August 24, 1999
Los Angeles County Local Agency Formation Commission
383 Kenneth Hahn Hall of Administration 500 West Temple Street Los Angeles, CA 90012
Re: Request that Proposed "Initial Fiscal Analysis" be Eliminated from the Request-for-Proposals for a Comprehensive Fiscal Analysis of Proposed Special Reorganizations of the San Fernando Valley and Harbor Area
Honorable Commissioners:
Before the LAFCO for possible adoption and issuance is a draft request-for-proposals ("RFP") for the retention of a consultant to prepare comprehensive fiscal analyses ("CFAs") required for the two proposed special reorganizations of areas of the City of Los Angeles.[1]. The draft RFP would require five phases of work from the consultant. We believe that one task required in Phase 1 is flawed, under the law and as a matter of public policy, and ought not be part of the RFP that is ultimately adopted and issued. We have attached for your consideration a suggested revision to the RFP’s text to address the problem.
The objectionable task is the proposed "Initial Fiscal Analysis" ("IFA") for each of the two special reorganizations. Ostensibly included in the RFP as part of the implementation of Steps 1-4 of the LAFCO’s "Seven Steps to Special Reorganization Study," the IFAs constitute a radical departure from Step 4, portend a violation of the Cortese-Knox Local Government Reorganization Act of 1985[2], and are not consistent with the authority for the public monies for the Valley study that have been received and the additional monies that may be forthcoming.
Preparation of the IFAs will require the consultant to draft several alternative models for the proposed new cities in advance of the applicants submitting their proposals (Step 5), precisely the reverse order of work. Preparation of the proposal is the applicant’s responsibility. Cortese-Knox calls for the LAFCO to review proposals after they are submitted. The public funding is intended to fund the study of these proposals, not their creation.
I. Viewing Steps 4 and 5 in Context: The "Seven Steps" and How They are to Work.
Steps 4 and 5 are better comprehended when seen in the contest of the full "Seven Steps to Special Reorganization Study" adopted by the LAFCO on May 26, 1999:
Step 1 Applicant identifies needs for data collection.
Applicant submits to LAFCO what it believes should be requested, analyzed and reviewed in terms of data from the City of Los Angeles.
Step 2 LAFCO prepares a request for information.
LAFCO determines what it needs from City of Los Angeles in terms of data and how it is to be presented and prepares a request for information.
Areas to be addressed: revenue, expenditures, assets, liabilities, enterprises such as DWP, sewer, etc.
Step 3 Data collection.
City of Los Angeles responds to LAFCO’s request for information and provides comprehensive data. information must be geographically relevant.
Step 4 Review, analysis of data.
LAFCO reviews, analyzes, packages information submitted by the City of Los Angeles. Guidelines are established for applicant, City to prepare a response and a proposal.
Step 5 Applicant reorganization proposal.
Applicant submits proposal for Special Reorganization.
Step 6 Response to applicant proposal.
City of Los Angeles responds to Applicant’s proposal.
Step 7 Final plan - comprehensive fiscal analysis.
LAFCO prepares final plan based on all information gathered including proposals from Applicant and the City of Los Angeles. Feasibility determined.
Plainly, as to both applications the process has yet to reach Step 2 – when the LAFCO is to develop its request for information. The process logically continues with the City’s compilation of data (Step 3), the LAFCO’s review, analysis, and packaging of it (Step 4), the applicants’ presentation of their proposals (Step 5), the City’s response to such proposals (Step 6), and the LAFCO’s development of a final plan - comprehensive fiscal analysis (Step 7). The RFP, however, drastically changes the seven-step process to require the LAFCO’s consultant in Step 4 to develop, analyze, and present proposals for municipal organization in advance of the applicants’ submittal of their proposal in Step 5.
It is clear enough from the text of 1.1.10.1 of the proposed RFP that the consultant will be required to prepare proposals if it is to be able to deliver what is required:
Phase 1 will include the collection of data from the affected parties, analysis and organization [of] the collected data, preparation of fiscal analyses, and preparation of guidelines and time lines for preparation of applicants’ proposals and the City’s responses. X Consultant will: (1) review and analyze data collected thus far from the City and other affected parties; (2) submit to LAFCO for consideration, formal requests for information for the collection of additional data from the City and other affected parties; (3) assist in the review of formal responses to request for information received from the affected parties for responsiveness and sufficiency; (4) organize and analyze data collected from all affected parties; and (5) prepare a preliminary fiscal analysis for each proposed special reorganization (the "Initial Fiscal Analysis"). Each Initial Fiscal Analysis should set for the Consultant’s analysis of the data and information collected and include three year projections of municipal revenues and expenditures, including city start-up costs and repayment of any reorganization costs deemed appropriate, cost and revenue impacts on the budgets of the City and other affected parties based on possible alternative methods and variations in the organization and delivery of services by each of the new cities. Each Initial Fiscal Analysis will be distributed to the affected parties and may be considered by the applicants when preparing their proposals for special reorganization and by the City when preparing its response to each proposal. Each Initial Fiscal Analysis will form the basis for preparation of the Draft and Final CFAs.
