River Governance

The Dream of Local Governance

Understanding the shortcomings

of the Governance Report

while finding real solutions

Key Points

Incomplete study: Released after 1.5 years and only 2 of 3 planned workshops and no real community engagement through a mailed survey.
Undefined service area: No boundaries set based on needs, history, capacity, or funding as requested in RFP.
Failed to account for communities of interest: defined by social, economic, and geographic relationships.
Two unactionable recommendations:
- Strengthen existing institutions: Ignores desire for local control and maintains status quo.
- Create large, impractical CSD: Covers entire 55 sq mi area, requires new taxes, and ignores distinct "communities of interest".
Misleading and lack of community engagement: Feedback limited to poorly attended 2nd workshop, not representative of broader community. There was supposed to be a broader set of local community meetings.
Missed opportunities: Fails to honestly explore incorporation for Monte Rio, Villa Grande, Guerneville, and Rio Nido, and recommendation of a CSD for Forestville and Hacienda.
Overall: While the study started off very strong, and did a good job at researching revenues and expenses and giving a framework of governance options. It ultimately fails to meet some of the core objectives and to offer realistic solutions.

The Path Forward

Recommend creating a CSD for Forestville and Hacienda:
- A second governance study to focus on what a Community Service District for the communities of interest, Forestville and Hacienda would look like.
Don't dismiss incorporation:
- Guerneville, Monte Rio, Villa Grande, and Rio Nido are capable of self-governance
- Rejects giving up because revenue neutrality creates a high barrier for incorporation
Focus on solutions:
- Advocate working towards incorporation, not abandoning it
- Encourage collaboration with LAFCO and Supervisors to come to a workable revenue neutrality plan
Negotiate for fairness:
- Seek a revenue neutrality mitigation plan that doesn't overburden the new town.
- Assume good faith negotiations for a balanced outcome.

It is this author's opinion that the governance report as delivered today has ultimately failed to meet the directives it set out to meet.

The Governance Study

The Lower Russian River governance study was commissioned by the Sonoma County Board of Supervisors in early 2022 with proposals being received in July of 2022. The Request For Proposal (RFP) that was issued stated that the overall goal of the project “is to improve the delivery of government services in the lower Russian River. The consultant team will conduct a baseline analysis of current services, engage the community to identify alternatives, and develop a community supported strategic plan for local governance solutions. Examples of expenses that may be analyzed in the governance study include expenses associated with law enforcement, fire and EMS, infrastructure, parks and recreation, maintenance, finance and administration. Examples of revenue that may be considered in the study include sales tax, property tax, transportation occupancy tax, and other fees for services. Anticipated solution proposals may include establishing satellite County offices, expansion or consolidation of local service districts, and possible municipal incorporation for some or all of the region.

This study will also determine boundaries for the service area(s) based on needs, historic and current boundaries, local management capacity, and funding sources.”

The Recommendations

On October 30, 2023, a draft report of the long anticipated Lower Russian River governance study was published on the Sonoma County website after a year and a half, and only two of the three planned community workshops. The study defined the Lower Russian River (LRR) region as “several unique communities spread along the Russian River in western Sonoma County; communities include Forestville, Hacienda, Rio Nido, Guerneville, Monte Rio, Villa Grande, and Cazadero”. The map that was included in the study covers a region of about 55 square miles with a population of roughly 8,500. Nowhere in the study does it “determine boundaries for the service area(s) based on needs, historic and current boundaries, local management capacity, and funding sources.” as directed in the original RFP. Instead, it provides two recommendations for the entire 55 square mile area.

The first recommendation of the study is “Strengthen existing institutions.” This recommended that Supervisor Hopkins seek approval from the Sonoma County Board of Supervisors for a MAC budget allocation, and form a LRR council of governments.

This recommendation does nothing to address the real lack of service issues as the MAC or LRR Council of Governments is still simply an advisory committee and has no governance authority. Rather, it creates more of the same - governance still remains with the sole Supervisor, who is responsible for 99,979 other constituents, and ultimately is just one of four other county supervisors.

The second recommendation is “Form a new community services district” with the authority to engage in a broad range of services, including roads and law enforcement. If authorized by the voters to do so, this entity could begin by providing a smaller initial set of services and then work in future years to expand the scope of services (with approval by the local governing board and a successful negotiation with Sonoma County).

This recommendation is a basic lack of understanding of how a community service district could effectively operate. There is good reason why the RFP included the requirement that the “study will also determine boundaries for the service area(s) based on needs, historic and current boundaries, local management capacity, and funding sources”, it would be impossible and ridiculous to create a Community Service District (CSD) across 55 square miles. It would both be unmanageable, and more importantly, it would require raising significant taxes on the 8,500 or so residents to create the revenue to operate. A CSD of this area simply reinforces the failure of the county to provide the necessary services.

