Orange County Grand Jury
• 2011-2012
Independent Special Districts of Orange County, California "let There BE Light" Dragging Special Districts from the
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Findings and Recommendations 15 findings
F1
Most Orange County special districts, with or without the assistance of the Local Agency Formation Commission (LAFCO), have been incapable or unwilling to consolidate, absorb, or eliminate these outmoded and/or redundant agencies. LAFCO typically addresses larger issues such as merging of cities and elimination of “islands” within the county. The special districts themselves have not worked seriously toward their consolidation or demise. In this regard, the enterprise special districts and the non-enterprise special districts require independent evaluation and handling.
Related Recommendations (1)
R9
Each special district should contribute 1% of its unrestricted reserve fund to LAFCO to help finance preparing and directing the consolidation, absorption, or elimination, and the setting of standards for reserves for the special districts. These funds should be included in LAFCO‟s future programs and budgets until the consolidation, absorption or elimination of each special district is achieved. With these additional funds, LAFCO should begin meeting with each special district before the 2014 fiscal year is budgeted for consolidation, absorption and/or elimination of these districts. (See F1, F2, F3, F4, F5, & F6.)
F2
Special districts have made very little progress in complying with the recommendations made by various governmental agencies. To ensure recommendations are followed, more coor- dination and cooperation is needed from the city and county agencies.
Related Recommendations (1)
R9
Each special district should contribute 1% of its unrestricted reserve fund to LAFCO to help finance preparing and directing the consolidation, absorption, or elimination, and the setting of standards for reserves for the special districts. These funds should be included in LAFCO‟s future programs and budgets until the consolidation, absorption or elimination of each special district is achieved. With these additional funds, LAFCO should begin meeting with each special district before the 2014 fiscal year is budgeted for consolidation, absorption and/or elimination of these districts. (See F1, F2, F3, F4, F5, & F6.)
F3
Most non-enterprise special districts in Orange County have outlived their purpose and usefulness. Services that they once only available through the special district are now being pro- vided by the surrounding cities and the expanding county.
Related Recommendations (2)
R1
All special districts (except the Vector Control District and the County Cemetery District) should be eliminated from the county tax rolls and should rely solely on fees or the services of surrounding governments. (See F2, F3, F4, F5, & F6.)
R2
Community service districts should be absorbed either in the cities surrounding them or into surrounding private homeowners associations. Each community service district should meet with LAFCO and with the appropriate city or homeowner‟s association to develop plans and schedules for the future of these special districts. This meeting should be take place before Sep- tember 30, 2012. (See F3, F4, & F12.)
F4
The eleven non-enterprise special districts of Orange County founded before 1965 have not reflected the growth of the cities and county. The services that were unavailable from cities or the county have long since been made available as both the cities and county grew. Some of these special districts could be removed from the county tax rolls, and their services funded and absorbed by the county, surrounding cities or homeowners associations wherein they abide.
Related Recommendations (2)
R1
All special districts (except the Vector Control District and the County Cemetery District) should be eliminated from the county tax rolls and should rely solely on fees or the services of surrounding governments. (See F2, F3, F4, F5, & F6.)
R2
Community service districts should be absorbed either in the cities surrounding them or into surrounding private homeowners associations. Each community service district should meet with LAFCO and with the appropriate city or homeowner‟s association to develop plans and schedules for the future of these special districts. This meeting should be take place before Sep- tember 30, 2012. (See F3, F4, & F12.)
F5
The sixteen enterprise districts typically started as local agricultural irrigation providers and sanitation providers for local communities. These special districts have transitioned into providers of potable water and sewerage disposal for the cities that blossomed around them after 1950. These districts grew until their boundaries met a neighboring special district that was also growing. Some of these local smaller providers have already been absorbed by larger districts under one management.
Related Recommendations (1)
R4
Water and sewer districts should be consolidated into no more than six regional districts. Consideration should be given to including the city water agencies in the consolidation. LAFCO should meet with the water and sewer districts before October 31, 2012 to develop plans and schedules for consolidation. (See F5, F6 & F9.)
F6
The sixteen enterprise special districts of Orange County founded between 1919 and 1964 have grown with the urbanization of the county. Thirteen of these special districts rely up- on taxes collected by the county while three rely on fees and other sources for their revenue. This suggests that all of these enterprise special districts could wean themselves from tax subsi- dies and rely on fees for their revenue. Severance from the tax subsidies would enable financial transparency and let the customers see the true cost of the services provided.
Related Recommendations (2)
R1
All special districts (except the Vector Control District and the County Cemetery District) should be eliminated from the county tax rolls and should rely solely on fees or the services of surrounding governments. (See F2, F3, F4, F5, & F6.)
R5
Water and sewer districts should be removed from the tax rolls and operate solely on fees and other revenues for their services. Consideration should be given to forming non-profit agen- cies with ownership shared by the constituents. These districts should meet with county officials before October 31, 2012 to prepare plans and schedules to remove themselves from the county tax rolls. (See F2, F5, & F6.)