(Emphasis added.) The IFAs will require development of detailed alternative municipal organization plans. The "three-year projections of municipal revenues and expenditures" will require an understanding of which municipal activities are to be undertaken by the new cities, the resources (assets and personnel) required to do so, and the debt burden to be borne by the new cities. "Start-up costs" will require assessment of how assets are to be divided between the existing city and the new cities. The "cost and revenue impacts on the budgets of the City and other affected parties based on possible alternative methods and variations in the organization and delivery of services by each of the new cities" will entail development of different municipal models. The IFAs are expressly intended to "form the basis for the preparation" of the CFAs and "may be considered by the applicants when preparing their proposals and by the City in preparing its response to each proposal."
The exercise thus contemplated for the IFAs will entail nothing short of the development of proposals for the two special reorganizations. These proposals, however, remain the responsibility of the applicants.
Proposals are needed. Thus far, the applicants have presented precious little in the way of describing the proposed new municipal governments. The LAFCO’s application form uses the word "proposal" in more than one place, and, indeed, includes a section entitled "The Proposal"[3]. The applications filed, however, left to the LAFCO the answers to the bulk of the questions about the scope of the proposal ("LAFCO will determine")[4]. The Valley applicant’s initial request for information did not expand much upon what it had stated in the application form[5]. The recently filed initial information request from the Harbor applicant tracks the Valley one (if not completely), but similarly fails to define the proposed new city.
Step 4 was to have been a review, analysis, and packaging of information submitted by the City and the establishment of guidelines for Steps 5 and 6 (proposal and response)[6]. Reasonably comprehended within review, analysis, and packaging are determinations on the sufficiency of the data supplied – its completeness, relevance, and usefulness. This work product would be turned over to each applicant, which would then be equipped to craft its proposal (Step 5), and to the City for its use in preparing a response (Step 6). To be sure, the draft RFP does require the consultant to assist in the review of data received "for responsiveness and sufficiency." But it also goes further. The IFA reaches far beyond review, analysis, and packaging of information in the required budget projections and analysis of variations in the "organization and delivery of services." That kind of analysis necessarily entails designing the new governments if only to analyze
them. Should this phase be transformed as contemplated the LAFCO will find itself in violation of its own procedures.
In regard to reorganizations, special of otherwise, the LAFCO possesses the power of review but not of initiation. Cortese-Knox clearly establishes a review-and-approval role for the LAFCO, a theme recurring throughout the statute.
The LAFCO’s power in regard to reorganizations is to "review and approve or disapprove with or without amendment, wholly, partially, or conditionally, proposals for changes or organization or reorganization."[7] This is not the power to propose. The CFA forms part of the executive officer’s report on the "application."[8] Statutory provisions concerning, for example, factors the LAFCO must consider in its review, the revenue neutrality requirement, and the determinations to be made by the LAFCO, all refer to a "proposal."[9] Proposals are thus essential and, as to reorganizations, it is not the LAFCO’s statutory role to prepare them.[10]
In having the IFAs perform much of the work properly borne by the applicants under Cortese-Knox, the LAFCO will place itself in the untenable position of having to review its own work. So situated, the LAFCO would run the risk of jeopardizing the public perception of its objectivity when it ultimately acts on the proposals.
Funding obtained to date and that being sought calls for funding of the study, not the development, of proposals for the two special reorganizations. The State funding of $1.8M in hand was expressly given for a "study" of the Valley special reorganization.[11] The conditional funding from Los Angeles County of $225,000 is for the same purpose.[12] Funding proposals pending in Los Angeles City government concern a study.[13] Expending any of these funds on the development of proposals, rather than their study, would constitute an improper use of the monies.
Much of the public and many public officials -- whatever their predisposition may be toward the question of secession itself -- perceive the wisdom of objectively studying the two proposed secessions from the City. The LAFCO’s "Seven Steps to Special Reorganization Study" rest on this foundation of public support. The IFAs, in their deviation from Step 4 through removal of the LAFCO from its customary role of reviewer, would undermine public confidence in the LAFCO’s work.
Respectfully submitted,
RICHARD J. RIORDAN Mayor
JOHN FERRARO President Member, 4th District Los Angeles City Council And Acting Mayor Los Angeles
CINDY MISCIKOWSKI Chair, Ad Hoc Committee on Secession Member, 11th District City Council
cc: Larry J. Calemine Executive Officer, LAFCO
Jeff Brain Valley Study Foundation, Inc.
Andrew Mardesich Harbor Study Foundation, Inc.
