Mayor Garcia Calls Special Jan. 10 Council Meeting (First Of Three Hearings) To Put "Blank Check" Charter Amendment On June 2018 Ballot, Letting Council Take Up To 12% From "Unnecessary" Water/Sewer & Gas Dept. Gross Revenues To "Maintain Local General Fund Services" is reader and advertiser supported. Support independent news in LB similar to the way people support NPR and PBS stations. We're not non-profit so it's not tax deductible but $49.95 (less than an annual dollar a week) helps keep us online.
(Dec. 25, 2017, 9:50 p.m., updated Dec. 26, 5:20 a.m. and 1:33 p.m.) -- Mayor Robert Garcia has scheduled a special joint meeting of the City Council's Charter Amendment Committee (comprised of all Councilmembers) with a coinciding special meeting of the full Council on Jan. 10, in the first of two required hearings (the second in 30 days followed by a final hearing with Council vote 21 days later) on an already-written City Charter Amendment on the June 2018 citywide ballot that asks LB voters to authorize transfers of up to 12% from otherwise "unnecessary" LB Water Dept. water/sewer and Gas Dept. gross revenues to LB's General Fund (as with the Measure A sales tax increase) for "blank check" City Hall purposes "to maintain local general fund services."

Giving initial notice during the traditionally low-public-attention year-end holiday period, Mayor Garcia has scheduled the special joint meeting one day after his "State of the City" message at which he may recommend that the Council approve the action.

Under CA Government Code section 34458, the City must hold at least two public hearings on a proposed Charter Amendment (the Jan. 10 meeting is the first)...and the second public hearing must be held at least 30 days after the first hearing...and the Council can't conduct a vote on whether to submit the measure to voters until 21 days after the second public hearing.

[Scroll down for further.]

As previously reported by here, city staff stated at a Dec. 19 afternoon Council study session that (despite collecting $45+ millon annually from Measure A leaving LB consumers paying the highest sales tax rate in CA tied with only a few other cities), LB City Hall faces deficits (gaps between spending and revenue) in FY19, FY20 and FY21 in a range of between $30.6 million and $36.6 million dollars. Those deficits are in addition to an $8.3 million litigation deficit stemming from a taxpayer lawsuit over City Hall imposed "pipeline fees" on LB's Water Dept. (that shrugged Prop 218's voter approval requirement.) Under state law, a city's budget must be "balanced" (meaning the Council can't adopt a budget showing spending exceeding expected revenue.)

The draft Charter Amendment text, which the Council could amend or tweak before placement on the ballot, proposes that LB voters explicitly authorize City Hall to transfer "unncessary" water/sewer and gas department gross revenue to City Hall, producing millions in "blank check" revenue that current and future City Councils could spend for any General Fund purposes as follows [bracketed material by us for clarity]:

[From Water Revenue Fund]...[Authorizes]...transfer to the general fund of the City any funds in the Water Revenue Fund and/or the Sewer Revenue Fund that are determined by the Commission to be unnecessary to meet [other Water Dept. obligations] provided that the maximum transfer does not exceed twelve percent (12%) of the water utility's and sewer utility's annual gross revenues, respectively, as shown by a financial report audited by an independent accounting firm. All proceeds from such transfers shall be used to maintain local general fund services as the City Council may by budget adoption or other appropriation direct, including without limitation 9-1-1 response, police/fire protection, street repairs, parks and libraries."

[From Gas Utility]...[Authorizes funds] determined by the City Manager to be unnecessary to meet the [utility] obligations...[to be] transferred into the general fund of the City as approved by budget adoption or other appropriation by the City Council; provided that with respect to the gas utility, the maximum transfer does not exceed twelve percent (12%) of the gas utility’s annual gross revenues, as shown by a financial report audited by an independent accounting firm. All proceeds from such transfers shall be used to maintain local general fund services as the City Council may by budget or other appropriation direct, including without limitation 9-1-1 response, police/fire protection, street repairs, parks and libraries.

The Charter Amendment also explicitly authorizes the City Council "to fix rates in an amount sufficient to recover the cost" of the utility's obligations (subject to other Charter limitations.)

To view the full Charter Amendment proposed changes [sections 1407 (5) and (6) and 1501 (d) and (e)], click here.

