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    In Depth / Perspective

    Did LB Harbor Comm'n Hold Money Transfer (Used By City Hall For Beach & Shore Related Items) Hostage To Council Approval of Port's Budget With No Changes? We Post Transcript; You Decide

    Background and Perspective

    (Sept. 12, 2004) -- On Sept. 7, just hours before the LB City Council was scheduled to vote on whether to approve or amend the Port of LB's 2005 spending plan, LB's Board of Harbor Commissioners met to approve an item approving transfer of about $6.85 million in public money (derived from Port fees) to the City of LB's Tidelands Operating Fund.

    Under LB's current City Charter, the annual transfer of up to 10% of Harbor Department net income to City Hall is within the discretion of Harbor Commissioners. As a practical matter, LB City Hall counts on the transfer to pay for beach and oceanfront items including beach maintenance, lifeguards, downtown shoreline items and others within the Tidelands.

    At the upcoming Council meeting, an item was also agendized by Councilmembers Tonia Reyes Uranga and Rae Gabelich that proposed to begin a process that (if ultimately approved by a vote of the people) would amend the City Charter to prevent the Port from taking positions on pending legislation that conflict with city policies established by LB's City Council.

    The Council agenda item resulted after the Port twice opposed clean air legislation supported by LB's City Council, most recently AB 2042 by Assemblyman Alan Lowenthal to prevent port growth from worsening air pollution beyond a 2004 baseline level.

    LB's current City Charter, adopted in 1981, gives five non-elected (Mayor chosen, Council approved) Harbor Commissioners broad, exclusive powers to govern affairs within the Harbor District. By putting Harbor matters outside the control of an elected body and thus largely beyond public control, the current Charter has effectively enabled massive Port expansion...which has brought health, safety, security and infrastructure costs to match.

    At the Sept. 7 Council meeting, Councilman Dan Baker and City Attorney Bob Shannon indicated they'd been told -- but hadn't personally heard -- that the Harbor Commission attached a condition to their fund transfer to the effect that there'd be no Port transfer of funds to City Hall unless the Council approved the Port's budget with no changes.

    At the Sept. 7 City Council meeting, Councilman Dan Baker (whose district includes Port area) noted that if the Council "in its legislative duties were to attempt to amend that [Port] budget, then that transfer would be held hostage." That comment brought Harbor Commissioner James Hankla to the podium, who took issue with the term "hostage."

    "I think 'hold hostage' is the wrong characterization. The [Port] budget is based on a series of assumptions. In coming to that budget, the Board of Harbor Commissioners must make certain findings, that those funds are surplus to the [Port's] needs. If that budget is changed, we'd have to go back and reconsider those findings."

    Councilman Baker replied that although he'd vote to approve the Port's budget now, "I am concerned, and as we move forward with Harbor discussions as it relates to our City Charter amendments which are forthcoming, one of the things I'm strongly going to push for, and I hope my colleagues will support, is that transfer will occur; it won't be a discretionary approval; it will occur on a regular basis, and I don't think we'll find ourselves in a situation where, whatever the correct language is, where there is discontent as to whether or not it should come over to the city."

    The City Charter gives the City Council the power to amend the Port's budget...meaning the Council could delete Port budgeted sums used to support and oppose pending legislation. However, this still wouldn't completely preclude Port legislative advocacy since Harbor Commissioners could theoretically use other funds to "backfill" sums deleted by the Council.

    In previous years, there was occasional Port squabbling over transfers to City Hall. However, to the best of our knowledge, the Harbor Commissioners' explicit condition that the City Council accept the Port's spending plan without changes -- or possibly jeopardize a transfer of millions of dollars to the City's Tidelands fund -- is unprecedented.

    The Council ultimately approved the Port's budget as submitted, an action usually unanimous, by a 6-2 vote (Gabelich and Lerch dissenting; Lowenthal absent for entire meeting).

    So, what did the Harbor Commissioners actually do at their Sept. 7 meeting, that effectively handed LB's City Council a "take it or risk it" proposition? The Harbor Commission does not televise its meetings. It doesn't provide an internet feed. It doesn't even provide a primitive telephone coupler so media outlets can listen in by phone. (If City officials have other arrangements to directly monitor the proceedings, we are unaware of them.)

