LAFCo Initiated Dissolutions Rare

A Case Review - Ocean View MWD
California Special District, Vol. 3, Issue 4, July-Aug 2008


Consistent with California Government Code section 56375, a Local Agency Formation Commission (LAFCO) may initiate the consolidation or dissolution of an independent special district. This, however, rarely occurs. Indeed, an informal phone survey of LAFCO initiated consolidations and dissolutions from the beginning of 2003 through 2007 revealed that most county LAFCOs had either one or zero LAFCO-initiated consolidation/dissolution proceedings during that five-year time span. Nevertheless, with budget tightening occurring throughout the state during this current economic down cycle, special districts may be concerned that a push toward a LAFCO-perceived need for greater efficiency might lead to the initiation of consolidation/dissolution proceedings. The example below supports the notion that most concerns about a LAFCO-initiated consolidation/dissolution are without basis.

2004 Municipal Service Review

The Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 mandates that each LAFCO conduct service reviews prior to or in conjunction with Sphere of Influence (SOI) studies and updates. LAFCOs are also required to review and update the SOI for all agencies not less than once every five years.

Government Code Section 56430 requires LAFCOs to conduct municipal service reviews and prepare a written statement of determination with respect to each of the following:

(1) Growth and population projections for the affected area.

(2) Present and planned capacity of public facilities and adequacy of public services, including infrastructure needs or deficiencies.

(3) Financial ability of agencies to provide services.

(4) Status of, and opportunities for, shared facilities.

(5) Accountability for community service needs, including governmental structure and operational efficiencies.

(6) Any other matter related to effective or efficient service delivery, as required by commission policy.

Section 56430 does not require a LAFCO to initiate changes of organization based on service findings relating to the six areas listed above. A LAFCO’s municipal service review determinations, however, may potentially be used to initiate changes to services, local jurisdictional boundaries, spheres of influence, etc. Nevertheless, the comprehensive analysis provided by a municipal service review should provide all special districts with essential information necessary to improve the efficiency and quality of service delivery.

In 2004, Ventura County LAFCO published a municipal service review for all of the water and wastewater agencies located within Ventura County. Among the agencies considered was the Ocean View Municipal Water District (Ocean View). Ocean View was described in the municipal service review as follows:

In the 1973 Ventura LAFCO Special Districts Study, the Ocean View MWD was identified as one of the “defensive” districts ostensibly formed in the 1960s as a means of preventing the expansion of the Calleguas MWD. While some of the conclusions in the 1973 report were contradictory (the agency’s sole function was to retire bonded debt; the agency was formed to prevent saltwater intrusion), the conclusion was that the Ocean View MWD should be dissolved. The study noted that in 1967 the District, the United Water CD and the City of Oxnard entered into an agreement that allowed the City of Oxnard to purchase the pipeline. The United Water CD was a party to the agreement since the water is obtained for agricultural uses and at special rates. The bonded indebtedness was retired in 1992.

In 1985, the “Special Districts” study reinforced the recommendation that the Ocean View MWD be dissolved or consolidated but added that it might be appropriate for the change in governmental structure to be delayed until the bonded indebtedness was retired. No recommendation was included in the 1993 study.

The District currently serves approximately 50 customers located along Hueneme Road with agricultural water. It is suggested that the Ventura LAFCO Commission initiate proceedings to dissolve the Ocean View MWD. The City of Oxnard and the United Water CD are two possible successor agencies.

Thus, this chronology and recommendation show that dissolution of Ocean View had been repeatedly recommended by Ventura County LAFCO over the course of over 30 years and that its original reason for existence may have come to pass with the retirement of the bonded indebtedness in 1992.

2008 LAFCO Initiated Dissolution

In 2008, Ventura County LAFCO initiated the dissolution of Ocean View. Ocean View’s board of directors agreed with Ventura County LAFCO’s determination that Ocean View should be dissolved. Indeed, the board provided a unanimous resolution supporting the dissolution of Ocean View. Ventura County LAFCO, in its resolution approving the dissolution of Ocean View, provided that the City of Oxnard was designated as the successor agency. Thereby, the City of Oxnard assumed all of the rights and liabilities of Ocean View.

John Zaragoza, a Ventura County LAFCO commissioner, stated in the Ventura County Star that “the district was insolvent and getting deeper into a hole.” Kim Uhlich, Ventura County LAFCO’s executive officer, noted that “[t]he water district received minimal property tax revenue and lost customers due to high rates.” Further, she stated that “[t]he dissolution promotes greater fiscal and governmental efficiency.” The executive officer also noted that Ocean View was without employees. Thus, there were significant reasons to support Ocean View’s dissolution.

Lessons

Ocean View demonstrates that it may take a LAFCO a long time to act on the dissolution of a special district, even when arguably the dissolution might be logical. Though a LAFCO-initiated consolidation/dissolution is highly improbable, it is not recommended that special district board members and staff assume that there is no possibility.

If you are not aware of your local county LAFCO’s perceptions regarding your district, review the most recent municipal service reviews addressing the services provided by your district. Then, you will have an idea of where you stand with your local county LAFCO. If you do not like what you find, perhaps you may want to consider opening up a dialogue with your county LAFCO’s executive officer to attempt to resolve any outstanding issues.