HMB leaders threaten to dissolve city if sales tax fails

By on Tue, August 31, 2010

The County Times has a good summary of the Half Moon Bay city council’s threatened dissolution if its proposed 1% sales tax increase is rejected by voters. The full article is well worth reading.

"The council has done everything in its power to keep the city whole," [city county member John] Muller said. "If it doesn’t pass, we could seriously not be in business much longer." [...]

City Manager Michael Dolder admits disincorporation is one of the options on the table now. The City Council already cut $900,000 from the current budget—including half its employees—and imposed furloughs on those who remain. Some of the cuts were needed to pay for the Beachwood lawsuit settlement, a $15 million burden the city will shoulder in bond payments for the next 20 years.

Despite those efforts, the city will finish the current fiscal year with a deficit north of $500,000. And tourist dollars, the city’s economic mainstay, aren’t likely to flow in anytime soon.[...]

Although the law lays out a clear procedure for disincorporation, including public meetings and a final majority vote by residents, it’s unclear how it could work from a practical standpoint, said Martha Poyatos, executive director of the San Mateo County Local Agency Formation Commission.

"We’re in uncharted territory," she said.

One thing is certain: disincorporation is not a bailout. The county would lay claim to revenues, including Half Moon Bay’s property taxes, sales taxes and hotel taxes, but not its liabilities. Today’s Half Moon Bay residents would be required to assume the debt burden of Beachwood bond payments, which would likely be added as a lien on their properties, according to Assistant County Controller Bob Adler.

Disincorporation: how would it work?

  • A City Council, school district, special district or group of residents can initiate disincorporation with the Local Agency Formation Commission, or LAFCo, by presenting a petition signed by 25 percent of voters.
  • LAFCo would then hold public hearings and choose whether to affirm the proposal with conditions or deny it.
  • A special election would be held, in which a majority of voters have to approve the terms of disincorporation.
  • The county Board of Supervisors would work with LAFCo and the city on disposition of the city’s assets.
  • Note: Disincorporation proceedings can be subject to legal challenges.