The report rather should have looked at the area through the lens of “communities of interest”. This would immediately lead to understanding that there are three areas of shared socio and economic interests within the 55 square miles of the Lower Russian River. These being: 1) Cazadero; 2) Monte Rio, Villa Grande, Guerneville, and Rio Nido; and 3) Forestville and Hacienda. The report should have made separate recommendations for each of these communities of interest based on their needs, historic and current boundaries, local management capacity, and funding sources, as was stated in the RFP.

The recommendations of this report are uninspired and unactionable.

Community Input and Public Opinion Survey

While the study boasts community engagement, it is extremely misleading. By the time that the study was completed, only 2 of the 3 workshops happened, with no formal public opinion survey. The first workshop was well attended giving hope of community engagement. Sadly, the second one was a bit of a disaster with less than 25 people attending, and 90% of them senior citizens. It was not even close to the diverse representation of the Lower Russian River, or any of the communities in the study, nor did it involve younger working class individuals or families - most of the sentiments captured during this meeting represented the aging members who attended.

What is more misleading is that the study attempts to show community sentiment through an online survey that took place during the second workshop, which was focused heavily on risk. This ended up resonating strongly with the aging seniors at the workshop who are likely to be risk averse. During this workshop, many of the members in the audience were not able to join the available Wi-Fi in the gym, several noticeably voicing frustration and so gave up trying to get the survey site to work. This online survey attempted to show both sides of a sentiment such as Local Control vs Minimizing Risk. The values presented in the report as authoritative of 6.3 vs 6 on a scale of 10 really represented the 20 or so people who were able to vote, if even that. It is a bit disingenuous for the study not to disclose the number of people who voted. At one point even this author gave up.

This just reinforces the laziness of this study and reinforces that across the board, this study critically missed the mark on almost every front. Why wasnt a return postage paid survey sent in the mail to the 8,500 residents of the Lower Russian River, expressing the importance of it and the significance of responding?

While the recommendations of the study are a failure, there are parts of the study that do capture the real issues and concerns from the various community members and leaders:

“Throughout the community engagement process, one clear theme emerged: the community feels it lacks a voice. Many stakeholders and members of the community expressed frustration with a perceived lack of responsiveness from and effective communication with Sonoma County decision makers. Multiple stakeholders and community members expressed the view that the County Board of Supervisors appears more focused on events in Santa Rosa or the Highway 101 corridor than on addressing concerns of the LRR region. Indeed, this overarching perception colored many of the comments and concerns raised throughout the community engagement process.”

Effective Costs of the Lower Russian River

This section of the study states “expenditures for municipal services by Sonoma County in the LRR region largely consist of expenditures for planning and building permits, law enforcement, and road maintenance. In addition, the county provides a range of countywide services that provide benefits to the LRR region, including criminal prosecutions, finance and tax collection, human services, probation, and others.”

It is important to understand that the County of Sonoma does not delineate spending based on zip code, so any attempt at projecting costs onto either the area of the Lower Russian River as a whole, or each community in it is fundamentally a guessing game. This example illustrates another weakness in the study - that the fiscal analysis is dependent upon the time and effort spent by busy county departments as well as the availability of segmented data.

With that said, the final estimated LRR share of Countywide services of $7,459,412 is based on the population of ~8,500. This means that the per capita expenditure of the county on the Lower Russian River is $ 877.56. This is not a lot of money being spent on each resident and can be seen as a leading indicator of lack of services, which is evident by the dire need of a governance study to create a solution to provide these services.

If we look across other incorporated cities that are providing direct services in Sonoma County, we see a stark difference in how much each incorporated community spends on its residents (per capita).

In 2021, Windsor spent $1,609.00 or 183% more on each resident, while Healdsburg, a wealthy community, spent $5,447.00 of 620% more. When looking at the above table, it is important to note that both Sebastopol and Sonoma standout with per capita expenditures of $2,480 and $2,296 which highlights both these cities' financial crisis due to mismanagement and over-spending.

When looking back at the study, this section simply highlights that the Lower Russian River is not receiving the services it should, highlighting the likely waste in the county administration and is fundamentally misleading the reader. What would happen if the county reported expenditures by zip code?

Starting at the Beginning

In order to understand the governance study report and recommendations, let’s start with some background on this effort…

Even before the official RFP was published in early 2022, efforts were already underway since 2020 to address the failure of Sonoma County's efforts to provide critical services to the unincorporated communities of Rio Nido, Guerneville, and Monte Rio/Villa Grande. These services are numerous and detailed in the governance study and show ultimately the negligence by the County of Sonoma for decades now.

