City Mgm't Memo Acknowledges That As Currently Written, Proposed Charter Amendment Could Take Up To $26 Mil From LB Water/Sewer/Gas Users For General Fund ("Blank Check") City Council Spending

Sum Is Over Three Times More Than Mgm't Previously Mentioned, It Goes Beyond Filling Budget Hole From Taxpayer's Prop 218 Lawsuit That Ended City Hall's Water/Sewer Pipeline Fees 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.
(Jan. 9, 2018, 4:30 p.m.) -- A city management memo, now accompanying draft text a proposed City Charter amendment -- scheduled for its first City Council public discussion on Jan. 10 -- indicates that as currently drafted the measure proposes to take up to $26 million from Water/Sewer/Gas utility users each year which the Council could then spend for any general fund ("blank check") purposes. The sum is over three times larger than the $8.3 million "litigation deficit" (resulting from City Hall settlement of a taxpayer's Prop 218 lawsuit aimed at City Hall pipeline fees imposed without a vote of the public on LB Water/Sewer Dept. customers.)

As currently written, the draft Charter Amendment would enable City Hall to take up to 12% from the gross revenues of LB's Water, Sewer and Gas utility users (to the extent deemed "unnecessary" by those utilities.) City management's memo -- visible here, states in pertinent part that $26 million is "approximately the amount that has been transferred in recent years, as well as provides for the recoupment of the amounts paid by the General Fund to the utility for the retroactive payments per the [taxpayers Prop 218 lawsuit] settlement. This is about $26 million (for all three utilities) at today's utility revenue levels." [Water/Sewer rates are set by a Mayor-chosen/Council approved Water Commission; Gas utility rates are set to market levels by city management.]

The measure's current draft text hasn't previously been discussed by the City Council or the public; it appeared (already drafted in legal form) immediately after a Dec. 19 Council study session agendized to discuss the City's fiscal outlook. The draft text will have its first of three required hearings on Wednesday Jan. 10 at 5 p.m. The Council can tweak or change the Charter Amendment's draft text before submitting it to LB voters (or choose not to put it on the ballot (which would require the Council to solve the litigation related deficits by other means.)

If the Council puts the Charter Amendment on the ballot in its current form and if LB voters approve it in June 2018, it would let City Hall reimpose $8.3 million annually in Water/Sewer fees the City collected from Water/Sewer customers (now disallowed under City Hall's settlement of taxpayer Diana Lejins Prop 218 lawsuit), plus roughly $10 million collected from Gas Dept. customers that may or may not be disallowed under a separate taxpayer lawsuit (city prevailed initially, ruling now on appeal by taxpayer) plus about $8 million that City Hall is now repaying LB Water/Sewer customers in settlement of fees that the City previously imposed and collected from LB Water/Sewer customers.

Sums collected from Water/Sewer/Gas Dept. customers under the Charter Amendment would be General Fund ("blank check") revenue that current and future City Councils could spend for any General Fund purposes.

[Scroll down for further.]

At a Dec. 19 Council "study session," (agendized to discuss the City's "Fiscal Outlook"), city management indicated that City taxpayers also face separate deficits (spending exceeding revenue) -- arriving after April/June 2018 elections for Mayor and five Council incumbents -- in FY19 plus FY20 plus FY21 in a range totaling between $30.6 million to $36.6 million dollars. These $30+ million deficits aren't from the taxpayer litigation but from Mayor recommended/Council approved budgets for items collectively ranging from police, fire, parks and libraries to pay-raises for city employees and management plus the FY19 anticipated start of 40+ years of annual escalating payments under the Civic Center tear down/rebuild/outsource transaction (approved by the Council in 2014 without a vote of the people.)

Management said the Council could pare down a roughly $13.6 FY19 deficit by about $6.3 million by increasing some fees and fines and shifting some "Measure A" revenue ("blank check sales tax funds now allocated mainly for infrastructure items) to "maintain" -- not restore further -- public safety services.) However, management said these measures would still leave LB taxpayers facing an estimated $7.3 mil FY19 deficit (that could require what management called "Departmental Reductions.") Under state law, the City's budget can't show a deficit and must be balanced.



A lawsuit by LB taxpayer Diana Lejins under Prop 218 forced City Hall settlement in late 2017 of sums collected under the City Hall-imposed Water/Sewer fees (imposed without voter approval) and now requires monthly rebates to Water/Sewer users. The Charter Amendment seeks voter approval to end those fees and end those rebates to Water/Sewer customers. Management says the settlement has reduced the average customer's water/sewer utility bills by roughly $3 per month, and says LB utility rates were already lower than comparable jurisdictions.) For years, multiple Mayors (O'Neill, Foster and Garcia) recommended budgets approved by multiple Councils (2003/2006 forward) that were "balanced" by using the now-invalidated Water/Sewer "pipeline fees."

At the Dec. 19 "study session, city management told the Council that a Charter Amendment (text not revealed at that time) could "fix" the FY19 $8.3 million Water/Sewer litigation-related deficit...and now says that (as currently drafted) the Charter Amendment would also address an additional potential $10 million exposure from a separate taxpayer lawsuit against LB's Gas Dept. (in which the City prevailed initially but now appealed by the taxpayer) and also let City Hall recoup sums it's now repaying (under the City Hall approved settlement) to LB Water/Sewer customers.


In its Jan. 10 memo, city management states:

The combined potential impact to the General Fund of both the water/sewer and gas lawsuits is over $18 million annually. Illustratively, the amount equals almost the entire General Fund net cost of citywide parks and recreation operations. The adverse impacts of the two lawsuits can be addressed through an amendment to the City Charter that further clarifies that the transfers are authorized by the voters. This is because neither Propositions 218 nor 26 prohibit a City from making utility fund transfers to its General Fund if the voters explicitly approve of the transfers. Staff is recommending the attached City Charter amendment (Exhibit B) to explicitly authorize the continuation of water/sewer and gas utility revenue transfers that the City had been making to its General Fund for over 60 years. By authorizing the continuation of utility revenue transfers, the Charter amendment can help avoid the service reductions that the lawsuits would likely otherwise cause, by returning to the historical status quo.



As previously reported by here, city staff stated at a Dec. 19 afternoon Council study session that (despite collecting $45+ million 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.

A Council majority has the power to tweak or change the terms of the current draft Charter Amendment to set a lower percentage or make other changes at any one of three hearings: on January 10 (starting at 5 p.m.) and on February 13 and March 6. plans to carry LIVE video of the Jan. 10 special Council meeting starting at 5:00 p.m.


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