When Long Beach began writing its budget for the fiscal year that ended in September, it originally projected a $30 million deficit, which shrank significantly as the year played out and tax revenue grew faster than expected.

That has led to a surplus of millions that the City Council could use to fund city services and expand the mayor’s staff Tuesday night.

The City Council is expected to revise a year-end budget update on the 2022 fiscal year, which ran from October 2021 through September, that saw the originally projected deficit shrink by $18.5 million, largely due to increases revenue from sales tax and for commodities like oil, natural gas and electricity.

Now, the City Council could approve using the unexpected funds for projects that were put on a wishlist by the council, and a new request to add multiple positions to the mayor’s staff including two new deputy mayor positions and a new position in the City Clerk’s office to track donations made to elected officials to comply with an amendment to the Levine Act that went into effect in January.

Rebounding economy 

One of the largest drivers of the shrinking city budget deficit was economic activity like housing sales and people buying things in the city of Long Beach, according to a city memo. Property taxes went up due to the value of city-owned and private lots being developed. Combined with a hot housing market seeing homes at big markups, this contributed to a $6.2 million increase in funds.

City officials say the same trends could materialize in this year’s budget, which was projected to have a $43 million deficit.

Sales tax, both Measure A and regular taxes, also increased. Collectively the two added over $30 million over what city budget officials projected in the originally projected. Hotel stays also increased, returning to “average pre-pandemic levels” and adding another $4.7 million to the city’s coffers.

The unexpected funds could allow the city to use COVID-19 relief funds that it previously allocated to close the budget hole on projects the City Council put on a wish list at the time it adopted the budget in September 2021.

Projects being funded 

The largest chunk of the $10.72 million that the council is considering allocating would go to the city’s homelessness response efforts. A proposed $5.4 million could be dedicated to cleanups, shelters and other programs run by the city as it enters its second month under a local emergency declaration for homelessness in the city.

Smaller allocations could go toward purchasing more library materials ($800,000), providing youth programming at parks in low-income areas ($390,000) and even paying back Councilmember Daryl Supernaw’s $250,000 contribution to Community Hospital’s elevators being fixed, something he requested after the hospital failed to remain open and serve the public as an emergency room.

Other social safety net programs like the city’s guaranteed income pilot program ($450,000), the Justice Fund that provides legal defense for undocumented people facing deportation ($300,000) and language access programs like translation services ($200,000) could all get infusions of money.

The mayor’s growing staff

A new proposal that will be considered by the City Council Tuesday is whether to add multiple new staff positions to Mayor Rex Richardson’s office, something that is estimated to cost an estimated $702,450 for the rest of this year, with the full cost needing to be worked into future budgets if the new positions are retained in the future.

The proposal would add about 4.5 full-time positions to the office, bringing it to about 150% of the eight positions Mayor Robert Garcia had over the past few years. Richardson said that he wants a deputy mayor to focus on housing and another to focus on economic development and pointed to the city of Los Angeles and the County Board of Supervisors who have additional staff to help in those areas.

“We told the public we were going to improve responsiveness and this is what it takes to do it,” Richardson said this week.

Richardson’s proposal also calls for the city to pay for a membership to the African American Mayor’s Association, which could cost about $20,000 per year, according to the organization’s website.

It also calls for new positions to help the city’s elected legislators focus on serving the community by helping stay up to date on new laws and another position in the City Clerk’s office to monitor contributions to elected officials so they don’t violate the recently amended Levine Act.

While a violation of the act, which now limits contributions to officials to $250 if a person has business before a governing body, is a violation of the Fair Political Practices Commission rules and wouldn’t implicate the city, other cities are funding similar tracking services for their elected officials and commissioners.

Fossil fuels fueling city budget

Oil production and fees and taxes charged for natural gas and electricity services in the city continued to be a boon for the city’s budget. The Utility Users Tax, which is charged to city utility customers monthly could account for an additional $7.1 million going into the city’s general fund over what the city budgeted.

The largest driver was the high electricity charged to customers this summer by Southern California Edison, which resulted in an additional $5.9 million in UUT money being available for the general fund.

Similar, higher natural gas prices paid by city residents and businesses in late 2021 and 2022 fueled an additional $5.8 million in gas transfer funds that the City Council could approve. The city assesses fees to its natural gas utility and can take up to 12% of gross revenues into the general fund at the end of the year. As the commodity price and consumption goes up, so does the city’s potential transfer.

In the 2022 fiscal year, the total transfer could be $17 million.

Finally, oil production in the city accounted for $46 million that could be pumped into the general fund after Tuesday’s vote. It’s about $24 million more than the city had budgeted for but the city’s take benefitted from dramatically high gas prices seen across the country in 2022 due to the war in Ukraine. The city had projected a per-barrel price of $55, but it ended up being $94.

Oil production could continue to be a big part of the city’s budget after Friday’s news that a new oil well setback law could be postponed from going into effect until 2024. The law, which was authored by Long Beach’s state Sen. Lena Gonzalez, would have prohibited new oil operations from being established within a 3,200-foot buffer zone around things like schools, homes and parks, has been temporarily blocked by a referendum.

The city said in December the law could cost the city up to $20 million per year and endanger its ability to pay for abandoning oil wells. Long Beach’s share of abandonment is $154 million and the city had set aside $70 million as of December but added a few million more due to the the increased revenue in 2022.

The additional funding could allow for the city to fund some priority projects in the Tidelands area that were identified by the council last year like a new junior lifeguard facility, repairs to the Long Beach Convention Center and costs to operate the Queen Mary.

 

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