LAFCO Approves Incorporation Feasibility Report

Board members and staff of the county Local Agency Formation Commission (LAFCO) heard a consultant's report on feasibility of Castro Valley cityhood at its meeting last Thursday, November 9 at Dublin City Hall.

If Castro Valley became a city, it would need to create more revenue than the County would provide to cover its costs, according to a consultant’s report before the County’s Local Agency Formation Commission (LAFCO) last Thursday.

Consultant Richard Berkson of Berkson Associates presented a revised financial feasibility update and recommendations to the LAFCO Board. The report considers a plan to incorporate Castro Valley by itself, or Castro Valley with the inclusion of the Eden Area (San Lorenzo, Hayward Acres, Ashland, and Cherryland) and Fairview, or the incorporation of the Eden Area and Fairview, but not Castro Valley. No new cities have been formed in California since 2011.

The LAFCO Board voted to accept the report but did not take a stand on Castro Valley cityhood. If residents desire cityhood, it will take either a petition signed by a designated number of registered voters or an application by a government legally able to propose a new city.

Contrary to belief by some, that can’t be LAFCO, said board President Karla Brown. “It’s not legal for us to apply to form a new city.”

Funding Gap

While plans to incorporate the unincorporated areas nearby would have an even bigger gap between costs and revenues if they pursued cityhood, Berkson noted, he did suggest Castro Valley cityhood proponents should consider including the Canyonlands area (parts of Crow Canyon, Cull Canyon, Palomares Road) in their efforts, as it would have little effect on financial feasibility.

Currently, Alameda County spends $46.9 million a year on services to Castro Valley residents. If Castro Valley became a city, the County would only receive $35.9 million—a gap of about $11 million that the new city would have to make up, Berkson said in his report.

One potential new revenue source from the state’s County Service Area (CSA) laws could lower that gap to about $2 million, much closer to a break-even point. CSA funds are money the state pays the County for public safety in unincorporated areas that could shift to a new city. The consultant’s main finding assumed the County would continue to receive those funds.

The Berkson Associates report mentioned a community service district as one way Castro Valley could gain more control over services without forming a new city. The consultant said annexation to another city was also an option, but one where Castro Valley’s needs would not necessarily take priority.

Frank Mellon, a Castro Valley resident, said the consultant’s findings bolster the case against cityhood.

“The negative numbers are higher than we saw back in July (in a preliminary report), by about $3 million,” he said, adding, “LAFCO has a fiduciary responsibility to residents not to go forward with a fiscally irresponsible plan.”

LAFCO commissioner Ralph Johnson, who has publicly backed cityhood, said that the law enforcement costs proponents used were quite conservative, and better data might change the feasibility picture.

“We need better numbers,” Johnson said.

Mellon urged Johnson to recuse himself from the discussion and vote due to his public advocacy of cityhood. LAFCO Counsel Andrew Massey said Johnson had no personal financial stake in the discussion and that the board was merely deciding whether to accept a consultant’s report, not to take any action on a proposed new city.

If voters or an agency did apply for Castro Valley cityhood, they or it would next be required to carry out another feasibility study at an estimated cost of $130,00-$180,000. However, said Jones, that might be reduced by $10,000 due to Berkson Associates having just done a feasibility study.

If the new study showed feasibility, the next stop would be negotiations over revenues with the County, seeking LAFCO approval, and a vote by Castro Valley residents. Two previous votes on cityhood, in 1956 and 2002, both failed.

Asked by a board member to sum up the mood of public meetings on cityhood, LAFCO Executive Officer Rachel Jones said people seemed interested in cityhood but a bit hesitant.