(August 11, 2001) -- In a move that could climax within days of LB's next citywide election, City Manager Henry Taboada has proposed reducing LB's utility tax on City Hall's natural gas utility to 7% effective July 1, 2001, to 6% October 1, 2001, and to 5% April 1, 2002.

The proposal is contained in the City Manager's annual budget message to the Mayor and City Council, a memorandum summarizing major budget news and transmitting next year's proposed spending plan to the Mayor who (with her recommendations) forwards it to the City Council for possible amendment and final action.

In the document, City Manager Taboada also reveals several City Hall revenue sources are producing more revenue than previously expected, including Gas Pipeline Franchise fees (collected from So. Cal Gas for transporting natural gas through city pipelines).

City Hall has indicated it will post budget documents on line next week, but because of the public interest in this issue, LBReport.com is posting the City Manager's nine page memo (without attachments) on line now.

News of the City Manager's proposal comes as a number of LB residents (as previously reported on LBReport.com) have indicated they plan to file a notice of intention to circulate an initiative petition to eliminate the utility tax entirely on City Hall run utilities (gas and water). .

LB's utility tax on gas, water, electricity and telephone bills, which was 10% one year ago, is now 8%, first reduced by Prop J, championed by Norm Ryan and passed by nearly 70% of LB voters in last November over City Hall's objections.

After natural gas commodity rates soared in late 2000 and early 2001, Mayor Beverly O'Neill suggested, and the Council approved, hastening Prop J's 2001 annual 1% rate reduction from October 2001 to April 2001. However, the Council did not move to use the General Fund or Gas Fund to lower or subsidize LB's natural gas commodity rates for mainstream consumers.

On May 31, 2001, a number of LB residents brought a class action lawsuit seeking consumer rebates, alleging City Hall's natural gas rates allegedly violated the City Charter that requires rates be based on those prevailing for other like utilities in the southern California area. The City Attorney's office has filed a demurrer, in effect denying the suit's central allegation and contending LB's rates are, in fact, based on prevailing rates, especially when SDG&E rates are considered.

In what appears to be a reference to the litigation (without mentioning it directly), the City Manager's budget message states:

"On the advice of the City Attorney, we will transfer only $6.0 million [instead of $14 million] this year, and "escrow" the remaining $8.0 million in the Gas Fund. The escrowed amount is equivalent to the percentage of gross revenues (53%) earned by the Gas Fund from December 2000 through March, 2001, the period of extraordinarily high gas bills."