Council Pursues November Ballot Measure To Raise LB's Oil Barrel Production Tax, Signal They Favor Spending Its "Blank Check" Revenue To Address Equity Issues
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(July 10, 2020, 7:15 a.m.) -- On July 7, the City Council voted 9-0 to direct city management to pursue a November 2020 General Fund ("blank check") oil barrel production tax increase. Councilman Rex Richardson and his allies signaled they want to spend the resulting new revenue to address "equity" issues.
During Council colloquy, Mayor Garcia (a co-agendizer of the item) acknowledged it will be a GeneraL Fund revenue measure with no legal guarantees as to its spending (decided by a Council majority) and requiring only a 50%+1 voter approval.)
City management indicated it would return to the Council in the coming weeks with a report on expected revenue that the measure could bring City Hall.
Councilman Richardson said the measure isn't a new tax, but an upward adjustment of a current tax and urged using the new revenue to address chronic issues including the effects of pollution, health impacts on SW and NW LB.
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No Councilmembers suggested using new revenue for police.
As oil producers, state of CA and City of LB would pay majority of the tax with three private entities (Signal Hill Petroleum, CRC and Synergy) paying most of the rest.)
The item was added to the July 7 agenda by Mayor Robert Garcia, joined by Councilmembers Richardson, Zendejas, Pearce and Austin. The tax increase, which wouldn't be paid directly by most LB taxpayers unless they own an oil well, would provide City Hall with a revenue infusion for Mayor/Council desired spending items.
The proposed ballot measure would invite LB voters to increase the per barrel tax rate currently applied by LB to oil producers under Measure H [advanced in 2007 under then-Mayor Foster that has since let oil producers pay the City of LB a lower tax rate than they pay the City of Signal Hill.)
The agendizers framed their proposal in terms of addressing global warming emissions and the shortage of open space in low income areas near freeways and industrial facilities. They didn't focus on budget issues (stemming form Council spending exceeding revenue) previously acknowledged by city management as issues for FY21 and beyond prior to COVID-19 (and worse now.) The agendizers also don't mention now-pending legal challenges to City Hall's March 2020 Measure A sales tax extension and the March 2018 Measure M utility revenue transfer (ruled unconstitutional, City Hall appeal pending.)
The agendizers' iterm sought:
Request the City Manager to engage the California State Lands Commission [Lt Governor + State Controller + Governr's Dir. of Finance] and other stakeholders regarding potential modifications to the Oil Barrel Production tax;
Request City Attorney to prepare all necessary documents to place a ballot question on the November 2020 ballot for an increase in the Oil Barrel Production Tax and to work with the City Manager to provide options and financial impact on the amount of the tax and mechanisms for a progressive tax that increases over time and for a resolution defining the City Council's intent for use of the funds; and
Request City Manager and City Attorney to explore the feasibility of preparing a ballot advisory question on whether to reinvest future cannabis revenue into economic equity, health equity, and youth investments, and to further strengthen our cannabis equity program to expand equitable ownership opportunities.
In their agerndizing memo, the co-agendizers wrote:
Long Beach is home to several on- and off-shore oil wells, as its history of oil production goes back to the early 1900s. Today, oil operations revenue still contributes to the City's General Fund and essential Tidelands area services, such as police, fire and lifeguards, beach maintenance, lease management, parking operations, and other support functions.
In 1964, Long Beach voters lifted an oil drilling ban, allowing drilling to resume across the City. The Oil Production Tax (OPT) was set at $0.15 per barrel in 1990, and in 2007, Long Beach voters approved the Police and Fire Public Safety Oil Production Act (Prop H). Prop H amended the City's Municipal Code to assess an additional $0.25 per barrel special tax on oil producers in Long Beach, with an annual adjustment according to the Consumer Price Index. Prop H proceeds can only be used for police officers, firefighters,
and related costs (equipment, facilities, training, etc.).
The Aquarium of the Pacific's Climate Resiliency Assessment Report for Long Beach lists oil-related industries as one of the biggest polluting sources within the region, next to vehicles
According to the City of Long Beach's Draft Climate Action and Adaptation Plan, "more than 13 million barrels of crude oil and 5 billion cubic feet of natural gas" were extracted within Long Beach in 2015. "The resulting lifecycle emissions total 8.3 million MT CO2e,
which is 2.7 times greater than the City's production inventory emissions." 91 % of these emissions occurred due to refining, transport to consumers, and end users of fuel; 9% is comprised of emissions associated with extraction (5%), and natural gas lifecycle emissions (4%)2. Each disproportionately impacts the health and quality of life of disadvantaged and low-income communities.
