By Mark Gutglueck
Trying not to convey as much to their constituents, the members of the San Bernardino County Board of Supervisors at their June 12 meeting tiptoed around the prospect that the cooperation they extended to four cities over the last three years will result in a financial loss to the county of somewhere in the neighborhood of $20 million annually. Clouding the discussion of fiscal year 2018-19’s $276.6 million county fire department budget were hints that extending agency-to-agency privilege to government officials in the cities of San Bernardino, Twentynine Palms, Needles and Upland to let them increase the taxes their residents pay and simultaneously ditch their local fire departments is now about to exacerbate an already alarming $29 million deficit the county has in running its own fire department.
Then, as boldly as before, a majority of the board moved to avail itself of the same ploy used by the four cities to bypass voters in creating a new taxing structure and shore up the county’s own fire department revenue shortfall.
Since 2015, the county and its division which adjudicates jurisdictional disputes, known as the Local Agency Formation Commission, have assisted the cities of San Bernrdino, Upland, and Needles, as well as the Twentnine Palms Water District, shed what were their previously municipal or locally administered fire departments and allow the county’s fire department, also referred to as a fire district, become the provider of fire safety service in those communities. Many of those among the civically active set consider the fashion in which this was done to have been particularly craven. In each case, those, or most of those, impacted by the changeover lived in an incorporated city in which fire protection provided by the municipal or local fire department had been in place since that particular city’s incorporation. As a basic service, fire protection as embodied in the presence of municipal fire department had been something the residents believed they were simply entitled to. Indeed, in the cases of Upland, San Bernardino and Needles, the municipal fire departments were traditionally considered a part of the city’s line of in-house operations, the costs of which were defrayed by those cities’ property tax allotments from the county. In the case of Twentynine Palms, the 29 Palms Fire Department had been in existence since 1957, and had always been under the control of the Twentynine Palms Water District, which serves the 55 square miles within the Twentynine Palms City Limits and the 33 square miles of unincorporated county area that also falls under the water district/fire department’s 88-square mile jurisdiction. The Twentynine Palms Fire Department’s operations were entirely defrayed by an annual $80 special assessment imposed upon all residential and commercial parcels within the water district boundaries.
In structuring the county’s takeover of fire service, more than a simple handoff of the service was at play. Rather than just shuttering their fire departments and contracting with the county for the delivery of fire service, the cities applied with the county’s Local Agency Formation Commission, which is also known by its acronym LAFCO, to have the entirety of their city limits annexed into a fire service and assessment district whereby each parcel owner in those cities was assessed a $143-to-$156 per year charge on top of their existing yearly property tax bill, creating a revenue stream that was used to defray in whole or part the cost of having the fire protection service delivered by the county. In this way, the cities saved in large measure the money they were previously expending to run their own fire departments. Getting out from underneath this burden and transferring it to their residents represented for these cities a continuous and ongoing yearly windfall tantamount to an added tax on their residents, who saw no respite in their property tax rates and now find themselves paying for a service they had been previously paying for through their property taxes. Layering onto those cities’ residents an additional tax was carried out without a vote of those to bear the new tax, as is required by the California Constitution. This was effectuated through the use of what many considered to be sleight-of-hand: instead of holding a straight up-and-down vote of those to be annexed into the assessment districts in which they were free to choose whether to create and subject themselves to the new tax, the Local Agency Formation Commission used an arcane provision of state law to subject the ratification of the assessment district to a so-called protest process. Under the protest process, residents and landowners of those cities were invited to make a protest to being inducted into the assessment district. All those who did not mail in a letter of protest were deemed to have supported the annexation. If 25 percent of those living within that particular city’s confines lodged protests, then an election would have been held. If 50 percent plus one or more of the residents lodged protests, then the effort to create the assessment district would have failed. City and county officials, banking on the consideration that apathy and a lack of public awareness about the significance or very existence of such protest opportunities doom all such protest votes to failure and that such
protest processes historically garner only minimal attention and participation of the electorate, in every case were able to see the assessment districts formed. Nevertheless, in all of the communities shoehorned into the annexations, a small but vocal contingent of the residents bitterly resented the ploy their elected officials had utilized to up their taxes while regionalizing a local service to which they had been accustomed, and inveighed against what their elected officials had done to them.
