Long Beach voters have given the city’s financial health a much-needed booster shot.

During Tuesday’s statewide primary, 53 percent of voters approved Measure M, also known as the Charter Amendment, which will allow the city to continue a decades-old practice of transferring money from the utilities funds to the general fund.

The measure’s passage will immunize the city from potentially draconian cuts, allow continued investments in public safety and other services, make the $12 million Long Beach owes to its own Water Department essentially theoretical, and alter the possible consequences if the city were to lose a lawsuit currently winding its way through appeals.

“The financial health of the city was always strong,” said Mayor Robert Garcia, “but this allows us to move forward in the direction we’ve been going.”

But it will also likely increase customers’ water bills, including those who do not live in Long Beach but still use the city’s Water Department – raising questions about possible disenfranchisement.

A lawsuit challenging the measure may also land in the city attorney’s lap, as opponents to its passage suggested on Wednesday that city officials may have misused their authority and taxpayer funds to push for the amendment – something the city denies.

“Once the final votes are tallied for Measure M, we will be weighing whether or not to pursue litigation that challenges this measure on several issues,” former councilwoman Gerrie Schipske said in a statement on behalf of herself and the three others who co-authored the official argument opposing Measure M.

Those violations, the authors said, include “violations of government code prohibiting the use of government resources for the passage of a ballot measure.”

Financial health

For years, the city had charged the Water Department permit fees to use the pipelines that run under Long Beach, and then transferred any surplus revenue – money not used to maintain the pipelines or otherwise keep the Water Department running smoothly – into the general fund. That practice raised $91 million over the last decade, according to city figures.

But a lawsuit brought against the city by Schipske and resident Diana Lejins challenged the city’s ability to transfer funds, citing a 1996 state law that requires ballot initiatives to levy new taxes.

In a November settlement, the city agreed to stop transferring money into the general fund and to pay back $12 million to the Water Department over four years.

That settlement created a financial problem for the city, which will already have to fill an $11.6 million structural deficit for its next fiscal year, which begins Oct. 1. Had the Charter Amendment not passed, the city would have needed to cover an additional $8.3 million hole, according to John Gross, Long Beach’s director of financial management.

Because the Charter Amendment is not retroactive, Gross said, the city still needs to cover about $5 million for the next fiscal year. But beyond fiscal year 2018, that shortfall should be gone.

“The city hopes that a good economy and overall budget savings can overcome some or all of that shortfall in fiscal year ’18,” Gross said. “But that is not assured.”

Gross’ team had been drafting two budgets, one for if the amendment passed and one for if it didn’t. The latter, he said, would have forced a difficult conversation about where to cut expenses.

Instead, the city will be able to transfer up to 12 percent of gross revenues from the water fund to the general fund.

Opponents to the amendment, though, argued on Wednesday that City Hall needs to be more financially prudent – but voters instead gave them free rein.

“The message is they can just continue spending like there’s no tomorrow,” Lejins said.

But Garcia countered, saying that the vote is an affirmation of the council’s work.

“The people trust us,” Garcia said.

Lawuits: past, present, future

The city’s finances also got some extra good news with the amendment’s passage, according to Deputy City Attorney Rich Anthony: The $3 million annual payment Long Beach must make to the Water Department over the next four years has essentially become moot.

Long Beach must abide by the settlement and continue making payments, Anthony said. But as long as the revenue transferred from the Water Department to the general fund is more than $3 million, wwhich the attorney said it should be, the payment will be pro forma.

“It will be a paper transfer,” he said. “The $3 million will go to the Water Department, but it will just come back.”

The amendment could do the same for a second lawsuit that is winding through the appeals process, Anthony said.

That lawsuit is similar to the one the city settled last year, but it involves transfers from the gas fund. A judge initially threw that lawsuit out, but the decision was appealed.

The city is expected to file its brief on the case in the next few weeks, Anthony said, but any decision on whether to uphold the original judge’s dismissal of the case or to force a jury trial could be at least a year away.

If the city loses that lawsuit, it would not have to stop transfers – doing so would create another $10 million hole in the budget, Gross has said – but would potentially force it to pay the gas fund back for transfers made from 2015 to the first half of this year, Anthony said.

Still, the effect would be that money would be transferred from the general fund to the gas fund and back again.

Anthony said he hasn’t discussed with the City Council whether continuing the lawsuit, if the appellate judge reverses the original dismal, would be worth it now that the amendment has passed.

But the city’s legal entanglements over the amendment could continue beyond the gas-fund lawsuit. Schipske, Lejins, and taxpayer advocates Tom Stout and Joe Weinstein said in their joint statement that they believe the city “used tax dollars to advocate for the passage of Measure M.”

Under state law, the city may spend money to educate voters on ballot initiatives, but it cannot advocate for or against them.

“There is a large amount of gray area” between education and advocacy, Anthony conceded.

But he added the city was told that the state’s Fair Political Practices Commission declined to open investigations into two complaints they received from the measure’s opponents, citing lack of sufficient evidence.

The opponents’ statement, though, also alleged impropriety by the City Council in advocating for the amendment.

“The Mayor and several city council​ ​members used their personal emails to ​purposely ​mislead voters by stating Measure M is not a tax, when it is​,” the statement said. “They also told​ voters the transfers would be taken from surplus funds, when the ballot measure states it will take transfers from gross revenues.”

Anthony responded that the councilmembers may advocate for any issues they want, as long as they aren’t using city resources.

“They have First Amendment rights,” he said.

Lejins, though, said that whether it is legal or not, the council’s campaigning amounted to “blackmail.”

“They scared voters, saying services would be taken away,” Lejins said. “It was extortion.”

What’s next?

City staffers will spend the coming weeks shoring up the budget proposal that they will present to the City Council for discussion, changes and, ultimately, approval sometime in August. They will do so, Garcia said, without the need to make tough choices about which services to cut.

“I’m for it,” said District 7 resident Pablo Marin, who voted for the measure on Tuesday. “It gives the city financial flexibility.”

Water customers, meanwhile, will likely see their bills go up by about $3 beginning in October, Gross said – the same amount bills decreased after the November settlement.

That goes for a handful of customers who don’t live in Long Beach but use its Water Department, including residents of a small pocket of unincorporated land within Long Beach.

Those water customers did not get to weigh-in on the measure.

“It’s a little odd,” Anthony said, “but you have to be a resident to amend the charter.

“Their rates will still be lower,” he continued, “than if they got their water from one of the surrounding cities.”