LBReport.com

News

Bombshell: Superior Court Rules Measure M (June 2018 Utility Revenue Transfer Enabling Current Level Of Mayor/Council Gen'l Fund Spending) Violates Prop 218

Rejects City Hall's defenses, rules for taxpayers/consumers Lejins/Kimball


If LBREPORT.com didn't tell you,
who would?
No one in LBREPORT.com's ownership, reporting or editorial decision-making has ties to development interests, advocacy groups or other special interests; or is seeking or receiving benefits of City development-related decisions; or holds a City Hall appointive position; or has contributed sums to political campaigns for Long Beach incumbents or challengers. LBREPORT.com isn't part of an out of town corporate cluster and no one its ownership, editorial or publishing decisionmaking has been part of the governing board of any City government body or other entity on whose policies we report.

LBREPORT.com 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. 6, 2020, 3:30 A.m.) -- A Los Angeles Superior Court has ruled that LB City Hall's June 2018 Measure M utility revenue transfer ballot measure -- that Mayor Garcia and City Council told LB residents wasn't a tax -- violates CA's Prop 218 constitutional provisions governing imposition of new taxes.

In a detailed 22-page ruling (extended excerpts below), Superior Court Judge James Chalfont ruled on a Petition for Writ of Mandate sought by ELB (5th dist. resident) Diana Lejins and "L.A. County island" (south of Heartwell Park, east of Woodruff Ave.) resident Angela Kimball, represented by attorney Eric Benink (San Diego lawfirm of Benink and Slavens) and co-counsel/former 5th dist. Councilwoman Gerrie Schipske.

Measure M, placed on the June 2018 ballot without dissent by the Council and approved by roughly 53.8% of LB voters following a six figure campaign run by a committee controlled by Mayor Garcia, authorized the annual transfer of a portion of sums paid by LB Water Dept. users to City Hall for General Fund spending unrelated to the utility's services. Measure M also authorized LB's Water Dept. (governed by a Mayor-chosen/Council approved Water Commission) to set water/sewer rates at a level sufficient to backfill sums transferred to City Hall.

The court ruled that Ms. Lejins and Ms. Kimball are entitled to an injunction "that commands the City to cease the transfer of Measure M rate revenue to its General Fund and to return all Measure M transfers from its General Fund to LBWD’s Water and Sewer Revenue. The two women didn't seek financial sums for themselves or restitution for water/sewer ratepayers; they simply sought to stop the transfers as violating Prop 218. After the two women testified in opposition at Water Commission and City Council meetings, the Council responded in September 2018 by voting (without dissent) to implement the Measure M revenue transfers.

The women then pursued their legal remedy in Oct. 2018, represented by attorney Benink and co-counsel Schipske, the same team that represented them in a previous legal action challenging City Hall-imposed "pipeline fees" (that LB's Water Dept. collected from the utility's users and sent to City Hall for General Fund spending.) The City imposed the pipeline fees without a vote of the people, and when challenged by the first Lejins-Kimball litigation, the City settled, agreed to end its "pipeline fee"...and proposed Measure M to create a "revenue transfer" (that Mayor Garcia claimed wasn't a tax) to replace sums City Hall had collected with the pipeline fees.

[Scroll down for further.]






Among multiple cases cited by Judge Chalfont (who in July 2018 upheld LB City Hall's Belmont Beach Aquatic Center EIR) was a 2002 CA appeals court case -- Howard Jarvis Taxpayers Assn. v. City of Roseville (97 Cal.App.4th 637) -- which stated: "The theme of Art. XIIID, section 6(b)(1), (2) and (5) [Prop 218] is that fee or charge revenues may not exceed the cost to provide the service," and "the key is that the revenues derived from the fee or charge are required to provide the service, and may be used only for the service."

In his analysis of the City of LB's actions, Judge Chalfont stated in pertinent parts of his ruling:

Sponsor

Sponsor

...In light of Art. XIIID, section 6(b) [Prop 218], the City is constitutionally permitted to levy user fees or charges only to recover the cost of providing its property-related services. The City raised water rates by 7.2% effective October 1, 2018 solely to fund Measure M transfers. The Measure M tax is embedded in the water and sewer rates and is denominated a "service" or "usage" charge on utility bills. [citations omitted]...The Measure M tax is imposed upon persons based on normal use of their property as water and sewer customers and is therefore imposed “as an incident of property ownership” within the meaning of Art. XIIID, section 2(e). [citations omitted[...The "normal use" of a City customer’s property is the consumption of water and sewer services. Accordingly, the City’s tax is imposed upon the City’s water and sewer customers as an incident of property ownership. Pet. Op. Br. at 17-18.

