Lake Gregory Incorporation Drive Hit With Financial Snag

Financial considerations and complications have undercut the previous fervor of the effort to incorporate Lake Gregory and create what would be San Bernardino County’s 25th municipality.
On July 16, a heavily-attended forum put on at the San Moritz Lodge by the Incorporate Lake Gregory Committee attracted local residents who are both in favor of and opposed to seeing the environs of Crestline becoming its own integral civic entity.  The standing room only crowd heard a number of informational briefings from cityhood advocates relating to the requirements that must be met for the entity overseeing jurisdictional matters, the San Bernardino County Local Agency Formation Commission, to sign off on allowing the city to form.
Ultimately, the question turned to hard fiscal considerations and whether the area on its own had the economic muscle to sustain the financial burden of municipal operations.
Several factors are at play in this consideration, one of the foremost being the fate of Assembly Bill 818, now pending before the California Legislature. In 2011, a budget trailer bill rushed through to passage during the state budget crisis, Senate Bill 89, made future city incorporations unviable by vectoring gas tax away from newly incorporated cities. Traditionally, a significant percentage of annual vehicle licensing fee revenues were handed off to counties and cities to cover local infrastructure improvement costs. With the advent of Senate Bill 89, the state started hogging the vehicle licensing fee for itself. Cities and counties bellowed like banshees over that, and when they did, the legislature relented by enacting legislation to let the state keep the vehicle licensing fee while having a roughly equivalent modicum of property taxes remain with cities and counties. That change was applicable only for preexisting cities. Those incorporated afterwards were out of luck and out of money.
AB 818 would provide future incorporations with a financing solution that was developed by the Legislature in 2017, when it was seeking to address the financial harm caused by SB 89. The solution is based upon a statutory formula, based on the vehicle licensing fee-property tax swap, one that would provide new cities with shares of property tax to offset the amount of vehicle license fee revenue they otherwise would have received. In future years, the amount will be adjusted according to the same rules applied in the vehicle licensing fee-property tax swap to other cities. In short, these cities will be treated equally with all other cities under the exchange.  Assembly Bill 818 would establish a separate vehicle license fee adjustment amount for a city incorporating after January 1, 2012.  Passage of Assembly Bill 818 would likely ensure that another $1.8 million would come into the City of Lake Gregory’s coffers than it would otherwise receive.
Another issue that was brought up was that earlier calculations of the new city’s viability had been based upon financial information provided by the county last October. There have been downward revisions since that time, however.
Cityhood proponents had been functioning under the optimistic forecast of the future incorporated Lake Gregory receiving a whopping 63 percent of ad valorem taxes that currently go to the county. San Bernardino County has since reduced that pass-through projection to roughly 45 percent. This would make the financial feasibility of operating Lake Gregory as an independent municipal entity questionable at best.
Without the Assembly Bill 818 windfall and with the county stingily hanging onto the extra 18 percent of revenue available in the Crestline/Lake Gregory area, the City of Lake Gregory would be running in the red right from the get-go.
As a consequence, those attending the July 16 meeting were told, the effort to incorporate Lake Gregory has been put on hold. Things are likely to stay that way until the outcome of Assembly Bill 818 – passage or rejection – is known. That will not come at least until January.
While incorporation advocates remain confident that cityhood represents a better future for the Crestline/Lake Gregory area, they will put the drive on hold until after 2020 arrives, they said.
Meanwhile, a head of steam is building for those working crosswise to the incorporation advocates. That group, functioning under the straightforward moniker Don’t Incorporate Lake Gregory, has established a website,
Since 2012, efforts to cut newly incorporated cities in on the property tax in lieu of vehicle license fess have been undertaken in a dozen different bills. Only seven made it out of committee. Four were vetoed by Governor Jerry Brown. Assembly Bill 818, a virtual clone of a bill that died in committee last year, has been suspended in committee.
There are always tussles between counties and their cities over property tax revenue. A major issue on whether Lake Gregory will be incorporated hinges on whether county officials will covet so much of the local tax revenue in the area that not enough money will remain for the city to be viable.
-Mark Gutglueck

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