    To know what actually happened, one either has to attend Harbor Commission meetings in person (not held at City Hall but at the Port Administration building) or listen to the audio tape routinely made of the proceedings. requested and was promptly provided with access to the Sept. 7 Harbor Commission audio tape at the Port's HQ. (This has routinely been the case when we've asked to hear parts of other Harbor Commission meetings).

    To our knowledge,'s unofficial transcript below is the first detailed published account of what took place. We believe it speaks for itself.

    Sept. 7, 2004 Meeting of Board of LB Harbor Commissioners, Agenda Item 3
    [Transcript unofficial, produced by]

    Harbor Commission President Calhoun: Item three is a resolution for adoption authorizing the transfer of funds to the Tidelands Operating Fund, and Mr. Holzhaus [Deputy City Attorney] let me ask you about that. We are making, we are making findings in this resolution, right? We are making findings that, number one, the Council has made its findings and made the request, but we are finding that the lawful obligations of the Tideland Operating Fund for the fiscal year October 1 through Sept. 30 will exceed the total reserves and anticipating revenues of the Tideland Operating Fund for that same period, that 10% of the net income of the Harbor Department as shown in the most recent available independently audited financial statements for the period ending Sept. 30, 2003 is $6,850,777 and that such transfer will not result in insufficient funds to pay the principal and interest as they fall due or otherwise impair the ability to meet covenants of the General Obligation and Revenue Bonds of the Harbor and that they will not be needed for Harbor Department operations including without limitation operating expenses and capital projects, right?

    Mr. Holzhaus: That's correct.

    Commissioner Calhoun: OK, so, yes [acknowledging Commissioner Hancock]

    Commissioner Hancock: We made this finding at the Committee meeting last week, and I'm prepared to make the motion to approve it at the Board level. This is incorporated in our current budget for the coming year, the payment of these funds, the budget to be enacted upon this evening by the City Council, so with that background on it I move approval.

    Commissioner Hankla: I second it but I have a question. Mr. Holzhaus, my recollection is that the Council approves the Harbor Commission budget, and when they approve the City's budget they approve the Harbor Commission's budget.

    Mr. Holzhaus: Right.

    Commissioner Hankla: Does the City have the ability to approve or disapprove, or may the city amend the Harbor Commission's budget?

    Mr. Holzhaus: I have not researched that issue. They do have certain rights that I recall to amend. Whether that's a line item veto or whether it is simply [momentary microphone drop out] back to the Board for further action and then they will approve it once the Board takes action [momentary microphone drop out]...

    Commissioner Hancock: You guys have any idea, cause this is an important question.

    Port Executive Director Steinke: Mr. Calhoun, I think, probably [is] researching it. We had a discussion before the Board meeting about the ability to amend the budget.

    Commissioner Hancock: If there's an ability to amend, I withdraw my motion.

    Commissioner Topsy-Elvord: Well, I have a question regarding that too. If it's amended in any way, then these figures that we have here would not be proper. These would not be the figures.

    Commissioner Hancock: My understanding was it was an approve action only, but if you're not on top of that question...

    [cross-talk off mike]

    [unidentified voice]: The numbers, those relate to a prior fiscal period so I don't think the numbers would change.

    Commissioner Hancock: Now the numbers isn't the issue. The issue is the payment. The payment is a part of the current upcoming budget.

    Commissioner Hankla: From my perspective, I think that certainly the Commission's approval of this item is based upon the budget that we have submitted.

    [unidentified voice]: Right.

    Commissioner Hankla: And it is therefore subject to the budget that we have tendered to the City Council.

    Commissioner Hancock: I will amend my motion to make the motion in that fashion, that we approve this resolution subject to the approval by the City Council of our budget as currently submitted.

    Commission President Calhoun: As submitted

    Commissioner Topsy-Elvord: As currently submitted.

    Commissioner Hancock: Yeah.

    Commission President Calhoun: OK. Alright, any other questions or comments?

    Commissioner Topsy-Elvord: I'll second that.

    Commission President Calhoun: There's a second. Any other questions or comments? Hearing none, all in favor of the motion please say "Aye." [unanimous Ayes] Any opposed? [silence] The resolution has been adopted with the caveat about the approval of the budget by the City Council as submitted.

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