Tuesday, April 5, 2011

City Hall to Receive $40M In Long Beach Port Oil Income

A 2010 Long Beach city charter amendment that stripped the Port of Long Beach of its control of port-area oil properties and was presented to voters as having no fiscal impact, could cost the port more than $40 million in 2011, according to port projections.

In addition to putting oil properties in the port area under City Hall control, the charter amendment also redirected all oil revenues generated in the port to the City Hall-controlled Tidelands Oil Revenue Fund (TORF). Known as Measure D, the amendment was passed by Long Beach voters in November 2010 by a 55.6 percent to 44.4 percent margin.

In the lead up to the November 2010 election both Mayor Bob Foster and City Attorney Robert Shannon repeatedly emphasized that the portion of Measure D related to oil properties was merely a clarification of charter language related to control of the port-area oil properties and not an attempt to divert port revenue to City Hall.

While City Hall has said that it will most likely return the FY2011 oil revenues to the port since the port had already included these projected funds in the port FY2011 budget prior to the passage of Measure D, the final disposition of the FY2011 oil revenues appears to be up in the air at the moment.

"I don't know that the city has made any firm and final decisions on oil revenues and what might be remitted to the port and what they will be retaining," Port Executive Director Richard Steinke told the Harbor Commission on Monday.

Members of the shipping industry have raised concerns with the State Lands Commission about the transfer of oil revenues from the port to City Hall, arguing that Measure D is shifting significant portion of the port's revenue to City Hall, threatening the financial security and competitiveness of the port. The SLC, which has oversight of the state's ports, has said in the past that they are carefully watching Measure D impacts on the port.

While no analysis was conducted by City Hall before placing the measure on the ballot, port financial staff estimated that Measure D would shift more than $100 million in oil revenues to the City Hall-controlled TORF over the next five years.

However, due to the rise in the price of oil, the latest projections are much higher.
"For the full fiscal 2011," Port Finance Director Sam Joumblat told the Harbor Commission on Monday, "I project that probably the net oil income would be over $40 million, if oil prices continue to be anywhere near their lofty present levels.

If oil prices remain near their current levels, this amount of oil revenue shifted to the control of City Hall could rise to more than $200 million over five years.

Nearly all the major stakeholders involved in the local international trade business community expressed opposition to Measure D, including: the Long Beach Chamber of Commerce; the Los Angeles Customs Brokers and Freight Forwarders Association; the LA/LB Propeller Club; the Pacific Merchant Shipping Association; the Harbor Association of Industry and Commerce; FuturePorts; and the California Marine and Intermodal Transportation System Advisory Council, or CALMITSAC.

A major concern raised by the PMSA and other opponents of Measure D is what the Tidelands Oil Revenue Funds are actually funding.

By state law, the funds can only be spent in the tidelands on oil production-related expenses. However, a caveat in the city charter allows the City Council to shift funds from the TORF to the general Tidelands Operating Fund (TOF). Monies in the City Hall-controlled TOF, which come from non-oil revenues generated in the city tidelands including port profits, must still be spent in the tidelands and then only on very specific uses such as maritime, navigation, recreational, environmental, fisheries and the promotion of maritime commerce.