It so happened that when the county and the City of Upland had effectuated the closure of the Upland Fire Department, they included neighboring San Antonio Heights, an unincorporated but affluent community of just under 3,400 residents, in the fire service district annexation, imposing on them a yearly assessment of $152.68 on top of the annual property tax each property owner was already paying. The San Antonio Heights Association, a collective of that community’s home and property owners, encouraged and supported by a number of Upland residents, retained attorney Cory Briggs to initiate legal action to challenge the annexation. In the lawsuit Briggs and his law partner Anthony Kim drew up, they asserted that the “protest vote” is not an actual vote.
The city, represented by attorneys James Markman and Donald Wagner, the county, represented by Laura L. Crane, and LAFCO, represented by Ginetta L. Giovinco, have staked their assertion of the legality and enforceability of the assessment district on the precedent-setting case of Sunset Beach v. Orange County LAFCO, in which an appellate court ruled against a small population of residents living in Sunset Beach, what had been an unincorporated county area in Orange County adjoining and partially surrounded by the City of Huntington Beach. Those citizens objected to being annexed to the city with the requirement that they also pay preexisting Huntington Beach special assessment district taxes. Those Sunset Beach residents maintained they had not voted on the assessments and therefore should not be forced to pay them. After the trial court agreed with Orange County’s Local Agency Formation Commission and ruled the annexation could proceed without a vote and Sunset Beach’s residents were not protected against taxes that they had not voted on, the residents appealed to the state appellate court, which upheld the trial court and ruled that the Sunset Beach residents had to accept the assessments once they were a part of the city.
In the Sunset Beach case, the property was annexed into a nearby and adjacent jurisdiction and the appellate court held that Proposition 218, which offers California residents an assurance that no tax a majority of voters has not approved can be assessed, does not apply to improvement assessments already in place when an annexation of property into an adjoining jurisdiction occurs. In the case of Upland and San Antonio Heights, however, they were annexed into the county’s Fire Protection Zone 5, which is neither adjacent to nor near them. Rather, Fire Protection Zone 5 provides county fire service to the communities of Silverlakes and Helendale, which are located in the Mojave Desert south of Barstow, 64 miles driving distance or 49 miles as the crow flies from Upland and 47 miles from San Antonio Heights.
Moreover, according to Briggs, another state voter approved initiative, Proposition 26, offers even more comprehensive protection against any new taxes not approved by a vote than does Proposition 218. Proposition 26 was passed in 2010, the same year that the Sunset Beach case was ruled upon, and was not yet in effect when the Sunset Beach case was considered and a decision on it rendered.
The San Antonio Heights Association suit has survived not one but three attempts by the county, the city and LAFCO to have it dismissed, and the judge hearing the case, David Cohn, has indicated he sees merit in some of the issues Briggs and Kim have raised. Trial is set to begin on August 22.
At stake in the case is a principle that is larger than San Antonio Heights, Upland, the county fire department, LAFCO and the county. While any ruling by Cohn in this case at the trial court level is not binding beyond the immediate matter being litigated, were he to rule that the assessment district was not properly imposed without an actual vote, that could resonate throughout the state if the governmental entities seek to appeal such a ruling and it is upheld. Such an eventuality would have serious procedural consequences on other cities, counties or jurisdictions that have relied on protest votes to usher new taxes in the side or back door. Such a ruling in favor of San Antonio Heights in the immediate case would dissolve the assessment district in San Antonio Heights at the very least and potentially in Upland. Moreover, residents in San Bernardino, Twentynine Palms and Needles are doubtlessly watching to see what the outcome of the litigation brought by the San Antonio Heights Association will be. If Cohn ultimately rules against the city, the county and the Local Agency Formation Commission, it is a virtual certainty that taxpayer groups in the four cities will beat a path to either Briggs’ or some other lawyers’ doors to clone the San Antonio Heights suit and file a virtually indistinguishable action against the county, LAFCO and their cities or, in the case of Twentynine Palms, the water district.
On June 12, the board of supervisors took up the 124th item on that day’s agenda, which called for conducting a public hearing on the San Bernardino County Fire Protection District’s 2018-19 recommended budget, the adoption of a resolution approving and adopting that budget, including signing off on appropriations, operating transfers out, planned contributions to reserves, quantifying available reserves and budgeted staffing, and authorizing the department’s final fund balance adjustments for all of the line items in the budget.
