Following a barrage of criticism—including an angry letter from Rep. Sam Farr—the Local Agency Formation Commission has indicated that it won’t charge Carmel Valley incorporation proponents upwards of $660,000 in fees after all.

“As a former Chairman of LAFCO, I am surprised that your concern is not to move the application to the ballot, but to collect sizeable fees for the benefit of the agency’s budget,” said Farr in a July 24 letter to LAFCO, the agency that coordinates municipal authorities in Monterey County. “As a matter of fair government and good public policy, I urge LAFCO to exercise its discretion to waive fees and allow the proposed formation of the new Town of Carmel Valley to proceed to a vote.”

According to LAFCO estimates, the agency needs $159,250.48 to continue processing the application. If the commission—and then Carmel Valley voters—approve it, Carmel Valley will become its own town, and will no more be a part of unincorporated Monterey County.

But in the meantime, there are bills to pay. In addition to the processing fees, LAFCO also wants an indemnification agreement—intended to protect LAFCO, the county and cities against potential legal challenges from incorporation opponents—that includes a $500,000 deposit as a guarantee.

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These fees didn’t sit well with the Carmel Valley Forum, the nonprofit group tasked with moving the application through the incorporation process. At the onset of the process, in May 2003, the Forum agreed to pay LAFCO a $5,000 deposit plus “pass-through” costs for processing the application. At the time, LAFCO estimated that these costs would run about $100,000. Carmel Valley Forum agreed to this price. To date, the group has paid $71,766 in pass-through costs, which funded the comprehensive fiscal analysis and an environmental analysis.

LAFCO made the $500,000 demand shortly after receiving a letter from local attorney Tony Lombardo.

Lombardo’s May 22 letter was sent on behalf Carmel Mission Inn, Barnyard Shopping Center, Carmel Rancho Shopping Center, Rancho Cañada Golf Club, Quail Lodge and Tehema saying that his clients do not want to be included in the proposed new town of Carmel Valley. In the letter, Lombardo says a vote on incorporation would likely violate state law.

LAFCO Executive Officer Kate McKenna won’t comment specifically on Lombardo’s letter. “We have received several statements regarding potential litigation from different sources,” she says.

At the July 24 meeting, Forum members asked the commission to cut the new fees.

 “Our position is, as always, we’re prepared to cover your pass-through costs,” Carmel Valley Forum treasurer Larry Bacon told the commission. “We’re not prepared to cover your staff costs.

“It really appears that you are trying to extract a really sizable fee on the back of incorporation petitioners.”

The majority of the countywide panel—made up of city councilmembers, county supervisors, special district board members and members of the public—appear to agree with Bacon.

At the Monday night meeting, LAFCO commissioners directed a subcommittee to continue meeting with Carmel Valley Forum members to work out a fee arrangement. This subcommittee has already recommended reducing the amount owed to LAFCO, and some commissioners at the July 24 meeting said that they might support charging the Forum less.

The commission will vote on a fee schedule—as part of the larger Carmel Valley incorporation proposal—at a public hearing on Oct. 18.

Later in the evening, during closed session, the commission also discussed the indemnification agreement.

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LAFCO Executive Officer Kate McKenna says she can’t comment on the closed session talks. However, a source close to the process says that LACFO has agreed not to charge the $500,000 indemnification fee in advance of processing the application.

When asked to confirm this, McKenna said: “That issue is part of the whole matter of potential litigation. I’m not at liberty to discuss it.”

But she’s happy to discuss LAFCO’s new timeline to process the proposal.

“We’re making progress, we’re moving forward,” she says. “If the commission acts to approve the incorporation at the October hearing, then what they are really doing is making progress towards a public election to be held June 2007.

“We are definitely moving forward to bring this matter to public hearing and an election.”