment amount for a city incorporating after Jan. 1, 2012.

Incorporate Lake Gregory expects this AB818 to generate a potential of $886,236 in revenue during 2022 and $852,124 in 2023, according their report. 

During the meeting, Rollings-McDonald said the first election to select city council members would be an at-large election, meaning that anyone from any part of the town could run for city office. 

Rollings-McDonald added that one of the first actions the city council would have to take would be splitting the town into five districts, so that in future elections city council members could only be elected to represent a district on city council if they live in the boundaries of that district.

Brenda Meyer, broker for Cozy Cabins Realty, raised a concern during the meeting about the economic growth that was used to determine the revenue amounts.

“I’ve noticed that in the forecast that there is a general two percent across the board from the implementation for an increase in revenue, but yet in the property tax share transfer that the growth rate of adjustment was six percent,” Meyer said. “Could you explain the difference and where those numbers derived from? Because as a real estate broker in town, I don’t necessarily see a consistent increase for the long term.”

“The choice for that in regard to the six percent was taking information we had from (2017 and 2018 audits) and applying a factor to get them to the transitional year or the first full year of operation … “ Rollings-McDonald said. “Two percent is the statutory maximum increase in property taxes. So we simply applied that across the board.”

“That doesn’t seem to be conservative in my opinion,” Meyer responded. 

Christian Shepherd can be reached at cshepherd@mountain-news.com.