Long Beach’s water board will decide on Thursday, March 31 how best to return the $9 million to taxpayers — possibly a one-time refund of about $100 apiece, Department of Water officials said.
The repayment comes after the state Supreme Court refused to hear an appeal of a court ruling that ruled that the voter-approved transfer from the water department to the city’s general fund was unconstitutional. The city has raised about $9 million annually since voters approved Measure M, which allows transfers, in 2018, an increase of about 54 percent.
The court ordered $9 million to be repaid within 30 days to fund the one-time credit. The second payment will be received in about 180 days and will be considered as part of the fiscal 2023 budget process, according to a Water Department staff report at Thursday’s meeting.
The Water Board has the power to decide how to reimburse customers. General manager Chris Garner said this week that his staff would offer alternatives, but the easiest one would be a one-off credit split evenly between residential and commercial customers. Garner said that if the commission agreed to repay the full $9 million in one go, it would equate to about $100 per customer.
The practice of transferring funds from utilities and the Port of Long Beach’s operating funds to the city’s general fund dates back to before the turn of the century. The original rationale for getting money from water, sewer and gas operations was to charge for pipes under city streets. But the process was successfully challenged in court, with a ruling arguing that if plumbing work was required, the city charged far more than the potential cost of street replacement.
So in 2018, the city council, at the urging of Mayor Robert Garcia, voted a measure that would allow up to 12 percent of surplus revenue to be diverted from water and gas into the city’s general fund.
Shortly after the election, Diana Leggins and Angela Kimball filed a lawsuit claiming that Measure M violated Proposition 218. Approved in 1996, the proposal is an amendment to the state constitution that states utility rates can only be used to deliver goods or provide services.
A Los Angeles Superior Court judge sided with Lejins and Kimball in January 2020; the appeals court agreed late last year. With the state Supreme Court refusing to review the case, the city had no choice but to start paying back the money it raised.
“$30.8 million is owed to the water fund and $18 million is required to maintain service in fiscal 2022 and 2023,” said a statement from the city manager’s office. “Of this $48.8 million, the City has set aside $24.7 million in escrow accounts, as well as a one-time reserve, to support the ability to keep services intact this fiscal year and the next.”
There was no estimate on Monday about how long it would take the city to start issuing tax refunds.