A report released last week by California Economic Forecast, a private company, claims that the proposed city of Goleta could face a decade of deficits if cityhood – the Measure H proposal – is approved by voters on Nov. 6.

The report, “A Review of the Goleta CFA,” examines the pitfalls of a Comprehensive Fiscal Analysis conducted by the Santa Barbara Local Agency Formation Committee. The review states that the economic justification for the new cityhood proposal is “highly questionable,” because the CFA ignores “hefty” mitigation payments to Santa Barbara County and expects revenues from the yet-to-be-built Page Hotel.

The review also states Goleta will face an unreasonable growth beyond the current residential, commercial and housing development ordinances, and will need to consider alternative scenarios to test the impact of the new city.

California Economic Forecast Director Mark Schniepp, who said he was motivated by personal interest, produced the review.

“I did it because I had some time to do it; I looked at it, there was a lot of controversy about it. I had a break in my schedule, started looking at it and got very interested. I realized [LAFCO] didn’t do a thorough job, and the assumptions they made seemed very odd,” Schniepp said.

The fiscal analysis, Schniepp said, would be more optimistic if the Goleta proposal included Isla Vista and UCSB.

“We know that if Goleta included Isla Vista and UCSB that the fiscal analysis would be more sound, because there would be significantly more population, for which they could obtain revenues from the state. Higher population means higher government revenue-sharing,” he said.

Jim McClure, Santa Barbara County director of budget and research, said the report did not offer a new perspective.

“I would say I don’t think it has anything new in it. Most of the points he makes have been made before,” McClure said. “The county’s position has been that the proposed city is only marginally feasible, and I don’t think that’s changed. I think it will only be less feasible because of the downturn in the economy and the Sept. 11 attacks.”

Many of the proposals, including the assumption that the proposed Page Hotel will operate at full capacity by July 1, 2004, are too presumptuous, Schniepp said.

“The growth scenarios that are being presumed seem a little bit too heroic. … There’s also an assumption of Page Hotel [completing construction] by 2004 and that seems a little bit presumptive as well,” he said.

According to Schniepp, the new review examined alternative scenarios for the proposed city – called “sensitivity analyses,” which he said were neglected in the LAFCO CFA.

“That’s what got me excited about the report … the fact that it didn’t have a sensitivity analysis. The whole thing is built on assumptions; they didn’t change the assumptions at all. They assumed one growth profiled. Why didn’t they assume a best, worst or middle?” he said.

“That’s what intrigued me the most. I thought, OK, it’s not that sensitive. Suppose you alter these scenarios and nothing happens. I did that and said, ‘Hey, things really change around here.’ I figured that story needed to be told. Economic justification for the city is highly questionable. The proposed city is more likely to face annual deficits for many years to come,” Schniepp said.

According to McClure, however, alternative solutions were considered.

“Mr. Schniepp didn’t know there were alternative solutions made. There was some sensitivity analysis tested. Some of those things were done. [A] consultant did do a sensitivity analysis, and it didn’t have a material impact,” he said.

Margaret Connell, a candidate for Goleta City Council who is in favor of Measure H, said the review is based on false assumptions.

“A lot of assumptions of this kind are not valid to take. I think [Schniepp] did this one rather quick,” Connell said. “[Schniepp] talked about the city’s fiscal liability. These payments are based on a percentage. If there is a slow-down in the economy, then the city’s payments to the county go down. Nothing in the report recognizes this fact,”

William Gilbert, a candidate for Goleta city council, said the proposal confirms the unfeasibility of Measure H.

“I am very pleased, being that I am a ‘No on H’ fan. [The review] took a different aspect than I’ve been taking, then the hardcore numbers game I’ve been working on. He talked about the growth potentials and so forth — very condemning and straightforward,” he said. “[Schniepp] confirms there is a big flaw in [CFA]. There’s been a big flaw in it all along.”

Gilbert said Goleta residents want to become a city, despite unfeasibility.

“People have egos. If you read some things in the paper, everybody wants a city. I want a government. If we get this one, what’s it gonna do? I think [I.V.] should be included,” he said.

According to Connell, the city will not face deficits, regardless of the future of specific projects.

“The viability of the city is not dependent on any one project. Other projects were not included [in the study]. For example, the Maria Retirement Project is already under construction. The financial health doesn’t depend on the Page Hotel,” she said. “It didn’t change my views. We have had plenty of reassurance that this city is going to be flush with money. I have confidence in the fiscal strength of the city.”