During the hearing what was revealed was that outlays to run the fire department countywide this year are projected to increase $18 million in Fiscal Year 2018-19, entailing total anticipated expenditures of $276.6 million. In the same 12 month period running from July 1, 2018 until June 31, 2019, the projected revenue from all sources other than fees from contracted ambulance service providers is expected to reach no more than $247.3 million, meaning the fire department will run a $29.3 million deficit. What is more, according to County Fire Chief Mark Hartwig, that deficit is anticipated to continue on a yearly basis for the next decade, “although,” he said, “the further we get the harder it is to predict property taxes and the trends on the primary funding for the fire district, which are property taxes. Last year’s budget of $258 million was increased by $17.9 million to $276 million [this upcoming year],” Hartwig said.
In the short term, meaning for 2018-19, the county fire department will plug the $29.3 million gap using $11.9 million in reserves it has on hand and accepting $17.4 million in funding from the county.
“I will tell you I am in a position this year that I was in last year I think we were trying to avoid, but it was the use of $11 million – actually closer to $12 million – in reserves and fund balances from the district to do business this year,” Hartwig said. “Its been called in the past a subsidy. It’s been called a supplementing of the fire district.” Hartwig referred to the $17.4 million in funding the county would put up a “service zone enhancement” which was put in place pursuant to a “county M[emorandum] O[f] U[nderstanding]” with various relatively remote unincorporated areas. “The county has invested in the fire district to provide services in areas throughout the district that don’t generate enough property taxes to provide the level of services they currently have provided to them by the fire district,” Hartwig said. “The board has continued to invest in not only those areas but some specific programs that the district provides.”
The county is losing a substantial amount of money on some to those efforts, Hartwig said, including putting up “$7.7 million to subsidize ambulance service and offset the losses from the low volume of calls in Lucerne Valley, Wrightwood, Phelan, Searles Valley, Lake Havasu, Yucca Valley, Lake Arrowhead and Baker.” The county must, Hartwig said, “pay for stations in areas that do not have enough money to pay for those services. The current rate of spending for fire services is not sustainable because of our reliances on one-time funding.”
Prepping his ultimate pitch by presenting the doom and gloom prospectus of the fire department’s fiscal condition, Hartwig ultimately sought to usher the board toward the option of expanding Fire Protection Zone 5, which was referred to by the acronym FP-5, to include virtually all of the unincorporated county areas in desert areas of the county, which lie within supervisorial district’s 1 and 3, which are represented by Supervisor Robert Lovingood and Supervisor James Ramos, respectively.
Saying there are “currently ten tax service zones within the county,” Hartwig told the board, “FP-5 is the largest. The board of the fire service zone [meaning the board of supervisors] can expand that zone to maintain or improve services within the county fire district.” He said the “expansion would generate $26.9 million.” The expansion of the district can best be effectuated, Hartwig said by having the board of supervisors simply impose the annexations on the areas in question through its own authority without a vote of those to be forced into the zone. “We would recommend from the district that we would adopt a protest process,” Hartwig said, calling upon the board to do so immediately. “Act now to generate income by August 2019,” he said.
Hartwig outlined other options, which included holding an election in which the members of the various unincorporated communities would be asked to voluntarily, through a majority vote, annex into the assessment district. Hartwig, with a display of little enthusiasm, said the county could next schedule a “new special tax election in March 2019 to generate income by August of 2020. That requires a two thirds vote.” He also said, again without enthusiasm, that the board could choose to “reduce services to match revenue” in those areas of the county where little property tax is coming in.
Deficit spending by the fire department cannot continue indefinitely, Hartwig said. “As your fire chief of seven years who’s responsible as a taxing authority to provide services to the communities that we protect, I recommend that we do something, that we don’t continue to rely on reserves or one-time money. The county board of supervisors, you, have invested in the fire district and the communities in this county. We’re thankful and the people of San Bernardino County specifically are safer and better off today because if that, but I don’t believe you have a legal obligation to do that. As a business practice I would like to find a more sustainable path forward. We don’t talk a lot about capital improvement and we don’t talk a lot about reserves. Not only are we not contributing again this year to our reserve funds, we are using our reserves and our fund balance. As we look at capital improvements, we aren’t fully refunding our vehicle replacement plan at this point. We do not have a viable or adequate capital improvement and replacement plan when it comes to fire stations and facilities.”
Fourth District Supervisor Curt Hagman said, “I do think we as a board should consider one of these two measures, if not both. I’m concerned that if we go with FP-5 that later on, with I think it’s a court case going through or legislation going through, that may reverse all those efforts. I think this is something we put in front of the voters and let them decide what levels of service they want.”
