Policy: Consolidations and Mergers

The Commission encourages local government agencies to cooperate with each other in pursuit of providing services most efficiently and reducing costs. As a significant initial step, the Commission encourages agencies to enter into functional agreements, such as memoranda of understanding or joint powers agreements, in instances where the results of a special study initiated by agencies or a Municipal Service Review finds that such agreements would result in the better provision of services and reduction of costs. Experience under such agreements may determine the practical implications of potential future changes of organization, such as consolidations or mergers.

In instances where the implementation of such a functional agreement has provided satisfactory results for all affected agencies, the Commission encourages agencies to pursue changes of organization, such as consolidations or mergers.

By law, LAFCO has the power to initiate consolidations and mergers. Although the Commission generally defers operational considerations to local agencies, it reserves the right to initiate proposals for consolidation, or merger, when:

There is documentation through a Municipal Service Review or similar study that such a reorganization is physically and economically feasible, and

Reasonable efforts have been made by the Commission and affected agencies’ staff to encourage the initiation of the action by resolution of one or more of the affected agencies.

All Municipal Service Reviews shall include review and analysis of any potential consolidations and mergers of the affected agencies.

Legal Authority

The Commission is governed by the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000, as amended (Government Code §56000) (the Act). One of the Commission’s responsibilities is to conduct comprehensive, regional studies of municipal services (Municipal Service Reviews, or MSRs) in conjunction with reviews of city and district spheres of influence (SOIs). The Act requires the Commission, in a Municipal Service Review, to make determinations with regard to:

1.  growth and population projections;
2. location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere of influence
3. present and planned capacity of public facilities and adequacy of public services, including infrastructure needs or deficiencies including any disadvantaged unincorporated communities
4. financial ability of agencies to provide services,
5. status of, and opportunities for, shared facilities;
6. accountability for community service needs, including governmental structure and operational efficiencies; and
7. any other matter related to effective or efficient service delivery, as required by commission policy.

The combination of these factors encourages the review and analysis of agencies’ governance structures, including potential consolidations and mergers.

Background and Discussion

In recent years, there has been growing concern about the economic viability of many of the special districts in Sonoma County. In some cases, district expenditures for core services exceed traditional revenue sources. Enterprise districts, such as water districts, can charge for the services they provide, and special districts have the power to request special taxes or fee increases from constituencies to fund district operations. However, in cases where voters do not approve increased taxes or fees, other options for generating sufficient revenue may be limited.

The Commission prefers that special districts work cooperatively to find mutually beneficial solutions to common problems. The first step is to look at internal opportunities for reduced costs and efficient administration of services. If necessary, a district should then look externally to consider opportunities for cooperation with other agencies, including nearby cities or other districts providing similar services and/or those with contiguous boundaries.

The Commission on Governance for the 21st Century noted that joint powers agreements (JPAs) are valuable tools. The Commission saw that the rapid growth of joint powers agreements in recent years did not necessarily indicate increasing fragmentation in governance. Rather, it might signal the opposite. Although some JPAs are formed solely to take advantage of a financing mechanism not otherwise available, most are true collaborations of governments that promote greater cooperation and coordination of services, if only for specific purposes. The Commission noted advantages from the use of joint powers agreements included the following: (1) efficiencies may be attained in providing services; (2) public improvements may be financed more easily; (3) grants may be more easily accessed; (4) organizational flexibility is enhanced; (5) regional problems may be addressed; and (6) local power is retained.

In Sonoma County, the City of Sonoma and the Valley of the Moon Fire Protection District have formed the Valley of the Moon Fire and Rescue Authority under a Joint Powers Agreement. The Russian River Fire Protection District and the Forestville Fire Protection District have an agreement to share a fire chief. Further, as of September 1, 2011, the Central Fire Authority of Sonoma County assumed administrative control of the Rincon Valley Fire Protection District and the Windsor Fire Protection District. The Commission recognizes and encourages these types of cooperative ventures.

In cases where districts are unable to identify cost reduction opportunities, the Commission may initiate and provide reviews or special studies to assist these agencies. The Commission’s main analytical tool, the Municipal Service Review, provides insight into the operations of the special districts. Though it is not the intent of the Commission to dictate operational changes or impose prescriptive solutions upon the subject district, the Act does direct the Commission to perform these reviews and requires the Commission to make determinations as indicated in the Legal Authority section, above.

In summary, the Commission believes that a cautious, metered, long-term plan is preferable to an abrupt reaction to immediate, though critical, problems. Consolidations and mergers are significant changes in governmental functions that need thorough review to determine the long-term implications.

Adopted: May 2, 2012