A lawsuit alleging that the City of Long Beach was illegally charging higher rates to its water department customers to fund general governmental operations was settled this week as the city and the plaintiff reached an agreement that will return $12 million back to the city’s sewer and water funds over the next four years.
The decision comes just over two weeks after the city council met in closed session prior to its regular October 24 meeting and instructed the city attorney’s office to negotiate a settlement. Under the agreement the city will transfer an aggregate amount of $12 million and will now be forced to address the shortfall going forward in future budget cycles.
The complaint, filed on behalf of Long Beach resident Diana Lejins in September 2016 in Los Angeles Superior Court, came after the city’s water commissioners and city council approved rate increases to the water and sewer funds earlier in 2016, taking a portion through fees it charges the water company to use the pipes running under the city.
Lejins’ complaint alleged that the city has regularly adopted fees for its sewer and water services that are above the cost of providing the service, something that is unconstitutional according to California state law. The complaint alleges this practice has persisted since 2003 with the excess money going toward general governmental costs once the money is transferred to the city’s general fund.
The result, the complaint said, was over $10 million annually being transferred to the general fund each year since 2013-2014.
“The transfers of the millions of dollars referenced above were undertaken solely for the purpose of bolstering the city’s general fund and to provide general governmental services unrelated to the provision of water and sewer services,” the September complaint read. “The expenses that are actually funded with the millions of dollars do not benefit water and sewer customers in anyway.”
The complaint asked for the cease of transferring of water and sewer pipeline permit fee funds going forward and a restoration of the full amounts transferred to the general fund since 2013. The rate increases, something also targeted by Lejins’ complaint, amounted to about $1.83 per month for the average bill.
“The pipeline permit fees were bogus from the start,” Lejins said in a statement from her attorneys. “Hard-working citizens don’t appreciate it when their government plays games. Hopefully, this lawsuit serves as a warning to those “money-is-no-object politicians who so fervently attempt to extract and spend every last dime they can from hard-working taxpayers.”
In its response in November, the city denied any wrongdoing in charging pipeline permit fees and transferring the revenue into the general fund where it also admitted that it was not earmarked for specific purposes and could be used for “any valid government purpose”.
One of Lejins’ attorneys is former Fifth District Councilwoman Gerrie Shipske. Shipske served on the council from 2006 to 2014, meaning she was on the city council during one of the years outlined in the lawsuit but could collect some of the $480,000 in attorney fees awarded in the lawsuit against the city. She is currently running for California’s 34th State Senate District.
Shipske called the victory a “tremendous win” for water customers in the city as it showed that cities like Long Beach cannot “assess fees merely because they want to raise revenue.”
On Wednesday, the city released news of the settlement and said that going forward it would only charge the water department $4.5 million in total for use of the city’s water and sewer pipes and transfer that amount to the general fund, a decline of about $7 million annually.
“The settlement will resolve this litigation, and provide for a predictable amount of annual support for the City from the Water and Sewer Funds,” said Long Beach City Manager Pat West in a statement. “We support the settlement as the most reasonable solution to this litigation, which has also been faced by other California cities up and down the coast.”
Included in the settlement is a further reduction in monthly water bills which the city said will amount to roughly $3 per month on the average customer’s bill.
The city has long had some of the lowest water rates in the region with the average bill standing at just under $70 per month. In contrast, cities like Los Angeles ($99.94), San Diego ($128.49) and California’s statewide average ($86.33) all charge their customers substantially more, according to the city.