[Current Charter section 1407 allows "To be transferred to the general fund of the City, if and when, in the judgment of the [Water] Commission, such monies are no longer necessary for the purposes of the Commission" and 1501 currently states: "The remainder in any of these funds determined by the City Manager to be unnecessary to meet the above obligations may be transferred into the General Purpose Fund of the City as approved in the annual budget by the City Council."



No city staff or Mayoral memos currently accompany the draft Charter Amendment text explaining the basis for the proposed percentage transfers, the additional monthly cost to LB ratepayers or other impacts of the proposed transfers [although city officials have presumably already considered these in creating the proposed Charter Amendment.]

The Water Dept's FY18 adopted budget indicates expected FY18 gross revenue from water charges at $103 million and FY18 sewer charge revenue of $19 million (total $122 million.) The Gas Dept's FY18 gross revenue is estimated at $92.8 million. The gross revenue amounts used to calculate the transfer could presumably increase annually as LB Water and LB Gas gross revenues increase with rate increases reflecting their increased costs and the like.


During the Dec. 19 study session, city staff mentioned that a then-unspecified Charter Amendment could let City Hall "fix" the litigation deficit by restoring water and sewer pipeline fees that previous Mayors/Councils began imposing on the Water Dept. in 2003/2006 (without Prop 218 voter approval.) For over a decade, City Hall used the pipeline fee revenue to balance City Hall budgets, but that practice recently ended after LB taxpayer Diana Lejins retained legal counsel (including former Councilwoman Gerrie Schipske) and filed suit alleging that City Hall's pipeline fees violated Prop 218's voter approval requirement. (In 2006, newly elected Councilwoman Schipske raised the Prop 218 issue without success.) The City recently settled the litigation and the Water Dept. will rebate some sums to customers, but city management says unless the pipeline fees are restored with a Charter Amendment, the City's FY19 budget will face a litigation deficit of $8.3 million.

City staff also indicated that the City recently prevailed in litigation (in a decision is currently being appealed) related to gas fund transfers.

No written materials were available to the press or the public prior to the Council's Dec. 19 "study session" (although requested them.) The "study session" was agendized simply as a "presentation on the City's Fiscal Outlook." This effectively left the press unable to preview the meeting's content the public unable to respond in a meaningful way to the magnitude of the approaching deficits and how to deal with them.



In addition to the $8.3 million litigation deficit, city staff indicated that taxpayers face additional annual deficits (gaps between spending and revenue) that will arrive in FY19...after 2018 city elections for Mayor and five of nine Council incumbents. City staff estimates these spending vs. revenue gaps will reach $13.6 million in FY19, plus $12-$16 million in FY20 plus $5-7 million in FY21. City staff said these figures, which are larger than staff previously estimated, are preliminary and likely will change.

City staff said the Council could reduce the $13.6 FY19 non-litigation deficit by $6.3 million if the Council were to approve increased parking ticket fines, raise other fees and reallocate part of Measure A revenue to public safety...but that would still leave a $7.3 million FY 19 deficit which would be followed by FY20 and FY21 deficits.


Staff said the non-litigation deficits are driven mainly by increased pension costs (although they reflect multiple collective Mayor/Council spending and budget decisions, some of which were and are controversial.) Among controversial Mayor/Council spending items were raises approved for multiple city employee groups (including police, firefighters and non-public safety employees), city managers (including some among City Hall's "$100,000 Club" and "$200,000 Club"), a Dec. 12 Council vote giving a downtown hotel developer (SE corner Pine/Ocean) 80% of the hotel's room tax over nine years (totaling $27 million), and the scheduled FY19 start of annual payments to a private entity (under a "public-private partnership" that avoided seeking taxpayer voted approval) for a Civic Center tear-down/rebuild favored by downtown interests that now obligates LB taxpayers citywide to pay annual increasing sums to a private entity for 40+ years.

Following June 2016 LB voter approval (by roughly 60% citywide) of Measure A (a General Fund/"blank check" sales tax increase), the Council allocated sums for multiple street paving and infrastructure projects, restored Fire Engine 8 (Belmont Shore), restored Paramedic/Ambulance Rescue 12 (NLB) but left LB taxpayers without 191 previously provided police officers and three previously provided fire engines (two in ELB, one downtown.)


1:33 p.m. Text added to explain requirement two public hearings (first one on Jan. 10), followed by a second public hearing at least 30 days later, followed by voted action on whether to submit the measure to voters at least 21 days after the second public hearing.

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