Next week, Long Beach councilmembers will debate the merits of a proposed amendment to the city charter that could help significantly balance its future budget. On Jan. 10, city staff will present more information on a potential solution promoted to address a projected $15.3-million budget shortfall for the 2019 fiscal year.
Ultimately, the voters will decide the fate of the proposed amendment in a few months. As the amendment is currently structured, a majority of Long Beach’s voting population will have to approve the change to the city charter in the June 5 election.
On Dec. 19, a staff member from the Financial Management Department took the time to explain to the city council during a special meeting why the City may see a budget shortfall in the 2019 fiscal year. The City already has new resources of revenue. Voters in 2016 passed Measure A, which essentially increased the sales tax to pay for public safety and infrastructure improvements. Later, Long Beach constituents approved other measures that regulated and taxed medical-marijuana dispensaries that would operate legally now in Long Beach. However, the amount of revenue from the taxes collected on the medical-cannabis business will be difficult to predict, according to the Financial Management Department. Assistant Finance Director Lea Eriksen explained that there isn’t enough data yet in the current fiscal year to establish revenue patterns. She described uncertainty in the pace of openings of the medical-cannabis dispensaries.
In order to explain the budget shortfall and the need for a charter amendment, Eriksen also pointed to one major factor— the City’s troubles with litigation. The City recently settled a lawsuit filed by a Long Beach resident who challenged the water and sewage-pipeline fees.
The assistant finance director said in her presentation last month that the impact of the settlement concerning those specific utility fees totaled approximately $8.3 million, due to revenue losses and retroactive payments. She further explained that the settlement is expected to reduce the average utility bill by about $3 per month. While the savings of a few dollars might be a welcome relief to property owners, Eriksen warned that this financial impact of the settlement could mean “significant” service reductions. However, she did offer one possible answer that could address the $15.3-million budget shortfall.
“The potential solution to this litigation is this— voters could allow the City to maintain the historical water and sewer revenue with no additional historical cost through a charter amendment,” Eriksen explained. “This action would restore the previous status quo of utility rates and city services and prevent service reductions caused by the litigation.”
The Financial Management Department also mentioned a second lawsuit when it provided a budget forecast for FY 2019. Eriksen said that the City did prevail in litigation concerning the Gas Fund, but she noted that the decision is under appeal.
Councilmembers will discuss at length the so-called Utility Revenue Transfer Charter Agreement at a special joint meeting on Jan. 10. Since councilmembers merely voted last month to receive and file the Financial Management Department’s report with the understanding that the proposed amendment would be discussed after the new year, details on the actual amendment were not fully discussed in December.
However, since that time, the proposed charter amendment’s measure has been released on longbeach.gov.
One significant change as outlined in the measure specifically allows money from the Water Revenue Fund and/or the Sewer Revenue Fund to be transferred to the City’s General Fund. If the amendment passes, the maximum amounts that could be transferred could not exceed 12 percent of either of the utilities’ yearly gross revenues, according to the measure.
Another significant proposed change addresses money the City paid from “funds raised by taxation or the payment of the principal or interest of any municipal bonds issued by the City for and on account of the water works or sewer system.” This modification to the charter would allow surplus money from the Water Revenue Fund to be returned to the City’s General Fund, upon approval by a commission.
If the proposed changes pass the council’s scrutiny and eventually appear on the June ballot, there is not much time to convince voters to agree to the charter amendment.
If Long Beach voters don’t approve the change to the city charter this June, the Financial Department staff hasn’t specified exactly where else cuts would or should be made to the budget.