Specifically, the City’s water and sewer surcharge violates Art. XIIID, section 6(b)(1) because the fee or charge imposed as an incident of property ownership exceeds the revenue needed to operate the City’s utilities. The City crosses the constitutional boundary by imposing fees intentionally inflated to generate surplus revenue to fund Measure M transfers. The City violated Art. XIIID, section 6(b)(1) when it imposed a levy in an amount that exceeds the revenue needed to operate its utilities...

The surcharge also violates Art. XIIID, section 6(b)(2) because the City transfers the fee charged for water and sewer services to its General Fund for unrestricted general revenue purposes unrelated to the provision of sewer or water service. Art. XIIID, section 6(b)(2) prohibits the City from using "revenues derived from" user utility fees and charges for property related services "for any purpose other than that for which the fee or charge was imposed." [citation omitted]...The City imposes fees and charges for water and sewer services and then transfers a portion of its sewer and water fee revenue to the general fund pursuant to Measure M. Section 1407(7) provides that these funds may be used as unrestricted general revenue unrelated to the provision of sewer or water service. The City admits that the transferred funds have not been earmarked for or restricted to any specific purpose or use. [citations omitted].

Finally...the General Fund to which the surcharge is transferred is used for general governmental purposes...The...City’s police chief, fire chief, and mayor promoted Measure M to support "Long Beach firefighter, paramedic and police office staffing, as well as funding for pothole and street repairs" LB 3556. The City Attorney’s Impartial Analysis of Measure M explained that the "General Fund pays for general City services such as police, fire and paramedic response, street repairs, parks, libraries and youth/senior programs” and that "the Long Beach City Council placed Measure ‘M’ on the ballot to maintain General Fund revenue." LB 3554. The City admits that the Measure M transfers are not earmarked for or restricted to any specific purpose. Stip. ¶1. A "general tax" is any tax imposed for general governmental purposes. Art. XIIIC, §1(a). Measure M authorizes a general tax because the City uses these funds for general governmental purposes.

Sponsor


Art. XIIID [Prop 218] section 6(b)(5) prohibits charging a utility customer for a service that merely benefits the community. "No fee or charge may be imposed for general governmental services including, but not limited to, police, fire, ambulance or library services, where the service is available to the public at large in substantially the same manner as it is to property owners." Art. XIIID §6(b)(5)...

...[T]he City’s surcharge is a general tax imposed as an incident of property ownership and not a charge based on actual water usage. The surcharge is not required to provide the water and sewer service (Art. XIIID §6(b)(1)), is not used only for that service (Art. XIIID §6(b)(2)), and only benefits the general community. Art. XIIID, §6(b)(5)...

...The City’s argument -- that its general tax on water and sewer services is not imposed as an incident of property ownership and also is not a user fee for a property-related service, ignores the plain language of Art XIIID, section 2(e)’s definition of "fee" or "charge." That provision, without the listed exceptions, states that a fee or charge is any levy imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service.” (emphasis added). This language plainly means that a levy imposed as an incident of property ownership includes, and subsumes within it, a user fee for a property-related service......

...The City’s surcharge meets Art. XIIID, section 2(e)'s definition of a levy imposed as an incident of property ownership. As stated ante, the Measure M tax is embedded in the rates and is denominated a "service" or "usage" charge on utility bills. [exhibit citation omitted] The Measure M tax is imposed upon property owners based on their normal use of the property as water and sewer customers, is not a commodity charge based on actual water and sewer usage [citation omitted] and therefore is imposed "as an incident of property ownership" within the meaning of Art. XIIID, section 2(e) as a fee that burdens landowners as landowners. [citation omitted] Accordingly, the surcharge is a general tax imposed upon the City’s water and sewer customers as an incident of property ownership and is subject to the constitutional restraints of Art. XIIID, sections 6(b)

The court rejeted the City's argument that approval by LB voters validated Measure M:.

...The City acknowledges that its surcharge is a general tax pursuant to Art. XIIIC (City RJN Ex. B (§1407(7)) and argues that this concession does not end the inquiry because general taxes imposed on the use of water and sewer service and approved by a majority vote are not prohibited by Art. XIIID...

...Prop 218 passed in 1996. The City notes that Art. XIIIC and Art. XIIID are functionally related and both further Prop 218’s goal of "limiting the methods by which local governments exact revenue from taxpayers without their consent." City RJN Ex. A, p. 108 (§ 2). In the words of its proponents, Prop 218 "CONSTITUTIONALLY GUARANTEES your right to vote on taxes." City RJN Ex. A, p. 77. This requirement was satisfied when 53.76% of votes were cast in favor of Measure M in the June 5, 2018 election "consolidated with a regularly scheduled general election for members" of the City’s governing body as required by Art. XIIIC, section 2(b). McWhirter Decl. Ex. F; City RJN Ex. D (Charter Art. XIX, §1901). As a result, the City argues that the surcharge is a general tax on water and sewer service that fully complies with Art. XIIIC’s election requirements. Opp. at 13-14...

