Before Measure G could get on the ballot, proponents for a new town needed to demonstrate – to the county and the regional governing body LAFCO – that a new town would be fiscally sound, and that the county, which will see revenues diverted from its coffers to the new town, could manage that change of revenue without imploding.

The county has received more tax revenues from Carmel Valley (property taxes, sales taxes, hotel taxes and various other fees) than is returned in services. In some years this has meant $2 million more goes to the county than to C.V.

The negotiating teams for the new town, the county and LAFCO devised a “revenue neutrality agreement” to ensure that the new town provides annual payments to the county to offset the county’s loss of revenue, payable over a 12-year period.

ACCORDING THE LAFCO, CARMEL VALLEY CAN BE FINANCIALLY FEASIBLE AS A TOWN, INCLUDING ITS “REVENUE NEUTRAL PAYMENTS” TO THE COUNTY. THE MITIGATION PAYMENTS BEGIN AFTER YEAR 2 AND OCCUR EACH YEAR UNTIL $15.9 MILLION IS PAID (COMPLETED BY APPROXIMATELY 2023).

The county would be paid an annual neutrality fee after a two-year grace period, beginning in the 2012 fiscal year, for 10 years. This fee would range from about $1.2 million per year to a high of $1.8 million in 2022, the last year the fee is due.

The budget of the town will be more than $10 million annually, with estimated expenses of around $9 million, including a contingency of over $800,000 a year, or 10 percent of expenses. Proponents claim this would offset any unexpected changes to the tax base from decreased property or sales taxes.

Pointing to the economic downturn, incorporation opponents questioned if the revenue neutrality agreement is still sound under the current economic conditions. For example, the recent sale of Carmel Valley Ranch for $18.5 million, valued at millions below what the previous owners paid (they spent $12 million on improvements alone in 2005), will decrease property taxes on the hotel by about $50,000 per year. And the recent announcement of the planned closure of Quail Lodge in November will further empty coffers if it goes through. However, the combined drop in hotel and sales taxes for the last fiscal year was about 5 percent, or just over $500,000.

Currently, the county spends roughly $500,000 to maintain the roads in Carmel Valley. According to incorporation advocate Larry Bacon, “While there is deferred maintenance on all county roads at present, the new town will have more funds available to spend on roads, if that is what the council chooses.” He terms it a very “conservative budget,” with some budget lines (e.g. town manager and clerk) higher than projected.

The town will have the option of joining the state’s retirement program (CalPERS), but may opt for a less expensive private retirement option, similar to what many businesses use.

While opponents argue that the new town would create a whole new layer of government, advocates say the new town would detach a piece of government from the county, and plop it closer to the service area.

As Glenn Robinson of the Carmel Valley Association points out, “Under the current system, Carmel Valley residents are represented by County Supervisor Dave Potter. The valley represents one-seventh of his district. So in reality, Carmel Valley is represented by one-seventh of one-fifth of the county board.”