F7
The unrestricted reserves of the special districts are available to the governing boards to spend as they please. Local citizens are not openly informed of this wealth when agencies ask for fee increases, special assessments, or bond measures. Most of the special districts do not ap- pear to have specific criteria for amassing these reserves nor do they have published long-range plans for their constructive use.
Related Recommendations (2)
R6
Special districts should adopt “board of director‟s practices” for all their reserves, re- stricted and unrestricted. All reserves should be classified in their 2013-2014 budgets according to GASB Standard No. 54. LAFCO should work with the special districts to prepare standard criteria for accumulating reserves according to the new classifications by December 15, 2012. These standards should be used in preparing the 2013-2014 budgets. (See F7 & F9.)
R7
Excessive unrestricted reserves should be used to reduce existing debts. Future revenues should be reduced to avoid the accumulation of unallocated revenue that does not meet the adopted new standards. (See F7 & F8.)
F8
The twenty-seven special districts in Orange County have amassed unrestricted reserves of over $866,000,000. That is enough money to fund all of these special districts for more than year without taxes, fees, interest, or other sources of revenue. The boards of directors have the sole discretion to spend these unrestricted reserves.
Related Recommendations (1)
R7
Excessive unrestricted reserves should be used to reduce existing debts. Future revenues should be reduced to avoid the accumulation of unallocated revenue that does not meet the adopted new standards. (See F7 & F8.)
F9
The Orange County Auditor-Controller allocated nearly $35,000,000 to four enterprise special districts (Costa Mesa Sanitary District, South Coast Water District, Trabuco Canyon Wa- ter District, and Yorba Linda Water District) that did not show this revenue in their budgets pro- vided to the Grand Jury. What happened to that money is not clearly recorded. Budgeting with- out the allocated taxes indicates that, along with the three other enterprise special districts that do not rely on tax revenue, these enterprise special districts could function without tax revenues.
No recommendations for this finding
F10
The enterprise special districts could save millions of dollars in administration costs by consolidation into regional special districts. Five or six such enterprise special districts within Orange County could save at least $500,000 per year for each special district absorbed.
Related Recommendations (1)
R4
Water and sewer districts should be consolidated into no more than six regional districts. Consideration should be given to including the city water agencies in the consolidation. LAFCO should meet with the water and sewer districts before October 31, 2012 to develop plans and schedules for consolidation. (See F5, F6 & F9.)
F11
The Buena Park Library and the Placentia Library (the oldest special districts in Orange County) have long outlived their original intent of providing reading materials for their original isolated communities with an electorate of about 100 people. They could readily be absorbed into the County Library System or the cities.
Related Recommendations (1)
R3
Library districts should be absorbed into the County Library System. Both the Buena Park and the Placentia Libraries should meet with LAFCO and their cities or County Library System before September 30, 2012 to develop plans and schedules for consolidation and removal from the tax rolls. (See F11.)
F12
The community services that the original non-enterprise special districts provided can be provided by the surrounding cities and the county that have engulfed these districts. Continuing to collect taxes for these special duplicative services is a disservice to both the community they serve and the surrounding communities that provide the same or similar services.
Related Recommendations (1)
R2
Community service districts should be absorbed either in the cities surrounding them or into surrounding private homeowners associations. Each community service district should meet with LAFCO and with the appropriate city or homeowner‟s association to develop plans and schedules for the future of these special districts. This meeting should be take place before Sep- tember 30, 2012. (See F3, F4, & F12.)
F13
The Surfside Colony Storm Water Protection District was formed in 1941 to protect the community from ocean swells during storms and high tide. Since then the community has changed and the local governments have grown to where these services can be performed by other county or city services, resources and equipment.
No recommendations for this finding
F14
The true cost of water and sanitary sewers in the enterprise special districts is hidden when both taxes and fees fund these districts. Only when the monthly service bills to the cus- tomers include all the costs for these services without the tax subsidy will the public understand the true cost of these services and achieve financial transparency.
Related Recommendations (1)
R10
The Orange County Tax Collector should obtain all the specific allocations for the 1% property tax from the County Auditor-Controller and show them on the tax bill (not just the cur- rent generalized summary) sent to each property owner so that the taxpayers are informed of how much each service is costing them. (See F14.) *******
F15
Only one of the special districts, The South Coast Water District, has had recent perfor- mance audits. The lack of performance audits for the remaining special districts leaves the po- tential for inefficiencies, poor practices, outmoded operations, etc. hidden from the governing boards and the communities they serve. The lack of published performance audits has contribut- ed to the public‟s ignorance of these districts.
Related Recommendations (1)
R8
Each special district should have an independent performance audit at least every three years. The executive summary of the performance audit should be distributed to all the taxpay- ers of each special district. Each of the special districts that has not had a performance audit within the last five years should contract with an independent outside consultant to conduct such an audit during 2012. These audits should be repeated at least every three years. (See F15.)
Agency Responses 25
Government agencies' official responses to this report's findings and recommendations. Click on a response to see the structured breakdown.