Thursday, July 7, 2011

Long Beach City Hall Formally Requests $17M Transfer of Port Funds

The Long Beach City Council voted unanimously on Tuesday to formally request a nearly $17 million transfer of Port of Long Beach port revenue to support the city's Tidelands Fund.

The request, if approved by the port Board of Harbor Commissioners, would bring the total amount City Hall will receive from the port between November, 2010, and the end of fiscal year 2012 to more than $80 million – $41 million in direct port revenue transfers and $40 million in oil revenues generated from port oil wells.

A controversial ballot measure approved by voters in November, 2010 – Measure D – changed the formula for how the city's annual request for port revenue was calculated and also channeled all port oil revenue to City Hall.

These transferred and oil funds are controlled by City Hall but must be spent in the city tidelands areas on specific and well-defined maritime, maritime-related and maritime recreation uses. The transfer funds are maintained in a City Hall-controlled Tidelands Operating Fund (TOF) and the port oil revenues go into the city's Tidelands Oil Revenue Fund (TORF). Both funds, by law, cannot be co-mingled with the city's general revenue funds. A provision in the city charter, however, allows City Hall to move oil monies from the TORF into the TOF.

The Tidelands transfer of port revenue – set at the time as 10 percent of the port's net profits from the previous year – was devised as an emergency measure more than 15 years ago to help the financially strapped city. The city has requested the transfer, which has ranged from the low single-digit millions of dollars to more than $12 million, every year since and the port has never refused.

Under the new formula, the transfer is calculated as 5 percent of the port's gross operating revenue.

Last week, the port's five-member governing board approved an $822 million FY2012 budget. Under the gun to approve a budget by a July 3 deadline and with no formal request from City Hall for the annual transfer, the port board passed the port budget without including a line item to cover a potential Tidelands transfer.

Port officials at the time said they assumed, since no formal request for the transfer had been made, the influx of oil revenues to the TORF, and vis-a-vis the TOF, were sufficient for FY2012.

In a June 20 port board meeting agenda item bringing the FY2012 budget to a final commission vote, port staff said as much: "We have assumed that the city will continue to direct the port's oil revenue to the Tidelands Operating Fund and as a result the Tidelands Operating Fund will not need a Tidelands transfer."

This elicited angry communications from City Hall to the port, with Mayor Bob Foster later telling the local Grunion Gazette newspaper that it was not up to the port to determine if the city needed the transfer funds and that the only reason in the city charter for the port to not make the transfer is if the transfer would represent an economic burden to the port.

On July 7, port Executive Director Richard Steinke told the City Council's Budget Oversight Committee, that, "based on the action taken by the Council, we will be taking this [request for the transfer] to our board and I am sure that they will carefully consider the request by the City Council."

At the same hearing City Council and Budget Oversight Committee members Gary DeLong and Suja Lowenthal were told by city staff that major sources of revenue for the Tidelands Operating Fund "are insufficient to fully support the tidelands operations," and that, "without that transfer we would anticipate about a $12.1 million deficit [in the TOF].

DeLong and Lowenthal also were told that due to fiscal problems within the city, capital investment in the city's tidelands area has been minimal for many years. The city currently estimates that there is more than $300 million in backlogged maintenance and capital improvement projects in the city tidelands area.