The Long Beach City Charter is the city’s constitution that allows its local rules to override state legislation in some cases and local lawmakers are looking to amend it to help offset a looming budget deficit.
In a special meeting of the Long Beach City Charter Amendment Committee, city staff presented the city council and Mayor Robert Garcia with the fiscal realities facing the city and how a charter amendment could help bring millions back into the general fund by tweaking language to more clearly outline the city’s ability to charge its own utilities for access to city property.
Long Beach has been assessing fees to its city-run utilities for decades with the water and gas departments paying fees to the city’s general fund through year-end revenue transfers amounting to millions of dollars annually that the city relies on to fund city services like street sweeping, park maintenance and others.
“The amendment if passed by a majority vote would negate the adverse impacts of the lawsuits and would explicitly authorize continuation of the 60-year-old practice of utility revenue transfer,” said Long Beach Director of Financial Management John Gross.
Both the gas and water/sewer line fees have been challenged in court by residents with the city settling one case late last year by pledging to transfer less than half of the revenue it had been taking from the city’s water and sewer funds since the early 2000s and agreeing to pay back millions over the course of the next few years.
The savings, the city said, amounts to a few dollars per month for customers but a loss of millions for the city’s general fund. The city also contends that previous to this $3-a-month savings that went into effect at the start of the year the city had already far lower monthly rates than many similar sized cities in the state.
The city came out victorious in the suit filed against it for transferring revenue from the gas utility fund but the decision is currently being repealed, and if overturned in favor of the plaintiff, could result in the loss of millions of more dollars for the city’s general fund. The city currently projects a budget deficit of about $15.6 million for the next fiscal year with over $8 million of that shortfall being tied to the water and sewer line litigation.
Gross said that while the city is expecting to ultimately win the appeal in the gas lawsuit, if they were to lose the annual hit to the budget would grow by another $10 million if the gas revenue decision is overturned.
The basis of both lawsuits were individual propositions passed by California voters that Proposition 218 (The Right to Vote On Taxes Act) and Proposition 26, which sought to eliminate special taxes levied by municipalities and passed in 2010, which each plaintiff argued were violated by the city’s practices.
While the city’s charter does not prohibit the transfers, the charter amendment would explicitly allow the transfers from each fund for no more than 12 percent of gross revenues annually.
That 12 percent figure would allow the city to continue to collect about the amount that it had been transferring to the general fund in the past, as well as let it recoup any one-time transfers it has already made back to any of the funds. Gross said the ceiling for the transfer was put in place so that future councils could not extract higher amounts from the city’s utilities.
“In previous years the transfers have sometimes exceeded 12 percent, that cannot and will not happen in the future with this protection added by the charter amendment,” Gross said.
The few members of the public that were in attendance for this introductory public hearing were not impressed with the prospect of a charter reform to reverse what they felt were justified lawsuits.
Tom Stout, who helped author the ballot measure against Measures A and B, alleged that this was merely a way of getting more money into the “black hole” of the general fund where pension costs and salary increases can be paid on the backs of utility customers.
“I just find it truly amazing that you guys have the brass balls after stealing such a large amount of money over a long period of time that you want to make it legal by doing a charter amendment,” Stout said. “How can you do that? Don’t you guys have any shame?”
The committee did not comment on the presentation.
Any amendment to the charter will require a majority vote by residents in the city. Two future meetings are also required to discuss the matter with those meeting dates currently scheduled for February 13 and March 6. If the council decides to place it on the ballot the potential charter amendment would be up for a vote during this year’s June 5 municipal general election.
If the council decides to move forward with language to amend the charter and a majority of voters agree with it June 5 it would give the city express consent to resume the transfers from the water/sewer funds, and potentially the gas fund, to the general fund and negate a large portion of the projected budget deficits.
It’s expected that placing the charter amendment on the ballot could cost the city another $565,000 but that scenario would only play out if the April primary did not decide any of the five council seats, the mayor’s seat and the other city elected positions. The 2018 budget accounted for these runoff elections on the June ballot but if they’re all decided in April other funds will need to be used to finance the charter amendment vote.