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Glendale officials say $57M judgment for 2013 energy rate hike is moot

Glendale officials say $57M judgment for 2013 energy rate hike is moot
Counsel for the city of Glendale argued new case law justifies a 2013 energy rate hike and general fund transfers of electricity revenues, in an appeal of a court ruling that determined the activity was illegal. (Raul Roa / Glendale News-Press)

Glendale officials argued Tuesday that a recent state high-court opinion vindicates the city’s 2013 energy rate hike and the transfer of electric revenues to its General Fund, appealing a 2017 court ruling that ordered the city to repay residents roughly $57 million for what it deemed illegal activity.

According to Michael G. Colantuono, attorney for the city, the California Supreme Court in August ruled that the city of Redding did not unlawfully tax residents without voter approval when it transferred money from its utility enterprise fund to its General Fund — which he said is analogous to the Glendale case currently pending at the Second District Court of Appeal.

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“The Supreme Court made it clear that the trial court got it wrong,” Colantuono said after oral argument.

In a tentative ruling in January of last year, L.A. Superior Court Judge James Chalfant said Glendale had violated its charter when it transferred $85 million from the electric revenue fund to its General Fund during fiscal years 2010-14.

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As a result, a 2013 electric rate increase — which included the General Fund transfers as an operating cost — was ruled in violation of Proposition 26 because the transfer was not related to the cost of providing electric service and required a two-third majority approval by voters.

The city was also ordered to return $1.7 million in illegally transferred monies from Glendale Water & Power's waterworks fund to the city's coffers, which the city did not appeal.

The Glendale Coalition for a Better Government, a watchdog group that filed the initial suit in 2013, contends that the city still violated Prop 26 despite the Redding ruling.

“They raised the rate because they felt the utility needed funds, but, at the same time, they were draining this constant transfer out of the utility,” said coalition board member Roland Kedikian, adding that the city’s charter states that only surplus funds should be transferred and there were none.

The alleged surplus funds were used for general city services “at the cost of running the DWP to the ground,” he said.

In a brief filed in support of the city in the initial case, Glendale finance director Robert Elliott said that without the transfers, “the city will need to cut essential services.”

Without being able to enforce 2013 electric rates, the General Fund will experience an annual budget deficit, Elliott also said in the 2016 brief.

While the appeal pends, the city does not have to repay the $57 million ordered to be refunded by the trial court as utility credits on customers’ bills.

The city adopted new energy rates in June, Colantuono said.

The Glendale Coalition for a Better Government prevailed in a different case against the city in February 2017, when Judge Chalfant judge ruled the city of Glendale violated Proposition 218 in creating its current water rate-pricing structure first adopted in 2014.

Those rate increases were made in violation of Proposition 218 and also required voter approval, the judge said.

That case is also up on appeal before the 2nd District court.

The appeals court has 90 days to issue decisions on both cases.

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