One of Hagman’s references was to a statewide initiative that petitioners have gathered signatures for and have submitted to the California Secretary of State. If passed by California’s voters it would do away with the protest process, preventing governmental entities from forcing residents into a service assessment zone or imposing taxes on them without a bona fide up and down vote. Governments would no longer be able to invite those to be annexed, assessed or taxed to protest and deem those who do not lodge a protest as supporting the tax or being put into the assessment district. Reportedly, the language of the initiative has a retroactive clause in it that would make it applicable to any annexations begun this year. Hagman expressed concern with the impact passage of the initiative might have on voters in the unincorporated areas if the annexation gets rescinded and the county then seeks a voter-approved assessment district creation. He said voters might at that point vote en masse against the creation of the district because they will perceive the effort as redundant.
Hagman’s other reference was to the lawsuit filed by the Sn Antonio Heights Association.
Second District Supervisor Janice Rutherford, whose district includes Upland and San Antonio Heights, expressed opposition to attempting to impose annexations into FP-5 without a vote. Rutherford last year did not make any opposition to the Upland/San Antonio Heights annexation, garnering the enmity of a significant number of her constituents. It nearly cost her the position she holds on the board of supervisors. First elected in 2010, Rutherford was up for reelection in 2014. In that race she cruised to an easy and lopsided victory over her opponent, Randolph Beasley, collecting 21,077 votes, or 68.13 percent to Beasley’s 9,861 votes or 31.87 percent. This year, however, Rutherford was put to the test against Marc Steinorth, who capitalized on LAFCO’s use of the protest procedure to ratify the annexation and Rutherford’s tacit acceptance of saddling residents with assessments against their will. Earlier this month, on June 5, Rutherford polled 30,231 votes or 53.24 percent in managing to stay in office, though Steinorth was nipping at her heels with 26,555 votes, or 46.76 percent.
“You’ve heard a lot of comments that have come out of the Upland Community since their annexation process into FP-5,” Rutherford said. “We’ve all gotten an earful on that. I make a distinction between a city that had a city council voting for them and an unincorporated area that doesn’t have that voice. LAFCO’s action to include San Antonio Heights in FP-5 by solely a protest vote has had absolutely horrific reactions and reverberations in the community. They are to say outraged would be an understatement. Our unincorporated residents want to have a voice and a vote in what taxes they are paying, and I believe they deserve to have this information presented to them in very realistic terms. I would support an affirmative vote in the unincorporated areas. I believe that not only gets the buy-in of the community but it also addresses the potential issue of a ballot measure that undoes an annexation by protest only. I know that’s a heavy lift and a heavy lift just like a special tax measure would be. It is hard to go out and explain to people why they should pay more taxes. But if they’re not willing to do that, then the consequences are the different service levels. We need to have that honest conversation with our residents and allow them to make the decision.”
Though Fifth District Supervisor Josie Gonzales would ultimately reverse herself with her vote, she initially seemed to enunciate the belief that those to be put into an assessment district should have the opportunity to vote on it. “I have long asked that the table of costs be put before the public, that they understand that if there is an inability for them to pay their full share of the cost of the delivery of high quality fire response services that they need to be aware it is within their realm to decide for themselves ‘Do I want to pay the additional costs through a voter approved special tax assessment or not?’ And if they choose not, then let’s then look at what can and cannot be provided under those parameters and deal with reality,” Gonzales said. This meant, she said, that the level of fire service would have to be reduced in those unincorporated areas of the county that were not overlain with an assessment district. She said the delivery of fire service to the more remote areas of the county was more expensive than in the more heavily populated and accessible regions of the county. “I have not been in favor of using the general fund money to subsidize the difference in costs,” she said.
Discussion at one point returned to the possibility that the statewide initiative would do away with protest procedures and the possibility this would complicate or undo the contemplated annexation of the county’s unincorporated areas into FP-5. Of some issue in this discussion was the retroactive provision in the pending initiative, which is now being evaluated by the California Secretary of State to determine if the petition to put it on the November ballot has enough valid signatures of voters to qualify.
Hartwig was asked about his concern that the initiative, if passed, would cancel the annexation.
“There is a lot of talk, from my firsthand knowledge, in Sacramento about the constitutionality of retroactivity, and so even if the electorate were to approve that ballot initiative moving in a retroactive format that would negatively impact special districts and others that might rely on it, that might be challenged and in fact that’s what we’re hearing,” Hartwig said in seeking to have the board disregard the threat posed by the initiative.
