The Long Beach City Council approved a plan last week to achieve a balanced budget for fiscal year 2019, including sources to compensate for a $11.3 million shortfall.
At the February 6 council meeting, Director of Financial Management John Gross gave a presentation on a projected budget shortfall for the new fiscal year beginning October 1, and possible ways to reduce the gap, which he attributed to pension costs and slow revenue growth.
Potential resources included a $4 million increase in ambulance fee and parking fine rates. According to Gross, the Long Beach ambulance fees are lower than the rates in L.A. County, and parking fees are lower than those in the City of Los Angeles. Another opportunity is to apply the transient-occupancy tax (TOT), which travelers pay for hotel accommodations, to short-term rental services such as Airbnb. Gross said this could result in $900,000 for the General Fund. He also suggested allocating $7 million in Measure A revenue to public safety services. Gross said there are “strong indications” that more Measure A funds are available than he previously thought.
“We’re eliminating the deficit before we begin the budget process. I think that’s really smart,” Mayor Robert Garcia said at the meeting. He also emphasized the importance of extending the TOT. “I’m glad we’re finally getting the work done. Not just for the members of the community who are seeing these homes being used as small hotels, but also from the short-term rental community. . . . Cities have seen significant investments back into their funds because of these short-term rental increases. The sooner we do that, the better.”
Gross called the potential budget-balancing actions “great news” but warned that “budget issues are likely to continue into the future.” The projections do not take into account the revenue losses from two lawsuits concerning the water and gas utilities, he said.
In November 2017, the city settled a lawsuit with resident Diana Lejins, who claimed the water department was illegally charging customers inflated pipeline permit fees, then pouring the revenue into the city’s General Fund. Former City Councilmember Gerrie Schipske served as Lejins’ attorney.
The settlement agreement required a transfer of $12 million from the General Fund to the water department over the next four years, resulting in an additional $8 million budget shortfall for fiscal year 2019.
The city won a similar lawsuit involving the transfer of revenue from the gas utility fund, but that ruling is being appealed. A loss for the city may add $10 million to the shortfall.
Councilmembers are considering putting the issue to a vote and allowing residents to determine whether to return the water utility rates to the amount they were before the litigation. This would require an amendment to the City Charter.
Vice Mayor/9th District councilman Rex Richardson emphasized the importance of educating the public on the potential impact of the litigation.
“[The city] deals with these lawsuits all of the time,” he said. “Many folks don’t know the impact of the decisions we have to make. . . . I love the direction of trying to protect the quality services our city provides.”
The next budget update is scheduled for March, and a three-year projection will be included with the proposed budget in July.