Racial and economic disparities are perpetuated spatially across the City, as low-income people and communities of color are more likely to live in areas with higher environmental health burdens; neighborhoods with less open or green space, located near major
freeways, oil refineries, and industrial sectors.
In Long Beach, African-Americans have the highest rates of hospitalization for heart disease, diabetes, and asthma compared to other races and ethnicities
Similarly, African-Americans and Latinos are disproportionately represented in the number positive COVID-19 cases and hospitalizations. These health disparities are exacerbated by climate change, increasing the vulnerability of the poor, elderly (who are socially
isolated), the very young, homeless, and those with compromised health.
The Long Beach City Council established the "Framework for Reconciliation in Long Beach," a process to address racial inequities and systemic racism in Long Beach. Environmental and economic equity are prevalent themes that have emerged from this
The Long Beach City Council adopted the adult-use cannabis ordinance in 2018, allowing 32 dispensaries to operate. The Cannabis Social Equity Program was adopted as part of this ordinance to address the long-term impacts of federal and state cannabis enforcement policies in low-income, Black and Brown communities in Long Beach.
Currently, there is a lack of ownership by African-American and Latino residents within the cannabis industry, due to this history of criminalization. This is an opportunity to reinvest in impacted communities and reduce harm.
While limitations on Tidelands funding have historically restricted where oil production revenue is invested, an oil production tax gives the City the resources necessary to advance health equity, economic inclusion, and youth opportunity.
Currently, Long Beach has the third highest OPT rate at $0.48, which includes the $0.15 per barrel flat rate and the CPI adjusted Prop H tax at $0.33 per barrel. Recognizing that lower producing cities, such as Signal Hill charge more per barrel, this is an opportunity
to bring the City's oil tax in alignment with other jurisdictions.
Oil Barrel Tax
La Habra Heights
Santa Fe Springs
Proceeds from these efforts could support programs that expand equity, opportunity, and justice across the City: including a youth investment fund, an economic equity fund, and a health and environmental equity fund.
The cost of placing this ballot measure on the November 2020 ballot has previously been previously by the City Manager to cost approximately $1.4 million; any available update on cost will be provided when the proposed ordinance is introduced. Due to tight timing
considerations, this recommendation is expected to have significant staffing impact and will result in reprioritization of other important actions related to immediate priorities, but the recommendation is also consistent with immediate Council priorities. Due to the
urgency of the item, no review has been done by Financial Management.
Statement of Urgency
For this proposed ballot question to be on the November 2020 ballot, the City Council needs to provide initial direction to staff on the July 7 agenda in order to make decisions to submit any measure to the ballot no later than August 4, 2020.
The agenda item attaches a "to-from-for" memo from city management that tells the Mayor/Council:
Should the City Council direct the City Manager to place a measure on the November 3, 2020 ballot, over the next two weeks, staff would need to conduct to determine an appropriate level of tax increase and work with the City Attorney to create ballot language. This analysis would be brought back to the City Council for consideration and further direction. According to the
City Clerk, the cost estimate for a one issue ballot measure is $1.1 million, with each additional ballot measure costing approximately $300,000. Eligible measures on the November ballot could include tax measures or changes to voter-approved ordinances. Changes to the City
Charter cannot legally be added to the ballot at this time as the State-required deadlines for considering a Charter change required a first hearing by May 19, 2020. The timeline for qualifying a City Council ballot initiative is summarized below.
City Council directs City Manager to place a measure on the ballot
City Manager and City Attorney present detailed analysis for proposed measure(s) and potential ballot language
Last day for City Council to adopt a resolution calling the election
City Council approves Mayor's list of argument writers
Ballot argument and rebuttal preparation September 3
Sample ballots mailed
LB's Reform Coaltion is currently suing the LA County Registrar/County Clerk to enable an affordable recount of a 16-vote passage margin claimed by LA County for the March 2020 City Hall-sought extension of the 2016 "temporary" Measure A (General Fund) sales tax increase.
In a separate action by LB taxpayers Diana Lejins and Angela Kimball, a Superior Court has ruled uncostitutional City Hall's June 2018 Measure M utility revenue transfer. (City Hall is appealing the ruling.) Measure M included a mechanism enabling LB's Mayor-chosen Water Commission to transfer a percentage of LB Water Dept. revenue to City Hall for General Fund spending and raise rates on LB Water Dept. users to backfill the transferred amount. (LB's Water Commission recently approved such an action for FY 21.)
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