On November 8, Long Beach resident Diana Lejins and the City of Long Beach settled a lawsuit Lejins had filed in September 2016, claiming the water department was illegally charging customers inflated pipeline permit fees, then pouring the funds into the city’s General Fund. The settlement will result in lower fees for customers.
The fees in question amounted to about $11 million per year that the city charged the water department. Lejins, a 32-year Long Beach resident, stated in a press release that they had “no legitimate purpose and were blatantly designed to bolster General Fund revenues on the backs of taxpayers.”
State Proposition 218 bans local governments from overcharging customers for utility services and then using the extra funds for non-utility purposes.
The settlement agreement required the city to eliminate the pipeline permit fees from its water and sewer rates in 60 days. It also mandated a transfer of $12 million from the General Fund to the water department over the next four years. The water department will still pay about $4.5 million into the General Fund every year for the use and upkeep of the pipelines, but the $7 million annual loss is “not insignificant,” city Financial Management Director John Gross told the Business Journal.
“That $7 million per year has been used to provide services for the library, parks and public safety,” Gross said. “We have to look as if there’s going to be new revenue and find other ways to reduce costs. None of that has been decided yet. It’s not the end of the world, but it is a significant loss.”
While the city has not yet formally started the process of establishing the budget for the next fiscal year, there is already a projected shortfall of $10.4 million, Gross said. The $7 million will widen that gap.
Chris Garner, general manager of the Long Beach Water Department, said the settlement should not have too much of an impact on his department and that the customers will benefit.
“The pipeline transfer fee that was being litigated was a pass-through in the rates to our customers,” he said. “With that being reduced or eliminated, the costs that we incur do go down quite a bit, and savings will be passed through to the customers through a rate reduction.” The average water and sewer bill will decrease by about $3 per month, according to the city manager’s office.
In a press release sent to the Business Journal, Lejins called the pipeline permit fees “bogus from the start. . . . Hard-working citizens don’t appreciate it when their government plays games. Hopefully, this lawsuit serves as a warning to those money-is-no-object politicians who so fervently attempt to extract and spend every last dime they can from hard-working taxpayers. This victory transcends the exploitation, validates the people’s vigilance and is truly of the people, by the people and for the people.”
The city must also pay Lejins’ attorney fees of $480,000. She was represented by Long Beach lawyer Gerrie Schipske and Eric J. Benink, Esq. of Krause Kalfayan Benink & Slavens, LLP, a San Diego law firm with extensive experience in cases regarding Proposition 218. Schipske served as a 5th District councilmember for eight years and also ran for the directorship of the water replenishment district covering Long Beach. The Water Replenishment District of Southern California oversees and protects the local groundwater resources. She is currently a candidate for the 34th California State Senate seat, which includes West Orange County and a small part of East Long Beach.
In a prepared statement, Schipske said: “This settlement is not only a tremendous win for the water and sewer customers in the City of Long Beach but also for the voters of California who approved Proposition 218, requiring voter and taxpayer control over local fees and taxes. The law is clear: cities, like Long Beach, cannot assess fees merely because they want to raise revenue.”
The Business Journal had several questions for Schipske about the settlement but she did not return phone calls or e-mail requests for an interview.