These early efforts were spearheaded by myself, Bryan Hughes, from the Russian River Alliance, and Elise Weiland who at the time was Field Representative for District 5. Working closely together, it was determined that a formal governance study was needed which was then set in motion by the Board of Supervisors allocating $150,000.00 to hire an outside consultant to do the study. Surprisingly, the first publishing of the RFP, which was written by Elise Weiland and myself had no responses which led us to lessen the scope of the proposal. On the second publication of the RFP, we received only 4 responses. A committee was formed which included Herman J Hernandez and Bryan Hughes (myself) as community members, along with Elise Weiland and Leo Chyi from the 5th District Office, and Maggie Luce from the County Administrator’s Office. After interviewing the consultants Blue Sky was chosen.

One of the clear goals as stated in the RFP was “determine boundaries for the service area(s) based on needs, historic and current boundaries, local management capacity, and funding sources”. The RFP and study was broken into three parts: Discovery; Research and Analysis, and Community Engagement; and Final Presentation and Recommendations.

Initially, the study was on track with Blue Sky focusing on the entirety of the Lower Russian River region as stated by the study. This was necessary during discovery and research to capture the complete picture of the broad governance issues being faced by this unincorporated region, lack of services and actual services being provided by the county, and community sentiment.

If you look on the map as published by District 5’s office and refer to the study, this area is massive and covers roughly 50 square miles.

The study fails to recognize that the Lower Russian River comprises 3 communities of interest, or those communities that share common social and economic interests, and often share geographic borders. In this case the combined area of Rio Nido, Guerneville, and Monte Rio/Villa Grande, and the combined area of Forestville and Hacienda are communities of interest as they identify together, while Cazadero does not and is their own respective community. Once the discovery and research phase was completed, the analysis should have identified these three communities of interests, and then created recommendations specific to their distinct needs, rather than the entire Lower Russian River.

Instead, the study recommends forming a new Community Service District (CSD) for the Lower Russian River. In the section “SOME EXAMPLES OF OTHER CSDS THROUGHOUT THE STATE”, the report casually states “with revenue coming primarily from service charges, taxes and assessments, and grant and donation revenue.” - the majority of revenue for any CSD will be new taxes and assessments. If it takes $8 million a year to pay for the existing services of the proposed CSD (assuming parity with the county), it would mean new taxes of $1,000 a year on each resident. It is important to note that any Transient Occupancy Tax (i.e. the hotel tax or TOT) can not be claimed by the CSD, 100% of that money still goes to Sonoma County’s general fund.

Even if CSD were to be created to govern these communities, the area alone would make it ungovernable and begs the question, what is the purpose? Isn’t this what the District 5 Supervisor is expected to do? This is not local governance. To put this in perspective, the City of Healdsburg is only 4.42 square miles with a population of 11,275, while the City of Sebastopol is 1.88 square miles and a population of 7,448.

Rather, the governance study should have focused on regional solutions. For Rio Nido, Guerneville, and Monte Rio/Villa Grande, the recommendation should be incorporation. For Forestville and Hacienda, its own Community Service District, and with Cazadero keeping the CSD they have.

Why the Need for Local Governance: Your Voice Today…

Sonoma County is 1,768 mi² with a population of 485,887 (2021) with only 16.67% living in incorporated cities, with the remaining 83% living in unincorporated rural communities. Of the total population, 24.87% live outside of any city or town.

Why the Need for Local Governance: Your Voice Today…

The above graphic shows the scale of a single person and their needs and their voice in a crowd of 1000 (or about the population of Monte Rio).

This is their need in the crowd of 5000 people, which is about the population of Guerneville.

This the voice and needs of a single resident of West County amongst the other 99,979 people in District 5 of Sonoma County.

Supervisor Hopkins is the only representation in government, a single person who hopes to balance the needs of all her constituents (all 99,979 of them) to make any change in Sonoma County; to take action on a resident of Guerneville’s needs, for example to have a severely neglected road paved, the supervisor must get 2 other supervisors to agree with them. Of the 5 districts, 3 are along the 101 corridor – only 2 supervisors have large unincorporated areas.

As this comes into perspective, the communities of Rio Nido, Guerneville, Villa Grande and Monte Rio represent about 6.5% of the total population that their supervisor is responsible for. More importantly, they represent .01% of the total population of Sonoma County. In other words, as an unincorporated community, if a road needs paving in Guerneville, their interests represent 6.5% of District 5, which represents 25% of Sonoma County.

