Monday, July 25, 2016

Schipske Protests Water and Sewer Rate Increases Because of Massive Transfer of Water Department Funds to City General Fund



July 25, 2016


Former 5th District Councilwoman Gerrie Schipske, today sent a letter of protest to the Long Beach Water Department Board of Commissioners over their proposed 4% increases in both water and sewer rates.  The announced increases would be the third in a row by the Water Department, which is an independent entity overseen by an appointed Board of Commissioners.


Schipske based her protest on the fact that the increases are due in part to the City of Long Beach manipulating a massive transfer of Water Department funds into the City's General Fund by assessing the Water Department with a "pipeline assessment fee" on both water and sewer pipes. These fees have been passed along to the ratepayer.


"This Budget year," explains Schipske,  "the City of Long Beach is assessing the Water Department $6.16 million for water pipelines and $4.73 million for sewers. This represents 0.2% of the water budget and 0.8% of the sewer budget." The assessment was started in 2006 and increased each budget year.


Schipske contends that these fees violate Proposition 218 which states in part, that cities cannot assess fees in order to generate revenue. "The fees must relate to actual costs incurred by the city to allow pipelines and sewers," says Schipske. "The fees also must be accounted for and utilized specifically to cover the costs."


Schipske notes that prior rate increase notices included a breakdown of what was causing the rate increases, including the pipeline assessment fee. "However, the current notice of rate increases does not include any explanation of how the city fees are a part of the rate increases."


In 2012, the City of Fullerton was sued for tacking on a similar fee for its water ratepayers. The fee was later stopped and revenue returned when an analysis was done showing that the fees were not related to actual costs as required by Proposition 218. 
 
Schipske reminded Commissioners that as  a councilwoman she asked the City Attorney in 2012 about the Fullerton case and why Long Beach was assessing the pipeline fees. "I was told that the case allowed cities to assess their utilities and that is correct. However, the assessment cannot be used to raise revenue and cannot exceed the actual costs which is required to ensure compliance with Proposition 218. I assert the fees are not in compliance with Proposition 218."
 
Schipske expressed concern that the Board of Commissioners have not protected ratepayers: "This is the third year in a row that the Long Beach Water Department Board of Commissioners has recommended rate increases, while it has sat silent about the City of Long Beach transferring millions of dollars in water department revenue into its General Fund." 


"The Long Beach Board of Commissioners has not met its fiduciary duty to its ratepayers because it has failed to challenge the City's assessment or to demand an accounting of how the assessment is spent by the  City of Long Beach. By not doing so, the Board of Water Commissioners has subjected its ratepayers to increases for water and sewer and increases in the 5% utility users tax which is assessed on the amount of water use billed."


 "So thanks to the Board of Commissioners appointed by the Mayor, the City gets two bites of the revenue stream: pipeline fees and increased utility taxes at the expense of ratepayers."


Schipske has requested that the rate increases be stopped until such time that a complete analysis is done on the fees and the actual costs the fees are being raised on. She also asked that there be an accounting of where the tens of millions in funds transferred since 2006 have been spent by the City of Long Beach and that any funds in excess of actual costs be returned to the ratepayers.


Written letters of protest must be submitted by the public hearing date of September 1 at 7:00pm. Letters should be sent to: Long Beach Board of Water Commissioners, Attn: Board Secretary, 1800 East Wardlow Road, Long Beach, CA 90807. The Public Hearing is open to the public and will be held at the Long Beach Groundwater Treatment Plant Assembly Room, 2950 Redondo Avenue, Long Beach, CA 90807.

See attached protest letter