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City may lose water revenue

Attorney warns that transfer of funds to General Fund might not hold up in court.

February 07, 2011|By Melanie Hicken, melanie.hicken@latimes.com

CITY HALL — The spigot for millions in water utility revenues that have been used to pay for public services could be turned off after the city attorney determined that recent court cases have thrown the legality of the practice into doubt.

City Atty. Scott Howard has recommended that the City Council suspend the annual transfer of water revenues to the city’s General Fund after conducting a review of the city’s Charter provision mandating the transfer of millions from Glendale Water & Power to support the General Fund, which pays for firefighters, police and other services.

Critics have for years assailed the transfers as illegal and contributing to higher utility rates. City officials have contended that the transfers are a vital income source since Glendale was hemmed in by Proposition 13, which put it behind other cities in terms of its stake in property taxes.

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Since 2000, nearly $35 million in water service revenues have been transferred to the General Fund. Another $153 million has been transferred from the utility's electricity revenues in the same period.

Critics seized on the waterside transfer last year as the City Council considered — and eventually approved — a controversial 3.8% water rate increase, which was expected to generate about $2 million, less than half of the $4.2 million in water revenues slated to be transferred to the General Fund this year.

The constitutional issues surrounding the revenue transfer stem from Proposition 218 — passed by California voters in 1996 — which required voter approval for any increase of property-related assessments and stated fees could not be used “for any purpose other than that for which the fee was imposed.” Electrical services are exempt from the provision.

While city attorneys have previously defended the water transfer as legal, Howard determined in a report to the City Council that court cases in recent years have changed the tide.

“I believe that the city is at some high risk if the continuation of the water transfer was challenged in court,” he said.

Cutting the flow of water utility revenues would spell extra trouble for the city’s budget, which already faces a projected $10-million deficit due to stagnant revenues and rising employee pension and health-care costs.

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