At the end of the day, our district supervisor can only give so much of her attention to the needs of these communities, and even then, if she decides to support or work to make any change, she often needs two other board members to join her.

The Real Recommendation: Incorporation and a CSD

The failure of the Governance Report, as I have mentioned above, is stark. Recommending throwing more funding at the expansion of the Municipal Advisory Committee does nothing for paving roads, picking up trash, policing streets, or basic public safety. The MAC has no authority. Even more stark is that a Community Service District (CSD) has to be funded through new taxes which will never be agreed upon. How do you effectively govern 8,500 spread over 55 square miles over extreme rural conditions through a CSD?

Instead, the report should have made two recommendations at minimum: incorporation for the communities of Guerneville, Monte Rio, Villa Grande, and Rio Nido; and a CSD for Forestville and Hacienda, assuming that there might not be enough TOT to fund a second incorporation.

What the study glosses over and makes scary is incorporation, which then perpetuates misinformation and fear over what incorporation actually means by the population at large.

Incorporation

So why is the incorporation of Guerneville, Monte Rio, Villa Grande, and Rio Nido different from any of the other communities across the state of california that would also like to incorporate? The fact that our area generates a lot of Transient Occupancy Tax (i.e. hotel tax or TOT). It is key to understand that ALL TOT goes to incorporated towns and cities, and for those unincorporated communities, straight to the general fund of the County which is then spent at the discretion of the Board of Supervisors across the entire county.

In 2019, the county reported a total of $ 48,837,536.34 in TOT receipts. Of this 44.83%, or $ 21,895,004.29 was attributed to “Unincorporated County”. It is estimated that of this amount, more than half is generated in West County, perhaps even closer to two-thirds.

What makes the possible incorporation unique is that it is estimated that the TOT generated in about a 3.5 mile radius of Guerneville (which includes Monte Rio, Villa Grande, and Rio Nido) is about $6 to $7 million accounting for a 55% occupancy rate. This data was collected by hiring a third-party private company that scraped Airbnb, VRBO, and Bookings.com to capture listed properties (which includes illegal rentals) and nightly booking rates by latitudinal and longitudinal position, while deduplicating the short term rental properties that are listed across all three sites.

When adding the share of property tax, sales tax, and fees that a typical city can generate, and other state and federal grants and funds, the revenue of our incorporated town, capturing 100% of the TOT, would be closer to $10 to $11 million annually, or more.

Here is why this matters. With a population of 6,500 and a revenue of $10 millions, this means that the town can effectively spend $1,500 per person on being a real city. This means a city with this annual revenue and per capita expenditures, it could easily provide the necessary and even basic services Guerneville, Monte Rio, Villa Grande, and Rio Nido lack:

Land Use
Police
Trash
A Hospital
Waste Treatment
Paved Roads
Parks
Animal Control
Traffic Control
Build Affordable Housing
Smart and Balanced Short Term Vacation Rental Zoning and Planning (that works)

Becoming a city means no longer being lost in the dysfunction of Sonoma County, but rather being able to create a vision of the future. If that vision is to keep a community the way it is, then the city can pass ordinances that codify this in zoning and land use.

The Revenue to Fund a City

It is rare that a set of unincorporated communities of interest has the revenue available to become a city without having to raise taxes and assessments on day one as Guerneville, Monte Rio, Villa Grande, and Rio Nido have.

To better understand whether or not a city or town could not only be financially healthy, but also thrive, one can assume that the per capita annual revenue would translate into a per capita expenditure, or how much per year does an incorporated town spend on each of its residents. In the case for cities that are healthy, this means that the income is at least the same or greater than the expenditure. Cities where the expenditure is higher than the income are operating at a deficit and in jeopardy of financial failure. This is usually the case of mismanagement and a failure of the current city government.

Using the California State Controller’s online database, we can further investigate the health of other incorporated communities in the state of california to compare whether or not incorporation as an option for Guerneville, Monte Rio, Villa Grande, and Rio Nido is feasible, based on the projected revenue of $10 to $12 million generated by capturing 100% of TOT and its share of sales and property taxes, along with regular fees generated by a city. The projected population of the incorporated community of Guerneville, Monte Rio, Ville Grande, and Rio Nido would be 6,900. This means that the proposed incorporated community would have a per capita expenditure of $1,739.13.

Using the online database, if we search for communities in California that are compatible with these projected expenses, we find two communities:

Now, if we pull 11 years worth of financial data from each community, we find that not only are they healthy, but thriving, with each town reporting new waste treatment infrastructures, newly paved roads, new parks, a new library, and a strong economy.

