A lawsuit over Long Beach’s longtime practice of transferring excess revenue from water and sewer fees to pay for other city services is likely heading to the California Supreme Court after an appellate court on Wednesday ruled against the city and determined the practice unconstitutional.

Passed by voters in 2018, Measure M authorizes Long Beach to transfer revenue from water and sewer fees to the city’s general fund to pay for public safety and other services.

The city has carried out this practice for decades, but residents in recent years have filed lawsuits challenging its constitutionality.

Last year, a Los Angeles Superior court judge ruled in favor of plaintiffs Diana Lejins and Angela Kimball, who argued that the city’s move to raise utility rates to generate more revenue than what is needed for the service was a form of illegal taxation on residents. 

On Wednesday, California Courts of Appeal justices upheld the lower court’s ruling, finding that the practice is unconstitutional, despite voter approval.

“Voter approval of Measure M… does not rescue the City from an independent constitutional violation…” the ruling said.

The city in a statement Wednesday said it disagrees with the ruling and plans to appeal to the state Supreme Court.

“The City and community rely on these transfers to maintain important City services, such as, but not limited to, public safety and emergency response, maintenance of streets, parks and storm drains, as well as libraries and services related to people experiencing homelessness,” the statement said.

Lejins, a longtime resident who’s active in local politics, said the city for years has illegally taxed citizens by raising utility rates and siphoning those funds for other purposes. She called the ruling an “early Christmas present.”

“I’m sick and tired of the corruption in our city by politicians,” she said.

If Long Beach loses its legal battle, the city could lose an annual $9 million in revenue, officials said in a budget hearing this year. The city would also have to repay some of the funds generated after Measure M, an amount that could range from $25 million to $42 million.

Under the court ruling, the city for now is required to set aside $9 million of the transfer funds into an escrow account each year until the case is settled. The city in its statement said it is “reviewing immediate impacts this ruling will have on the City’s current and future budgets.” 

Long Beach’s water and sewer revenue transfers ruled unconstitutional