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    Follow-Up On $2.8+ Million In LB Taxpayers' Gen'l Fund Money Used To Support "Self-Supporting" Airport:

  • City Hall's Comprehensive Annual Financial Rpt. Says (as of Sept. 30/02) Repayment To Gen'l Fund Will Be Contingent on "Airport Increasing Flights"

  • City Hall CFO Torrez Says Report's Statement Does Not Refer To Policy On Flights Above Current LB Airport Noise Ordinance

    Updated to reflect June 3 Council presentation

    (June 1, 2003, updated June 4) -- In April 2003, was first to report that for a period spanning roughly a decade, LB City Hall had been quietly spending General Fund taxpayer money -- totaling roughly $2.8 million -- to pay for items at LB Airport for which the city's Airport, publicly portrayed as self-supporting, hadn't paid. Nearly a quarter of the money taken from LB taxpayers came in FY 01-02 (Oct 1/01-Sept 30/02), and the total sum was put on the books as a debt to be repaid.

    Our report prompted Councilmembers Val Lerch and Rob Webb to remove from the Council's no-discussion consent calendar an April '03 City Auditor report that mentioned the practice and Lerch asked city management about it.

    As reported, then-Acting City Manager Jerry Miller responded basically that during the 1990s when the Airport wasn't very busy, Airport revenues dropped, unable even to pay for a basic level of fire service (a requirement for an Airport). "We simply could not afford to pay for that through the Airport Enterprise Fund because there was not sufficient activity at the Airport to generate the revenue needed to be able to pay that cost," Mr. Miller said, noting that the Council, by resolution or action embedded in a budget vote, had effectively agreed with this approach and to a repayment schedule. He added that the debt had been discussed as part of the 3-year financial strategic plan which anticipates full repayment in FY 06, with interest, totaling $3.3 million. is now first to report that City Hall's "Comprehensive Annual Financial Report" (CAFR), an official document used by various government and financial institutions to assess the city's financial state as of Sept. 30, 2002, says that repaying LB Airport's debt to LB taxpayers "will be contingent on the Airport increasing flights in and out of the Long Beach Airport."

    Asked about that specific verbiage by, City Hall's CFO/Director of Financial Management, Robert Torrez, said the statement did not refer to increasing flights above those in LB's Airport Noise Compatibility Ordinance (41/day > 75,000 pounds, 25/day < 75,000 pounds, subject to increases within their respective noise budgets).

    "The CAFR is a financial document required to be accurate as of Sept. 30, 2002. As of that date, JetBlue had not yet completed its ramping up of anticipated increases in daily flights. The CAFR's data and language are accurate as of Sept. 30/02. The statement on flights was before the then-anticipated increases. The statement in the CAFR is not meant to pertain to policy issues on the number of flights at LB Airport," Mr. Torrez said.

    Public release of the CAFR comes more than three months after a February 19, 2003 transmittal letter indicates the CAFR was sent to the Mayor and Councilmembers. There is no written explanation for the delay. The CAFR has now been agendized as a "receive and file" item on the June 3 City Council "consent calendar"...items intended for routine approval without discussion (unless separately pulled by Councilmembers or addressed by the public).

    Consent calendar placement was also used for the April 8 City Auditor's report which said LB Airport owed LB taxpayers the $2.8+ million...with nearly a quarter of the General Fund money -- $676,000 -- taken for Airport items in FY 02 (Oct 1/01-Sept 30/02).

    The Airport related statement in the CAFR was spotted by 4th district homeowner and Stearns Park Neighborhood Association President Traci Wilson-Kleekamp, who alerted to it. On page 72 of the CAFR, "Notes to Basic Financial Statements, Sept. 30, 2002," the Comprehensive Annual Financial Report states:

    The Airport Enterprise Fund reimburses the General Fund for City services provided within the Airport area by the General Fund, including police and fire services. The Airport was not able to pay for certain costs in previous years due to a decline in flights and revenues. The amount due has been recorded as a long-term advance payable in the amount of $2,883,000 at September 30, 2002. The amount increased $676,000 in fiscal year 2002. The repayment schedule will be contingent on the Airport increasing flights in and out of the Long Beach Airport.

    [update] At the June 3 City Council meeting, Councilmember Reyes-Uranga (noting Councilman Webb, absent due to a conflicting engagement had also asked about it) and Councilmember Richardson pulled the consent calendar item for discussion and city management provided the following information:

    City Manager Miller: ...It's important we clarify the choice of words. It may have been an unfortunate choice of words when the CAFR was produced, so I'd like to ask Bob Torrez our Director of Financial Management to clarify the statement...

    Mr. Torrez: ...The Comprehensive Annual Financial Report or CAFR is an accounting and audit document which reflects the city's financial condition as of Sept. 30, 2002. And in that respect, it's written as if it was Sept. 30, 2002.

    With regard to the statement on page 72 of the CAFR, the statement is to the effect that the Airport will begin paying its $2.8 million debt owed to the General Fund once flights out of the Airport increase. The statement was written and reflects the situation as of Sept. 30, 2002, and as I explained very carefully to the press, the statement simply means that at the time, JetBlue had not yet ramped up to its full allocation of flights within the existing flight cap. That statement had nothing to do with any subsequent concerns over Airport expansion.

    It was an unfortunate but inadvertant use of words that the press tried to twist into something it was not, so hopefully that clarifies that statement for you.

    Councilwoman Reyes-Uranga: ...So if for some reason JetBlue is unable to ramp up to their full flight level, then...why are they [the Airport] incurring costs that they couldn't cover?...

    City Manager Miller:: ...Let me just simply say that we are on a three year schedule for the Airport Enterprise Fund to repay the General Fund and we believe that schedule's on track, and the General Fund is going to be reimbursed.

    On motion of Councilwoman Richardson, the item not received and filed but was referred to the Council's Budget Oversight Committee (for substantive budget purposes).

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