How can one single report be interpreted in two completely different ways? This seems to be the case with the California State Controller’s review of the 31 questions raised by Incorporate Olympic Valley regarding the draft comprehensive fiscal analysis (CFA).
After the state’s review — which was requested and paid for by IOV — was released at the end of October, IOV appeared confident that the State Controller report had found enough errors in the draft CFA from May — which determined that a Town of Olympic Valley was not financially viable — to show that a town would not only work, but would run a multi-million dollar surplus at the end of 10 years. However, both Squaw Valley Ski Holdings’ consultant and the Placer County Local Agency Formation Commission reached the opposite conclusion — that the State Controller’s review of the draft CFA did not find enough significant changes to make the town fiscally feasible.
“Although there are several adjustments that would improve the financial assumptions of the proposed city, it still appears at this time formation of the city is not financially viable, particularly in the first three years,” wrote LAFCO Executive Officer Kris Berry in a Nov. 18 staff report on the State Controller’s review.
This is contrary to the conclusion IOV reached after its consultant, Tom Sinclair of Municipal Resource Group, reviewed the State Controller report and determined that the state had found errors in 18 out of the 31 issues that resulted in a ruling in IOV’s favor.
“The State Controller review starkly turned red ink into black,” said Steve Hoch, a consultant for IOV, at a Nov. 3 IOV meeting in Squaw Valley. “No one big item became a game changer, but 10 had impacts that exceeded $1 million. The cumulative surplus is expected to rise to $15 million at the end of 10 years. The town is extremely viable.”
Fred Ilfeld, chair of the IOV Foundation, added that the average surplus is now expected to be $1.5 million for each of those 10 years.
However, SVSH’s consultant Matthew Newman of Blue Sky Consulting, disputed that finding.
“The State Controller review shows that there are not enough changes to move the needle far enough to make the town work,” he said. “The overwhelming majority of changes were very minor with no fiscal impact at all, or an impact of a few thousand dollars.”
LAFCO’s Berry agrees with Newman. She said that she and her staff met with the State Controller’s Office several times to clarify some of the state’s points.
“We don’t feel the changes were significant enough to alter the viability of the town,” she said. “Most changed very little.”
Newman also pointed out that a surplus at the end of 10 years is beside the point, and that what is important is the first three years when the city has to have a balanced budget. He also believes the numbers, some of which are based on expected property tax revenue from the proposed Squaw Village expansion project, still don’t show that there is enough revenue to pay for the town.
“IOV shows a surplus at the end of 10 years, but that doesn’t reflect the important reality of the first few years or that the development doesn’t happen or at a pace not anticipated,” Newman said. “IOV interpreted the number of findings in a way to show that the town is more viable than it is, but in practice it may not come to pass.”
According to Ilfeld, there were four points in particular that made the most difference in terms of the town’s fiscal feasibility. These had to do with the transference of North Lake Tahoe Resort Association services and the property tax to pay for them to the town, assessed home values, cost of law enforcement, and number of town employees. Of these, the NLTRA issue made the biggest financial impact, which is “a $12 million swing over 10 years,” Ilfeld said.
But both Newman and LAFCO disagreed with this interpretation of the State Controller’s findings.
“The State Controller did not say that it should be transferred; they only said that if resort association services are transferred, then it should come with property tax revenue,” Newman said. “But as a practical and legal matter, regional services are not transferred to a new town. I think this is impossible to happen.”
IOV responded to LAFCO’s report upholding the draft CFA’s findings with a Nov. 15 letter that stated “the report displays a misunderstanding of the purpose of the State Controller’s Office (SCO) review … the staff report misstates, misinterprets, or misrepresents the SCO conclusion in 14 of the 31 issues of concern … We find many instances in the staff report where the Controller’s report has either been rejected or ignored.”
The letter, signed by Ilfeld, goes on to request that LAFCO reject the staff report and instead accept the State Controller review. While Ilfeld said IOV is not currently requesting that the draft CFA go back to the State Controller, “It does not mean it won’t happen,” he said.
At the same time that the LAFCO staff report still finds the town not viable, the agency recommended proceeding with a final CFA that will include updated financial data from 2014-2015 and pursuing an environmental impact report to be paid for by IOV by Dec. 1 at cost of $147,000, plus $15,000 for LAFCO expenses.
IOV, which estimates its efforts to incorporate Olympic Valley have cost it close to $300,000 over the last three years, views the process as unfair.
“We have paid big on this,” Ilfeld said. “One of our major goals is to get an honest picture of the CFA. We won’t even want to pay for the other things until we get an honest CFA.”
IOV may not get the chance for an updated CFA. At the Nov. 18 LAFCO meeting, despite staff’s recommendation in its report to proceed with the final CFA and an EIR, the commissioners asked staff to head toward a denial process for incorporating Olympic Valley and to present options at its next meeting on Dec. 9 for a decision at its Jan. 13 public meeting.
“A town does not appear to be financially viable,” said Berry, noting that the commissioners are unsure “whether it is a benefit to the region or not.”
