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& Arthur Young









             •    Arthur  Young  has  evaluated  prior  LAFCO  reports  for  other  proposed
                  cities.  We  found  that  LAFCO  uses  a  very  conservative  approach  in
                  developing  its  budget  analyses  and  that  once  cities  are  official-
                  ly  formed,  the  actual  financial  position  of  the  cities  we  re-
                  viewed  bas  been  much  stronger  than  LAFCO  originally  estimated.
                  For  the  four  most  recently  incorporated  cities  in  Los  Angeles  and
                  Ventura  Counties,  their  June  30,  1986,  General  Fund  fund  balance
                  ranged  from  over  one-third  to  nearly  two-thirds  of  their  actual
                  General  Fund  expenditures  for  that · year.                 These  factors  lead  us
                  to  conclude  that  the  financial  outlook  for  the  proposed  City  of
                  Santa  Clarita  should  be  viewed  with  a  high  degree  of  optimism.

             In  conclusion,  given  Arthur  Young's  municipal  finance  and  audit
            experience  and  LAFCO' s  revised  budget  estimates,  it  appears  that  a
            very  healthy  financial  outlook  exists  for  the  proposed  City  of  Santa
            Clarita  with  first            year     revenues  exceeding  expenditures  by                   2~
            percent.

            Very  truly  yours,

            ARTHUR  YOUNG




            By:
                  David  C.  DeRoos

            jm
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