Ms. Lejins is represented in the legal action by a San Diego law firm that has successfully represented taxpayers in a number of Prop 218 cases challenging local government actions and is joined as co-counsel in the Long Beach litigation by attorney (and retired Long Beach Councilwoman 2006-2014) Gerrie Schipske...who from her earliest days on the Council publicly raised questions about the pipeline fee issue and more recently filed a protest in connection with this year's (FY17) Water Dept. water and sewer rate increases that includes the City Hall imposed fees.

[Scroll down for further.]

The legal action recites that voter-enacted Prop 218 prohibits local governments from (a) charging more than it costs to provide utility service; (b) using utility fees for non-utility purposes; and (c) using utility fees to pay for general government services...and alleges that the City of LB's actions violate Prop 218 because the transfers don't fund water or sewer services and [without a vote of the people] fund general government services [which can range from police, fire and public works to perks and pay raises.] Basically, the legal action alleges that LB City Hall created the type of loophole that Prop 218 sought to close.

In Nov. 1996, CA voters statewide (through the efforts of the Howard Jarvis Taxpayers Association) put petition-signature initiated Prop 218 -- the public's right to vote on taxes -- into the CA Constitution [that LB elected officials swear to uphold.]

The legal action asks the Court to invalidate the allegedly illegal fees and charges City Hall imposes on the City's Water Dept., enjoin collection of those fees, charges and transfers and restore to the Water Dept's water and sewer funds all transfers made to the City during the three years prior to filing the action.

If the petitioner/plaintiff's position prevails and it achieves the remedies it seeks, the result could return to LB's Water Dept. over $41 million (collected from ratepayers and transferred to City Hall in FY 13-14, FY14-15, FY15-16 plus budgeted in FY16-17) and simultaneously hand City Hall a bill for that sum which would drill a roughly $10 million hole in the City Council's recently enacted FY17 General Fund. In addition -- and of potentially greater future practical and political significance -- LB City Hall would presumably be unable to continue "balancing its budgets" by relying on sewer/pipeline fees imposed on the City's Water Dept. without LB voter approval.

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As first reported by LBREPORT.com weeks ago, on Sept. 6, 2016, Ms. Lejins stood before the City Council and stated that Councilmembers had been sent a letter "from a law firm and I am hereby stating my protest that I object to and protest the Long Beach Water Dept.'s proposed Water and Sewer rate increases for the fiscal year 2017. I protest on the grounds that the proposed rates violate Proposition 218. For the reasons stated in the letters, I respectfully request that the City decline to approve the resolution that are associated with it. Such actions violate Proposition 218 and will -- I emphasize will -- invite litigation against the City."

LBREPORT.com provided a link to the law firm's two letters (part of the record of the proceedings on the City Clerk's website -- visible here.) In the letters, the law firm warned that it considers the Water Dept. and City actions illegal under Prop 218 and says the City Council will invite litigation if approves a FY17 budget that includes the fees...which the Council ultimately did without dissent.

Ms. Lejins told LBREPORT.com in September that she is pursuing the protest because "to me this Council is a like a runaway train when it comes to taxes, grabbing money and spending it on their frivolous pet projects."

Independently of Ms. Lejin's protest, at least one other LB taxpayer also spoke at the LB City Council in September 2016, questioning the City's imposition of the fees on the City's Water Dept.

City Hall contends the Pipeline Fees are calculated based on the physical dimensions (diameter and linear feet) of the pipes. The law firm's September letter to City Hall acknowledged that "the costs of operating a city-owned utility may be recovered from a city's general fund when the general fund incurs costs on the utility's behalf [but] there is no basis to recover these Pipeline Permit Fees. First, the dimensions of previously-installed pipes bear no relationship to ongoing costs. Second, all water and sewer pipes were funded with ratepayer funds and are accounted for in the Water Department's accounting system. Thus, the City's General Fund incurs no costs -- either directly or indirectly -- in connection with the water and sewer pipes."

LB Deputy City Attorney Richard Anthony told LBREPORT.com in early September that the City Attorney's office didn't have any comment on the matter at that time; we were unable to seek comment from the City Attorney's office in response to the legal filing by the close of City Hall's business day on Friday (Sept. 30.) In September, text visible on the LB's Water Dept. website regarding Prop 218 stated that the LB Water Department complies with Proposition 218 when setting water and sewer rates.

The San Diego law firm retained by Ms. Lejins as lead counsel -- Krause, Kalfayan, Benink & Slavens, LLP -- indicates in releases that it "represents citizens, ratepayers and taxpayers in fee-related litigation against municipalities." It states in Nov. 2015 release that it represented a resident ratepayer against the City of Chino alleging that it violated Prop 218 "by transferring funds each year from its water utility fund to its general fund as a transfer in lieu of property taxes. Petitioner alleged that the transfers violated Proposition 218 because they were not tied to the actual cost of providing water service to Chino Residents."

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[Law firm's 2015 release text] Although Chino took steps on its own to correct its past unlawful conduct by, for example, returning over $4 million from the general fund to the water utility fund, it further agreed as part of the settlement that any future transfers from any of its enterprise funds (including water, sewer, storm drain and sanitation) will be completed using a methodology agreed to by the parties that helps to ensure that such transfers are made only to cover the actual costs of providing each of the public services as required by Proposition 218...

