"If you've got them by the balls, their hearts and minds will follow." Plaque displayed on desk of former Nixon White House Counsel Charles Colson

(July 19, 2005) -- At its July 19 meeting, the City Council voted 8-0 (Lowenthal absent) to approve a city management-proposed resolution (text below) asking LB's Board of Harbor Commissioners to OK a transfer of nearly $9.5 million -- 10% of the Port's FY 04 net income -- to City Hall's Tidelands Operating Fund...without which, city management says LB's "Tidelands Operating Fund would close the fiscal year with a deficit which would necessitate the closing of beaches and elimination of safety services in the Tidelands areas."

The vote came without serious Counsel discussion and only one quick question from Councilwoman Rae Gabelich...who asked City Manager Jerry Miller if this year's action was different than last year. It's being requested earlier this year so the Port can make this part of its adopted budget, City Manager Miller replied.

City Manager Miller didn't bring up a few other pesky matters, perhaps because they're already known or should be known to Councilmembers...who didn't bring them up either.

In the current (now ending) FY 05, the 10% Port transfer amounted to about $6.85 million in public money (derived from Port fees) to City Hall's Tidelands Operating Fund.

However in FY 06, it'll be nearly $9.5 million...and based on what city management has told us, LBReport.com believes that even this larger Port transfer may still leave the Tidelands fund in the red if certain events come to pass.

As previously reported by LBReport.com, City Hall's Dir. of Financial Management, Mike Killebrew, told us at a July 9 "budget summit" that City Hall's FY 06 budget now being prepared treats as "receivable" several million dollars in rent from the Queen Mary operator (currently seeking bankruptcy protection). City Hall contends the rent [reported elsewhere to now exceed $4 million] is due and owning...and the Queen Mary operator denies any rent is due or owing. .

If a bankruptcy court or other settlement erases all or part of Queen Mary rent budgeted by City Hall as receivable, that would put the taxpayers' Tidelands fund in the red...even with the Port transfer.

As previously reported by LBReport.com, city management told Councilmembers in late March 2005 -- via a non-agendized memo (previously reported by LBReport.com -- that elements of LB's downtown beach/waterfront area in the tidelands are losing money and have for some time.

Neither issue was explored publicly by Councilmembers or raised by city management at the July 19 Council meeting.

Under LB's current City Charter, the annual transfer of up to 10% of Harbor Department net income to City Hall is within the discretion of Harbor Commissioners but has occurred nearly routinely in prior years. (It hit choppy water in Sept. 2004, details below). In FY 05, city management says the Port transferred funds were used to balance the budgets "of the various departments that provide services in the Tidelands. Continuity of services in the Tidelands area, such as beach maintenance, lifeguards, fire and police is contingent on the Port transfer."

The transfer of up to 10% of Harbor Dept. net income requires a City Council request via a resolution approved by two-thirds of the entire Council (at least six votes) and Harbor Dept. approval via a resolution approved by a majority of the Harbor Commission (at least three votes).

The City Council has the power to approve or amend the Harbor Department's budget as part of the Council's annual adopting of the City's budget each September. In September 2004 -- after Harbor Commissioners voted to oppose clean air legislation supported by the Council (AB 2042-Lowenthal, to prevent port growth from worsening air pollution beyond a 2004 baseline level) -- Councilmembers Rae Gabelich and Tonia Reyes Uranga agendized an item to begin a process that (if approved by voters) would amend the City Charter to prevent the Port from taking positions on pending legislation that conflict with Council-established city policies.

The item was agendized for the same Council meeting at which Councilmembers were scheduled to decide whether to approve -- or amend -- the Port's budget. (Deleting sums budgeted by the Port for advocacy might not stop Port lobbying against City Hall policies if the Port tried to "backfill" deleted sums from other sources; this would be prevented by a Charter Amendment.)

Hours before the Council meeting, Harbor Commissioners attached a condition to their transfer to the effect that there'd be no Port transfer unless the Council approved the Port's budget as submitted by Harbor Commissioners...without changes. (LBReport.com prepared and posted an unofficial transcript of the Harbor Commission proceedings at the time. To view it, click here.)

At the Sept. 7 City Council meeting, Councilman Dan Baker (whose district includes Port area) noted that if the Council "in its legislative duties were to attempt to amend that [Port] budget, then that transfer would be held hostage." Baker's comment brought Harbor Commissioner James Hankla to the podium, who took issue with the term "hostage."

"I think 'hold hostage' is the wrong characterization. The [Port] budget is based on a series of assumptions. In coming to that budget, the Board of Harbor Commissioners must make certain findings, that those funds are surplus to the [Port's] needs. If that budget is changed, we'd have to go back and reconsider those findings."

Councilman Baker said at the time that although he'd vote to approve the Port's budget now, "I am concerned, and as we move forward with Harbor discussions as it relates to our City Charter amendments which are forthcoming, one of the things I'm strongly going to push for, and I hope my colleagues will support, is that transfer will occur; it won't be a discretionary approval; it will occur on a regular basis, and I don't think we'll find ourselves in a situation where, whatever the correct language is, where there is discontent as to whether or not it should come over to the city."

In September 2004, the Council approved the Port's budget as submitted by a 6-2 vote (Gabelich and Lerch dissenting; Lowenthal absent for entire meeting).

On July 19, 2005, Councilmembers approved the resolution below on an 8-0 vote (Lowenthal absent):