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           .L)~ A MEMBER OF ARTHUR YOUNG INTERNATIONAL



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           Arthur Young                                                                Lu::;  Anqclt':r,. C r1l1forn i:i f;0071
                                                                                       fo l()phonc: (213) 977- 3200


            September  18,  1987








            Santa  Clarita  Incorporation  Committee
            c/o  Mr.  Louis  Garasi,  President
            Gruber  Systems
            25636  Avenue  Stanford
            Valencia,  CA        91355

            Members  of  the  Santa  Clarita  Incorporation  Committee:

            Arthur  Young  was  retained  in  January  1987,  by  the  Santa  Clari ta
            Incorporation  Committee  to  assess  the  proposed  City s  budgets  as
                                                                                            1
            prepared  by  the  Los  Angeles  County  Local  Agency  Formation  Commission
             (LAFCO).        Our  primary  objective  was  to  evaluate  the  revenue  and
            expenditure  data  compiled  by  LAFCO  and  to  comment  on  the  potential
            degree  of  reliability  inherent  in  these  data.                        Tbe  Incorporation
            Committee  retained  Arthur  Young  due  to  our  audit  and  management
            consulting  experience  with  the  newly  formed  cities  of  Agoura  Hills,
            Westlake  Village,           West     Hollywood       and    Moorpark  as  well  as  our
            experience  with  larger  and  well  established  municipalities  such  as
            Beverly  Hills,  Lancaster  and  Palmdale.                      Based  on  Arthur  Young's
            knowledge  of  municipal  finance,  the  Committee  believed  our  firm  would
            be  well-suited  to  assess  the  potential  strength  of  the  proposGd  City
            of  Santa  Clarita's  finances.
            Currently,  LAFCO's  estimated  budget  for  the  pJ·oposed  City  of  Santa
            Clarita  (contained  in  a  LAFCO  report  dated  April  22,  1987)  presents
            revenues  of  approximately  $3.5  million  over  expenditures.                               This
            budget  reflects  a  very  positive  financial  outlook  for  the  proposed
            City.      In  addition,  several  factors  which  have  not  been  quantified  in
            LAFCO' s  analysis  may  serve  to  enhance  the  City's  al ready  positive
            financial  outlook.          These  factors  include:

            •     The  rapid  economic  development  exp~rienced  in  the  Santa  Clarita
                  area  should  cause  significant  sales  tax  growth  which  would
                  further  increase  municipal  revenues.                For  example,  LAFCO's  report
                  recognizes  that  six  new  automobile  dealerships  and  two  junior
                  department  stores  have  recently  opened.                   The  sales  tax  revenue
                  resulting  from  these  known               enterprises  is  not  reflected  in
                  LAFCO's  budget  data  as  actual  sales  tax  data  for  these  businesses
                  were  not  available  when  the  report  was  prepared.
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