TITLE
Recommendation to request City Manager to engage California State Lands Commission and other stakeholders regarding potential modifications to the Oil Barrel Production tax;
Request City Attorney to prepare all necessary documents to place a ballot question on the November 2020 ballot for an increase in the Oil Barrel Production Tax and to work with the City Manager to provide options and financial impact on the amount of the tax and mechanisms for a progressive tax that increases over time and for a resolution defining the City Council's intent for use of the funds; and
Request City Manager and City Attorney to explore the feasibility of preparing a ballot advisory question on whether to reinvest future cannabis revenue into economic equity, health equity, and youth investments, and to further strengthen our cannabis equity program to expand equitable ownership opportunities.
DISCUSSION
The Problem
Long Beach is home to several on- and off-shore oil wells, as its history of oil production goes back to the early 1900s. Today, oil operations revenue still contributes to the City's General Fund and essential Tidelands area services, such as police, fire and lifeguards, beach maintenance, lease management, parking operations, and other support functions.
In 1964, Long Beach voters lifted an oil drilling ban, allowing drilling to resume across the City. The Oil Production Tax (OPT) was set at $0.15 per barrel in 1990, and in 2007, Long Beach voters approved the Police and Fire Public Safety Oil Production Act (Prop H). Prop H amended the City's Municipal Code to assess an additional $0.25 per barrel special tax on oil producers in Long Beach, with an annual adjustment according to the Consumer Price Index. Prop H proceeds can only be used for police officers, firefighters, and related costs (equipment, facilities, training, etc.).
The Aquarium of the Pacific's Climate Resiliency Assessment Report for Long Beach lists oil-related industries as one of the biggest polluting sources within the region, next to vehicles.
According to the City of Long Beach's Draft Climate Action and Adaptation Plan, "more than 13 million barrels of crude oil and 5 billion cubic feet of natural gas" were extracted within Long Beach in 2015. "The resulting lifecycle emissions total 8.3 million MT C02e, which is 2.7 times greater than the City's production inventory emissions." 91% of these emissions occurred due to refining, transport to consumers, and end users of fuel; 9% is comprised of emissions associated with extraction (5%), and natural gas lifecycle emissions (4%)2 Each disproportionately impacts the health and quality of life of disadvantaged and low-income communities.
Racial and economic disparities are perpetuated spatially across the City, as low-income people and communities of color are more likely to live in areas with higher environmental health burdens; neighborhoods with less open or green space, located near major freeways, oil refineries, and industrial sectors.
In Long Beach, African-Americans have the highest rates of hospitalization for heart disease, diabetes, and asthma compared to other races and ethnicities". Similarly, African-Americans and Latinos are disproportionately represented in the number positive COVID-19 cases and hospitalizations. These health disparities are exacerbated by climate change, increasing the vulnerability of the poor, elderly (who are socially isolated), the very young, homeless, and those with compromised health.
The Long Beach City Council established the "Framework for Reconciliation in Long Beach," a process to address racial inequities and systemic racism in Long Beach. Environmental and economic equity are prevalent themes that have emerged from this process.
The Long Beach City Council adopted the adult-use cannabis ordinance in 2018, allowing 32 dispensaries to operate. The Cannabis Social Equity Program was adopted as part of this ordinance to address the long-term impacts of federal and state cannabis enforcement policies in low-income, Black and Brown communities in Long Beach. Currently, there is a lack of ownership by African-American and Latino residents within the cannabis industry, due to this history of criminalization. This is an opportunity to reinvest in impacted communities and reduce harm.
The Opportunity
While limitations on Tidelands funding have historically restricted where oil production revenue is invested, an oil production tax gives the City the resources necessary to advance health equity, economic inclusion, and youth opportunity.
Currently, Long Beach has the third highest OPT rate at $0.48, which includes the $0.15 per barrel flat rate and the CPI adjusted Prop H tax at $0.33 per barrel. Recognizing that lower producing cities, such as Signal Hill charge more per barrel, this is an opportunity to bring the City's oil tax in alignment with other jurisdictions.
City Oil Barrel Tax
Siqnal Hill $0.67
La Habra Heighls $0.60
Long Beach $0.47
Seal Beach $0.45
Beverly Hills $0.42
Santa Fe Springs $0.41
Huntington Beach $0.37
Proceeds from these efforts could support programs that expand equity, opportunity, and justice across the City: including a youth investment fund, an economic equity fund, and a health and environmental equity fund.
Statement of Urgency
For this proposed ballot question to be on the November 2020 ballot, the City Council needs to provide initial direction to staff on the July 7 agenda in order to make decisions to submit any measure to the ballot no later than August 4, 2020.
FISCAL IMPACT
The cost of placing this ballot measure on the November 2020 ballot has previously been previously by the City Manager to cost approximately $1.4 million; any available update on cost will be provided when the proposed ordinance is introduced. Due to tight timing considerations, this recommendation is expected to have significant staffing impact and will result in reprioritization of other important actions related to immediate priorities, but the recommendation is also consistent with immediate Council priorities. Due to the urgency of the item, no review has been done by Financial Management.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
MAYOR ROBERT GARCIA
REX RICHARDSON
COUNCILMEMBER, NINTH DISTRICT
MARY ZENDEJAS
COUNCILWOMAN, FIRST DISTRICT
JEANNINE PEARCE
COUNCILWOMAN, SECOND DISTRICT
AL AUSTIN
COUNCILMEMBER, EIGHTH DISTRICT