Each Member of the Los Angeles City Council
William T. Fujoka City Administrative Officer
Ronald F. Deaton Chief Legislative Analyst
(Comprehensive Fiscal Analysis of the Proposed Special Reorganizations
of the San Fernando Valley and Harbor City - dated August 18, 1999)
Revision of 1.1.10.1:
1.1.10.1 Phases in Preparation of CFAs.
Phase 1: Initial Data Collection and Fiscal Analysis (Steps
1-4).[14]
Consultant will: (1) review and analyze data collected thus far from the
City and other affected parties; (2) submit to LAFCO for consideration,
formal requests for information for the collection of additional data from
the City and other affected parties: (3) assist in the review of formal
responses to requests for information received from the affected parties for
responsiveness and sufficiency; and (4) organize and analyze data
collected from all affected parties; and (5) prepare a preliminary
fiscal analysis for each proposed special reorganization (the
Initial Fiscal Data Analysis"). Each
Initial Fiscal Analysis should set forth Consultant’s analysis of the data
and information collected and include three year projections of municipal
revenues and expenditures, including City start-up costs and repayment of
any reorganization costs deemed appropriate, cost and revenue impacts on the
budgets of the City and other affected parties based on possible alternative
methods and variations in the organization and delivery of services by each
of the new cities. Each Fiscal Data
Analysis will be distributed to the affected parties and may be considered
by the applicants when preparing their proposals for special reorganization
and by the City when preparing its response to each proposal. Each
Initial Fiscal Analysis will form the basis for preparation of the Draft and
Finals CFAs.
Consultant shall also assist the Executive Officer in the development, for consideration and adoption by the LAFCO, of guidelines and time lines for the applicants’ preparation and submittal of their proposals for special reorganization and for the City’s preparation and submittal of its response to each proposal.
Within one (1) month of Contract authorization, Consultant shall have
prepared and submitted to LAFCO a formal request for information or
additional information, as applicable, for the proposed San Fernando Valley
special reorganization, based upon its review of the data and information
provided by the City thus far. The Executive Officer shall provide
Consultant with a deadline for preparation and submittal of formal requests
for information for the proposed Harbor City special reorganization at a
later date. Consultant shall then prepare and complete an Initial Fiscal
Data Analysis, as set forth above, for each proposed special
reorganization, within a period of six (6) to nine (9) months of Contract
authorization, as specified by the Executive Officer.
Other Revisions:
Change the term "Initial Fiscal Analysis" to "Initial Data Analysis" throughout the remainder of the RFP.
[1] Request for Proposals: Comprehensive Fiscal Analysis of the Proposed Special Reorganizations of the San Fernando Valley and Harbor City (8-18-99 draft).
[2] California Government Code is 56000 et.seq.
[3] Application to Initiate Proceeding for Change of Organization/Reorganization/Special Reorganization
[4] Among the subjects treated in this way were the plan for providing services, how to deal with property, funds, and debt; and changes in services or costs to the public.
[5] It indicated an intention to claim local assets, but deferred how to deal with regional and central assets. It indicated a willingness to accept an equitable share of the debt, including pension obligations, and to share the existing workforce with the remaining city. It presented an approach for dealing with the proprietary departments.
[6] “#4 Review, Analysis of Data. LAFCO reviews, analyzes, packages information submitted by the City of Los Angeles. Guidelines are established for Applicant, City to prepare a response and a proposal.” Steps to Special Reorganization Study (Los Angeles LAFCO, May 26, 1999).
[7] California Government Code X 56375(a).
[8] California Government Code 56833, X 56833.1.
[9] See California Government Code 56841, 56845(b), 56851 (also referring to a “plan of reorganization, or any alternative plan of reorganization as set forth in the report and recommendation of a reorganization committee”), 56852.3, 56852.5, 56855.
[10] The 1997 legislation that amended Cortese-Knox to deal with the simultaneous detachment and incorporation then coined “special reorganizations” -- while changing the procedure for adoption of such proposals, see California Government Code 57103 -- did not revise the process by which LAFCOs are to review them.
[11] SB 160 authorized allocation of the monies by the State Controller to the LAFCO “for the purposes of c “Recommendation as submitted by Supervisors Yaroslavsky and Antonovich: Appropriate $225,000 for the purpose of conducting a study of the San Fernando Valley secession, contingent on the City of Los Angeles appropriating an equal amount....” Statement of Proceedings, Los Angeles County Board of Supervisors (7-7-99). conducting a succession [sic] study for the San Fernando Valley.”
[12] “Recommendation as submitted by Supervisors Yaroslavsky and Antonovich: Approximately $225,000 for the purpose of conducting a study of the San Fernando Valley secession, contingent on the City of Los Angeles appropriating an equal amount....” Statement of Proceedings, Los Angeles County Board of Supervisors (7-7-99)
[13] Partial funding of the Valley study by the City was the subject of a motion in the City Council (Bernson-Miscikowski-Wachs) that requested an appropriation to expend funds “for the City’s share of the cost of studying the San Fernando Valley secession proposal.” That motion garnered the support of the Council’s Ad Hoc Committee on Secession on July 29, 1999, and was sent to the Budget & Finance Committee.
[14] As used herein, “steps 1-4" refers to those steps set forth in the “Steps to Special Reorganization Study” attached hereto as Exhibit A.