Well into the discussion it appeared that the sentiment of a majority of the board was to either not use the protest process or hold off on committing to initiating it at least until it is determined whether the anti-protest process initiative qualifies for the ballot. But with Hartwig pushing the board hard to initiate the process at once, Third District Supervisor James Ramos militated strongly in favor of using the protest process to ensure that the revenue to offset fire department costs and cure the department’s deficit be used. When other board members brought up the alternative of holding a vote to approve a special tax in the unincorporated county areas to pay for enhanced fire service, Ramos by his questioning demonstrated that the fire district had not firmed up the special tax proposal even to the point of knowing how much each property owner would be assessed, a tacit admission that the special tax which the residents would have the opportunity to vote upon was not truly a serious suggestion by the fire district.
Rather than take that as an indication that Hartwig was not giving the board an unbiased smorgasbord of options, Ramos instead suggested the board support the fire chief in the direction he wanted to go and drop consideration of the special tax vote for the time being and concentrate on the protest process option.
“That option [i.e., the special tax vote] is more of an idea that came forward and trying to figure out if the board wants to pursue that,” he said. “We would have to have more information on that to make a decision. The one we’ve been presented with is FP-5.”
By her body language, demeanor and verbal reaction, County Counsel Michelle Blakemore appeared to be troubled by the board’s sudden veering back toward making an immediate decision to initiate the FP-5 annexation while excluding the option of scheduling a vote of those in the county’s unincorporated with regard to a special tax. Three times she began to draw a distinction between the voting protocol for approving a special tax and the protest process but was interrupted in her explication each time by Ramos. She discontinued her effort when in expressing herself she came to the brink of being argumentative with Ramos.
When Hartwig was asked directly what he considered to be the best solution, he did not hesitate to reiterate that using the protest process to impose on the residents of the county’s unincorporated areas a tax they are not now paying was preferable to giving them a chance to say no to the assessments at the ballot box.
“I can tell you from the fire district’s perspective, we like that [protest process] option,” Hartwig said. “We believe that as the board looks at maintaining or improving service levels within the district, that the board has the authority to essentially apply that FP-5 service zone over the areas that don’t currently have a service zone. Most of the sustainable districts that I’m aware of, and I do quite a bit of work throughout the state, don’t solely rely on property tax revenue. They rely on some other type of revenue.”
The proposed solution that proceeded from Hartwig’s suggestion, which was already outlined in the agenda item’s back up documentation, was expanding the scope of the assessments already levied in San Bernardino, Upland, San Antonio Heights, Twentynine Palms, Needles, Helendale and Silverlakes to virtually every other unincorporated community in the county where the county fire department provides fire protection and emergency medical service.
That parcel assessment would run to $157.26 yearly as of 2020 and would bump up three percent annually thereafter. All of the unincorporated county area not already in an assessment district would be welcomed into Fire Protection Zone 5.
As that motion moved toward a vote, Rutherford sought one last time to dissuade her colleagues from using the protest process to levy the assessments on those areas’ residents.
“This was the process that LAFCO imposed on the San Antonio Heights residents,” she said. “The outrage from that community at being limited to a protest vote when they wanted to all be able to have a say at the ballot box was absolutely overwhelming. If you go forward with the FP-5 vote today, you are buying that from every other area of the county. Having been the brunt of that, even though I didn’t vote on the LAFCO measure, I can assure you it is not pretty to have your residents and your taxpayers not be able to vote on a tax being imposed on them. People want that. It is a basic right. They are going to demand it. And I’m going to stand up for them and demand that of us today.”
The vote to initiate the boundary change for FP-5 and also to adopt the resolution to establish the protest procedures was 3-to-2, with Ramos, Gonzales and Hagman voting in the affirmative. Lovingood, who earlier had stated that much of the emergency response of the fire department in the First District was to situations involving travelers on the highways through the district, voted along with Rutherford in opposition.
Information provided to the Sentinel suggests that Hagman’s expressed concern about the continuing viability of the protest process, the inclusion of the option to conduct a special election to raise taxes to defray fire department expenses in the county’s unincorporated areas and Blakemore’s reaction to Supervisor Ramos’s push to initiate the protest process are indications that the office of county counsel has made a sober assessment of the case filed by the San Antonio Heights Association, and the county’s attorneys are less than sanguine about the pending outcome of that litigation. If the San Antonio Heights Association prevails in its suit, the county would remain legally bound to deliver fire service to Upland and San Antonio Heights but would be cut off from the revenue it is now drawing from the assessment district. If similar legal actions proceed against LAFCO, the county and the cities of Needles and San Bernardino along with the Twentynine Palms Water District and end in the same outcome, the net cost to the county would at present run close to $20 million annually.
By Mark Gutglueck