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Gerrie Schipske

2919 Studebaker Road


Long Beach, CA 90815
schipske@gmail.com

July 25, 2016


Long Beach Board of Water Commissioners
Attn: Board Secretary
1800 East Wardlow Road
Long Beach, CA 90807
RE: Protest of Proposed 4.0 percent increase in water rates and 4.0
percent increase in sewer rates for single family household

Dear Board of Commissioners:


I am hereby providing written notice of my protest of the proposed
increase in water and sewer monthly charges for the "typical single family
household" as outlined in the "Notice of Public Hearing" on the following
basis:
1. The current "Notice of Public Hearing" concerning the announced
increase for water and sewer fails to tell the public that part of the
reason for the increases is that the City of Long Beach has assessed a
massive transfer of revenue from the Water Department into its
General Fund since 2006 through a "pipeline assessment fee." While
Proposition 218 requires that rate increase notices must include
language regarding the proposed rate or fee adjustment itself but does
not require a detailed delineation of all the factors contributing to the
proposed adjustment, prior Water Department rate increase notices

were transparent and included the pipeline assessment fee in a


breakdown of the reasons for the rate increases.
2. Since 2006, the City of Long Beach has assessed the Long Beach Water
Department a "in lieu of franchise" fee through a "pipeline assessment"
fee for the pipelines and sewers the Water Department maintains.
These funds have not been returned to City Departments who have
supposedly incurred costs related to the "pipeline fees" but instead the
City of Long Beach has deposited these fees, which total to over $10
million for Budget Year 2016 into the General Fund as revenue.
Consequently, in order to pay this continually increasing fee, which is
increased based upon the Consumer Price Index and calculations of
pipeline footage/diameter, the Water Department has charged it back
to residents and businesses through increases in water and sewer
rates. This Budget year, 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.
3. This transfer of money from the Water Department through a "pipeline
assessment fee" may be a violation of Proposition 218 in as much that
the City has never demonstrated that the fees do not exceed the
actual costs of the pipelines and sewers being in city soil. In 1996,
voters approved Proposition 218, which states that the fees charged
for utility service must reflect the actual cost of providing service;
however water service fees were exempt. In 2006, a court ruling
established that water service may not be exempt from this
requirement. In other words, fees on the Water Department
cannot be used to generate revenue. The fees must be directly
related to the costs for allowing pipelines and sewers in the city.

4. Conveniently, the City of Long Beach transferred responsibility for


sewers to the Water Department from the City Public Works
Department. Had this not happened, the City would have been unable
to assess a fee on itself but now can assess on an "independent"
department.
5. In 2012, the residents of the City of Fullerton sued their city for
assessing a "in lieu of franchise" fee on water rates. In Fullerton's case,
the fee was tacked directly on to the utility bill. Long Beach tacks the
fees onto the Water Department's budget which in turn then passes it
along to the ratepayer. This is not as transparent as Fullerton which is
most likely why we have not had a ratepayer rebellion in this town.
6. When Fullerton was sued (and has since stopped the fee and settled
the case), the City was forced to provide an analysis of the actual costs
to the City for allowing its own Water Department to operate. The
"costs" in no way came close to the fees the city hauled in and that is
why they had to return money. Nor was Fullerton complying with
Proposition 218 by accounting for or utilizing funds for specific costs
related to the fees.

7. As a Councilwoman, I inquired of the City Attorney in 2012 why Long


Beach was continuing to assess such a fee on the Water Department
and I was told that the case in the matter of the City of Fullerton
allowed cities to assess their municipal utilities. He was 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.

8. 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 and increases in the 5% utility
users tax which is assessed on the amount of water use billed. So the
City gets two bites of the revenue stream: pipeline fees and increased
utility taxes at the expense of ratepayers.

9. The proposed rate increases should be stopped until the


ratepayers of Long Beach receive:
a. A complete analysis of how much the City's fees have caused
rate increases since they were implemented;
b. An accounting of how much of these tens of millions in fees are
justified because of actual costs; and
c. The return of prior funds taken that exceed the costs of allowing
these pipelines and sewers in the city.

Sincerely,

Gerrie Schipske
Gerrie Schipske