Also to note, that as an incorporated community, the city has access to various federal and state funds. These can range from Sonoma County Transportation Authority (SCTA), Regional Climate Protection Authority (RCPA), SCP, Association of Bay Area Governments (ABAG), and Metropolitan Transportation Commission (MTC); to leverage our status as a Qualified Opportunity Zone (QOZ) by the IRS, which is an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.

The Real Challenges of Incorporation

When a community chooses to incorporate, there are fundamentally two very distinct challenges: are there reliable revenues available to fund the town that the population will agree to; and is the town actually capable of self government, meaning are there competent people to take on the mantle of City Council member and town manager to run the city?

Revenue Neutrality and the Failure of the State of California

In the report, there is some discussion of the challenges of incorporating a new city in the state of california, specifically “revenue neutrality”, which creates an unfair and unreasonable hurdle.

Until the 1980s newly-formed cities did not have to compensate counties for the privilege of becoming incorporated. That was changed thanks to Sacramento County's aggressive, though eventually unsuccessful, struggle to stop Citrus Heights from becoming a city. One facet of that struggle was the passage of a new law that carved into stone a notion of revenue neutrality whereby new cities had to transfer money to the county to make up for future revenue losses. This was just another unintended consequence of Proposition 13 in 1978, which had rolled back property taxes to 1% and frozen them at their 1976 value. Future assessments were limited to 2% per year for the original owner and could only be adjusted to reflect market value if a property was sold. Prior to Prop 13, the array of municipal service providers (the county, school districts and special districts like fire districts and cemetery districts) adjusted their property tax assessments separately each year - something like a layer cake of taxes. Once the 1% assessment was mandated, the various service providers had to divide up a single fixed-rate tax pie. Post-Prop-13 amounted to some 40% less revenue than prior to prop-13. Splitting the pie was further complicated by the lobbying of the school district's and successful achievement of legislation setting aside 1/2 of the state's general fund for schools.

It was understandable that Sacramento County fought back against what it perceived as further deterioration of its budget if Citrus Heights gained a seat at the pie-eating table. Revenue Neutrality, as it was called, went into effect as Senate Bill 1559 of 1992, effectively stating that anytime a community wants to incorporate, it must not only be financially feasible, but it must also have no negative impact on its county by doing so . Citrus Heights found itself in negotiations with Sacramento County that resulted in the city budget being burdened with millions of dollars of revenue transfers to the county annually for 25 years.

Sacramento County, which no longer had to shoulder the costs of providing municipal service to Citrus Heights, did not lay off any of its municipal services staff. And it did likewise when Elk Grove and then Rancho Cordova followed Citrus Heights' lead and became cities. Sacramento County, which no longer serves municipalities totalling 345,000 people, continues to get millions of dollars of revenue from those municipalities. Those county revenues have been the result of the cities' hard work at nurturing their retail economy and improving the value of residential property with enhancements to streets, sidewalks and parks, service delivery improvements (particularly for law enforcement) and neighborhood empowerment services.

Imagine how much better those cities' municipal services could have been if the revenues generated in their communities had stayed in their community. But, no, the money has flowed to the county's general fund to be spent as the board of supervisors sees fit. New cities have to agree to it because the LAFCO process gives the county the upper hand in negotiating the price of the divorce.

The Way Forward

So what do we do about Revenue Neutrality, the wall that keeps new cities from forming? It’s time to restore opportunities for city incorporation: the roots of American democracy!

In 1992, when the revenue neutrality law was passed, the population of the state of California was 30,875,920. In 2023, it is now 39,029,342, or an increase of over 8 million new residents. Since 2017, with the incorporation of Jurupa Valley, a city in Riverside County, no new cities have formed in California.

That’s a problem.

The call to action is not to suggest that the proposed incorporation and our community is incapable of self-governance, or that “revenue neutrality” is a barrier so high so why even bother. This is not the American way, to just give up because it might be a steep hill to climb. Rather, instead of giving up without trying, we should be working on a path to incorporation, working with LAFCO and the County of Supervisors, assuming they would negotiate in good faith a revenue neutrality mitigation plan that doesn't doom the nascent town by an undue burden. Working in parallel, and especially if negotiations for revenue neutrality are failing to come to a realistic agreement, then also working with other groups such as the League of Cities, and California Unincorporated to sue the state to get the legislation changed.

Footnotes

1 https://properties.zoomprospector.com/sonomacounty/pinpoint/38.49653866294932/-123.00962448120117/demographics

2 https://scta.ca.gov/wp-content/uploads/2023/02/3.3-SCTA-RCPA-2023-Briefing-Book.pdf

3 https://mtc.ca.gov/tags/abag

4 https://www.caunincorporated.com/bring-municipal-alimony-under-control

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