In 2014, the same law firm settled a lawsuit it brought against the City of Pasadena which alleged that Pasadena City Hall had violated Prop 218 by illegally transferring millions of dollars annually from its separate water utility fund to its general fund. "The suit challenged Pasadena's practice of transferring a fixed six percent of the water utility's operating revenues to the City's general fund to be used for general municipal purpose. The lawsuit alleged that from 2010 through June 30, 2014, the City illegally transferred approximately $11.9 million," said the 2014 law firm release.

"Proposition 218 prohibits local governments from taking money collected for water utility service and using it to pay for general government services unrelated to water service. Water utility fees and other so-called "property related fees" may only be used to cover the cost of providing service to ratepayers," the law firm's 2014 release said, and added, "The settlement requires Pasadena to restore $7.2 million to the water utility fund over five years. The City also agreed to stop the six percent transfers to the general fund."

Co-counsel in the Long Beach litigation is retired Councilwoman Gerrie Schipske, who served on the Council from mid-2006 to mid-2014, during which time she voted on City Hall budgets that included the fees. On Sept. 12, 2006, during her first Council budget session, newly-elected Councilwoman Schipske publicly raised the issue of the fees. Before voting on the budget, Councilwoman Schipske sought an explanation from city management of the pipeline fees. "My understanding is that the taxpayer association in San Diego are actually making noises and movements to go after the City of San Diego for these same fees, so it would be very helpful to get some kind of memo indicating that we're standing on very firm ground here," Schipske said. That prompted a response from then-City Attorney [now Long Beach Water Commission Vice President] Robert Shannon, who stated: "We're satisfied that this is a legal action but we'd be happy to come back off-agenda to give you a memo to that effect."

Nearly a decade later on July 25, 2016, now-retired Councilwoman Schipske sent a letter protesting the proposed LB Water Dept. water and sewer rate increases and raised the Prop 218 issue [salient text follows, paragraph numbering omitted, emphasis as in original]:

[Schipske July 25, 2016 protest letter]...This transfer of money from the Water Department through a "pipeline assessment fee" may be a violation of Proposition 218 in as much that the City has never demonstrated that the fees do not exceed the actual costs of the pipelines and sewers being in city soil. In 1996, voters approved Proposition 218, which states that the fees charged for utility service must reflect the actual cost of providing service; however water service fees were exempt. In 2006, a court ruling established that water service may not be exempt from this requirement. In other words, fees on the Water Department cannot be used to generate revenue. The fees must be directly related to the costs for allowing pipelines and sewers in the city.

Conveniently, the City of Long Beach transferred responsibility for sewers to the Water Department from the City Public Works Department. Had this not happened, the City would have been unable to assess a fee on itself but now can assess on an "independent" department.

In 2012, the residents of the City of Fullerton sued their city for assessing a "in lieu of franchise" fee on water rates. In Fullerton's case, the fee was tacked directly on to the utility bill. Long Beach tacks the fees onto the Water Department's budget which in turn then passes it along to the ratepayer. This is not as transparent as Fullerton which is most likely why we have not had a ratepayer rebellion in this town

As a Councilwoman, I inquired of the City Attorney in 2012 why Long Beach was continuing to assess such a fee on the Water Department and I was told that the case in the matter of the City of Fullerton allowed cities to assess their municipal utilities. He was correct, however, the assessment cannot be used to raise revenue and cannot exceed the actual costs which is required to ensure compliance with Proposition 218. I assert the fees are not in compliance with Proposition 218.

This is the third year in a row that the Long Beach Water Department Board of Commissioners has recommended rate increases, while it has sat silent about the City of Long Beach transferring millions of dollars in water department revenue into its General Fund. The Long Beach Board of Commissioners has not met its fiduciary duty to its ratepayers because it has failed to challenge the City's assessment or to demand an accounting of how the assessment is spent by the City of Long Beach. By not doing so, the Board of Water Commissioners has subjected its ratepayers to increases and increases in the 5% utility users tax which is assessed on the amount of water use billed. So the City gets two bites of the revenue stream: pipeline fees and increased utility taxes at the expense of ratepayers.

The proposed rate increases should be stopped until the ratepayers of Long Beach receive:

a. A complete analysis of how much the City's fees have caused rate increases since they were implemented;
b. An accounting of how much of these tens of millions in fees are justified because of actual costs; and
c. The return of prior funds taken that exceed the costs of allowing these pipelines and sewers in the city.

The Prop 218 issue also arose during an August 23, 2011 City Council budget session dealing with LB's Parks & Rec Dept. when then-Councilwoman Rae Gabelich (2004-2012) mentioned the pipeline fee, which led then-Councilman (now Assemblyman) Patrick O'Donnell to mention Prop 218 and add that he had questions about the matter. That prompted then-City Attorney Shannon to state that his office had written a memo on the subject about a year earlier that he said "addresses the serious questions" [that Councilman O'Donnell was raising.] Mr. Shannon, now retired from the City Attorney's office, was appointed to LB's Water Commission in March 2014 by then-Mayor Bob Foster.

Developing. Further to follow on LBREPORT.com.