The answer is that Art. XIIIC does not relieve the City from complying with Art. XIIID, which carries independent constitutional requirements. [citations omitted]...Art. XIIID, sections 3 and 6 reflect the Prop 218 voters’ determination that local governments can never impose general taxes upon parcels or persons as an incident of property ownership -- even if local voters approve it. As Petitioners’ argue, this is not surprising in light of Proposition 218’s historical background, which began in 1978 with the adoption of Proposition 13, the purpose of which was to cut local property taxes. [citation omitted] Prop 218 continues that purpose of limiting local property taxes, which cannot be overcome by partial compliance. Nothing in Art. XIIID expressly or implicitly relieves a qualifying fee or charge from Art. XIIID, section 6’s substantive requirements. As for Art. XIIID, section 3, Petitioners correctly argue that the interpretive principle of expressio unius est exclusion alterius (the enumeration of things to which a statute applies is presumed to exclude things not mentioned) forecloses any possibility that the drafters intended Art. XIIID, section 3 to permit a local government to impose general taxes as an incident of property ownership once voter approval was obtained...

...The City voters' approval of section 1407 does not trump the constitutional restrictions of Art. XIIID, sections 3 and 6. The Supreme Court has rejected the notion that local voters approving a city charter provision can override Prop 218’s constitutional restrictions...

The City argues that, if Art. XIIID, sections 3 and 6 ban general taxes on the use of water and sewer service, then special taxes on such service dedicated to “specific purposes” and approved by a two-thirds vote will be lawful, but general taxes on such services, approved by a majority vote, will not. Opp. at 21. This is true, and the short answer is "So what?" Prop 218 -- and its predecessor Prop 13 and successor Prop 26 -- changed the rules for local government imposition of property-related taxes...

Sponsor

Sponsor

The Court also ruled that the City had unconstitutionally imposed its tax beyond LB's city limits [petitoner Kimball is a resident of the "L.A. County island" south of Heartwell Park, east of Woodrulff Ave.] "The City could impose a tax on the proportionate amount of such services if it could do so lawfully for customers within city limits under Art. XIIID. As stated ante, it cannot do so. The City certainly cannot impose a general tax on customers outside city limits where it cannot lawfully do so inside city limits," the court ruled. [This presumably also applies to LB Water Dept. users in Signal Hill, although no Signal Hill resident or Signal Hill City Hall participated in the legal action.]

Sponsor

Sponsor

The Court said Petitioners Lejins and Kimball are "entitled to (1) a mandate that directs the City set aside the Ordinance based on Measure M, (2) a judicial declaration that the City cannot impose general taxes, even with voter approval, upon parcels of property or upon persons as an incident of property ownership and that the City may not impose the general tax on any customers residing outside City limits, and (3) an injunction that that commands the City to cease the transfer of Measure M rate revenue to its General Fund and to return all Measure M transfers from its General Fund to LBWD’s Water and Sewer Revenue Funds."

The Court issued its ruling at midday Thursday Jan. 2 but LB city officials have said nothing about it publicly as of predawn Monday Jan. 6. LBREPORT.com presumes the City Attorney will at some point schedule closed session to discuss the City's options with the decision-making City Council.

On December 17, 2019, city management conducted a Council study session on the city's fiscal outlook. In its Power Point presentation ("Preliminary FY21 General Fund Fiscal Outlook and Budget Strategy"), city staff stated on one page in a single bullet point: "Water litigation - if lost would be a major future impact."

Developing...with further to follow on LBREPORT.com.


Support really independent news in Long Beach. No one in LBREPORT.com's ownership, reporting or editorial decision-making has ties to development interests, advocacy groups or other special interests; or is seeking or receiving benefits of City development-related decisions; or holds a City Hall appointive position; or has contributed sums to political campaigns for Long Beach incumbents or challengers. LBREPORT.com isn't part of an out of town corporate cluster and no one its ownership, editorial or publishing decisionmaking has been part of the governing board of any City government body or other entity on whose policies we report. LBREPORT.com is reader and advertiser supported. You can help keep really 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.


blog comments powered by Disqus

Recommend LBREPORT.com to your Facebook friends:


Follow LBReport.com with:

Twitter

Facebook

RSS

Return To Front Page

Contact us: mail@LBReport.com



Adoptable pet of the week:



Carter Wood Floors
Hardwood Floor Specialists
Call (562) 422-2800 or (714) 836-7050


Copyright © 2020 LBReport.com, LLC. All rights reserved. Terms of Use/Legal policy, click here. Privacy Policy, click here