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Utility transfers up for debate

Critics say water revenues' move to General Fund causes rates to artificially inflate.

September 24, 2010|By Melanie Hicken, melanie.hicken@latimes.com
(FILE PHOTO )

CITY HALL — As Glendale Water & Power officials continue to push a proposed water rate increase, questions have been raised regarding the annual transfer of millions in utility revenues to support the city's General Fund, which pays for most public services.

A review of city records shows nearly $35 million in water service revenues have been transferred to the General Fund since 2000. Another $153 million has been transferred from the utility's electricity revenues in the same period.

City critics have for years seized upon the multimillion-dollar transfers — written into the city's Charter by Glendale voters more than 60 years ago — as causing artificially high utility rates.

In turn, city officials have long defended the transfers, which they say make up for Glendale's below-average property tax rates, frozen decades ago by Proposition 13.

"Other cities that did not have a power company had much higher tax rates," said Glendale Mayor Ara Najarian.

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While transfers from electricity revenues remain protected, city attorneys are in the process of taking a fresh look at how a 2006 California Supreme Court ruling affects the water side.

"We are looking at that very closely," said City Atty. Scott Howard. "There are some more recent cases which have caused us to have to take a hard look at the continued validity of our Charter provision."

The review should be completed in the next few months, he added.

Critics have continuously pointed to the court decision, which determined that water service fees could not be used to supplement unrelated programs, in opposing the annual transfer.

"I don't know whether it's good policy or not," said Glendale resident Harry Zavos, a former attorney and law professor who has repeatedly broached the topic at city meetings in recent months. "All I know is it seems to me a city should not be in a position of doing something that undermines the [state] Constitution."

The annual transfers have been a key revenue source for the General Fund, which has been buckling under the weight of rising costs — due in large part to the increasing burden of health-care and pension benefits for city employees — and stagnant revenues during the protracted recession.

So if the water revenue transfer is deemed unlawful, city officials say taxpayers could still be left on the hook since those millions will have to be found elsewhere.

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