"Your tax dollars at work!" proclaims a sign at the edge of the road, where a public works project is under construction. If we were to see this sign in Calimesa, a city in the San Gorgonio Pass area of western Riverside County, we might be forgiven for pausing and trying to parse its meaning.
When the sign says "your tax dollars," what exactly is the sign referring to? The taxpayers of Calimesa? Or the taxpayers in neighboring Beaumont, whose tax dollars are now flowing to Calimesa as a result of a settlement to avoid litigation between the two cities.
The peculiar settlement between Beaumont (population 11,000) and Calimesa (population 7,800) could be characterized as one of those "don't-try-this-at-home" tricks. In this case, the trick not to try is attempting to readjust the spheres of influence of two neighboring cities — and then not completing the job. The ensuing standoff between the two cities and the generous payoff that followed is exactly the kind of wrangling and side-deal-making that the Cortese-Knox-Hertzberg Act and Local Agency Formation Commissions are supposed to avoid.
A massive residential subdivision, known as Oak Valley and covering more than seven square miles, is the gambit in this small-town tragi-comedy. The specific plan for the project, approved by Riverside County for an unincorporated area of the county, entitles the developer, Oak Valley Partners LP, to build up to 13,000 single-family homes, giving the Oak Valley subdivision a larger population than Beaumont and Calimesa combined currently have.
At issue is the last bit of Oak Valley that has not yet been incorporated, a 2.7-square-mile area that surrounds The PGA of Southern California Golf Club at Oak Valley. By itself, this area has entitlements for 4,000 houses.
During the 1990s, LAFCO had placed nearly the entire unincorporated portion of the project within Beaumont's sphere of influence. In the late 1990s, Beaumont and Calimesa negotiated about splitting the Oak Valley subdivision more evenly between the two cities. According to an agreement dated July 23, 1997, Beaumont would give up its claim to the golf club portion. The two cities shortly thereafter sent applications to Riverside County LAFCO requesting the sphere change.
A side story, which or may not be meaningful to this case, is the highly in-grown nature of local government during this period. Alan Kapanicas, Beaumont's city manager then and now, was also contract city manager for Calimesa. That position is currently filled by Harry Jensen. Beaumont city staff prepared the sphere-change applications for both Beaumont and Calimesa, according to George Spiliotis, executive officer of Riverside County LAFCO. Later, according to Spiliotis, Calimesa asked LAFCO to put the sphere amendment application on hold.
In spring of 2002, according to Calimesa's Jensen, "we started working with LAFCO to resume progress to complete the application and finalize the transfer of the sphere of influence and simultaneously annex that area." Yet about two months after Calimesa re-started the annexation process, "Beaumont and a prospective (land) purchaser started to talk to LAFCO about annexing the same area into the city of Beaumont."
Perhaps Beaumont considered the 1997 agreement a dead letter when the city informed LAFCO in more recent times that the city wanted to incorporate the golf club area. We do not really know, because we were unable to reach Kapanicas or any other Beaumont city officials, including the mayor, who did not return repeated calls for this story. We do know this: Calimesa officials got wind of the plan and threatened to sue both Beaumont and LAFCO.
The two cities had public and sometimes acrimonious discussions about a settlement. In December, they finally hit upon a deal. In my view, it is a generous settlement for Calimesa.
Basically, the agreement works this way: In exchange for renouncing its bid to annex the territory that Beaumont wants, Calimesa receives $100,000 from the developer, Oak Valley Partners LP. The city will also receive a fee surcharge of $100 for each of the 4,000 homes from the land developer and the homebuilder, Pardee Oaks. In addition, the two cities will share sales and property tax revenue from commercial development on a 50-50 basis for the next 15 years. Similarly, the two cities will share transient occupancy tax for 25 years. A tiny bit of the property, about 1 acre adjacent to an existing retail center, will be annexed by Calimesa.
Maybe I am being uptight, but the way this pie was carved up bothers me. It is being called tax sharing, but it really more like a tax shakedown. Now, I think tax sharing can be an enlightened form of public policy. It is unfortunate that the peculiarities of the current California tax code tend to make competitors and enemies out of neighbors. Rather than raiding each other's retailers, killing each other's projects and wasting public money in endless court battles, cities are often better off sharing the tax benefits of major projects.
The difference here, however, is that this ostensive tax-sharing plan is not based on policy. The money that Beaumont is giving to Calimesa is not based on some notion of the regional good. It is a penalty that one city is paying for allegedly trying to screw its neighbor. Without a clear benefit to Beaumont taxpayers, the tax-based payoff to Calimesa seems like a confusion of the nexus between taxpayers and the public benefits that taxpayers can reasonably expect to receive. In other words, this "tax-sharing" deal is one further example of neighbors fighting and despoiling one another, rather than cooperating.
Beaumont taxpayers might well ask where their tax dollars are going. If they are interested in finding out, all they need to do is drive to Calimesa and look for a sign that says, "Hey Beaumont — Your tax dollars at work."