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
Rejects City Hall's defenses, rules for taxpayers/consumers Lejins/Kimball
|(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:
...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.
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)...
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...
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.]
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.
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