The Santa Clara County Board of Supervisors voted unanimously this morning to re-enter into negotiations with the San Martin Neighborhood Alliance, a grassroots group of San Martin residents who want to incorporate their rural community of about 6,000. Last April the county voted 4-1 to oppose San Martin's incorporation unless the nascent city pays the county more than $10 million over a period of time. Why? Because the county claims San Martin's independence will pull $872,000 from its coffers annually, but San Martin city-hood proponents also point to the fact that the county will save $1,461,000 annually in its road fund. That equals an annual net benefit of $591,000 for the county.

But that road money can only be spent on road-related projects, unlike the $872,000 that can finance anything. For this reason, the new round of negotiations must take place with a "clear understanding" that the road fund is off the table, Supervisor Blanca Alvarado said.

"It should be very clear that we all understand the road fund must not be considered as part of the bargaining element," Alvarado said. Assistant County Counsel Miguel Marquez agreed and reminded the board that the Local Agency Formation Commission - an independent state-mandated commission formed to oversee boundaries of cities and special districts - must separately consider fiscal impacts on restricted and unrestricted funds. Road funds must finance road-related projects and are therefore restricted, unlike the county's discretionary, though indebted, general fund.

Not exactly, said Richard van't Rood, the attorney hired to fight for San Martin's incorporation.

"Unfortunately the county thinks they need to put these kinds of constraints on negotiations, but as far I am concerned road funds are not off the table," he said. As he has in the past, van't Rood pointed to one portion of state government code that requires restricted and unrestricted funds to be considered separately, yes, but only for property taxes, he said. Another set defines "revenue neutrality," a requirement for incorporation, as follows: The revenues transferred to the town from the county must equal the county expenditures for services that will be assumed by the town.

"That means, and everybody I've talked to seems to agree, that expenditures, direct or indirect, made by the county include those costs for road maintenance," van't Rood said. "The county clearly doesn't understand this. I know I'm a lawyer and I read this stuff all day long, but I don't understand how anyone who reads English can argue against this."

An outside legal counsel hired to advise LAFCO has also sided with the residents, putting the county and LAFCO further at odds. That is why continuing the debate is important, Supervisor Don Gage said.

"I think we need to exhaust every opportunity to hear what folks in San Martin are saying and what the county is saying," Gage said. He also sits on the LAFCO board and added that if the county's permanent legal counsel butts heads with LAFCO's independent counsel, "It says that you're looking at a big issue here, because if it goes one way or the other, there's going to be some kind of litigation as a result."

If that happens, Richard van't Rood will be a lot busier, but for no good reason. The county is making things more complicated than they need to be because it needs money to cope with its deficit, he said.

"The county has twisted this whole thing," van't Rood said. "It's very frustrating."