How Felix & Alma Cost City $4 Billion

Oil was discovered in harbor area in 1932. The California State Supreme Court in 1938 ruled that the City of Long Beach could keep the “hidden treasures” found in the tide and submerged lands granted to the city in 1911. Under this grant the state conveyed to the City of Long Beach all of the tide and submerged lands within the corporate limits of the city in trust for commerce, navigation and fishing. The city of Long Beach began extracting oil and “dry gas” in 1939 and was spending the money from this gigantic oil field on things like harbor development.

However, once the development was completed, the Harbor Department kept accumulating money it could not use.

In 1950, Congressional candidate, Helen Douglas, proposed that the federal government take all of the tidelands revenues from oil and gas found by Long Beach – for which she was denounced in the local press as a “communist” and “confirmed socialist.”

A year later, the city lobbied the state legislature to pass a bill that would allow Long Beach to keep 50 percent of the oil revenue and 100 percent of the dry gas which it would sell to its customers through its own “gas department.” The city argued that they could use those funds for streets, libraries, and other facilities.

In 1953, the voters approved a change in the City Charter which allowed the transfer of “excess” funds from the harbor department to the city for general purposes under what was called the “Public Improvement Fund.”

Then along came Felix Mallon and Alma Stewart who challenged the transfer to the city because as taxpayers they felt that the excess funds from the tidelands area belonged to the State of California, especially since they were not being used by Long Beach for “commerce, navigation and fishing.”

The case wound its way through the courts and finally in April 1995, the California Supreme Court ruled 4-3 that the money belonged to the State of California and that Long Beach should not have been spending it as it had. When the ruling came, Mallon ironically remarked that he was sorry the city lost the case.

A newspaper article summarized that the court had issued a “$4 billion dollar decision,” because it meant the end of Long Beach transferring money to use for general purposes. The Supreme Court ruled that the transfer of tidelands funds to Long Beach would be “a gift of public funds” and in violation of Article IV of the state constitution.

By 1964, Long Beach had taken $200 million in oil revenues. The fight between Long Beach and the state continued as it became determined that the field produces 66% of all oil revenue in the state. Long Beach voters approved an “oil development” referendum so that more oil could be extracted. The then City Attorney Robert Parkin remarked that the city was entitled to oil revenues because: “We voluntarily exposed ourselves to the risk of environmental damage.”

In 1967, the split for revenue from tidelands was 15 percent for Long Beach and 85 percent for the State of California.

In 1971, the state legislative committees met and proposed that Long Beach be stripped of tidelands fund because it had spent $5.3 million to acquire the Queen Mary in 1967 and had indicated it would spend an additional $8.75 million to refurbish it and to develop “a maritime museum and hotel.”

No one could quite recall whose idea it was to purchase the Queen Mary but what did get disclosed was that the idea to add a “maritime museum” came after private financing fell through and the city knew that to use tidelands funds it needed to include “navigation or fishing” as a use.

In order to avoid a lawsuit from the state over the Queen Mary, the city agreed to invest $7.4 million in municipal bonds for the construction of the convention center and then to deed the convention center over to the tidelands trust.

Gerrie Schipske is a native of Long Beach and a local historian who has authored several books on the history of the city.

gerrie@beachcomber.news