Glendale transfers $20 million in GWP funds to the general fund despite court ruling
Despite a court ruling that Glendale’s transfer from its utility to the General Fund violates state law, the City Council approved a $20-million transfer for the 2017-18 fiscal year during a council meeting Tuesday.
Glendale is also holding off on reimbursing residents almost $57 million and returning $1.7 million in transferred money from the water revenue fund, because it is in the middle of appealing the court’s ruling.
“The trial court’s rulings … are stayed pending appeal,” said city spokesperson Tom Lorenz.
“While the appeal is pending, the electric rates and water rates may lawfully continue to be collected based upon the current rate plans, and no credits or refunds are to be issued,” he added.
L.A. Superior Court Judge James Chalfant ruled in February 2017 that the city violated Proposition 26 when it issued an energy rate hike in 2013, which included the General Fund transfers as an operating cost.
Because the transfer was not related to the cost of providing electric service, it should have required a two-thirds majority approval by voters, the judge said.
“The transfer cannot fairly be described as cost of providing electric service,” Chalfant wrote in the ruling. “Any contrary conclusion would defeat the purpose of Proposition 26 by permitting a city to drain monies from its public utility as an alleged cost and then impose that cost on the utility’s customers without a vote from the electorate.”
The judge also ruled that the city’s accounting practices violate its charter and that transfers made from the city’s general water fund — a practice that was discontinued in 2011 — violated Proposition 218, known as the Right to Vote on Taxes Act.
“We respectfully disagree with the court,” said City Atty. Mike Garcia. “Our position is that Proposition 26 — the wording is very explicit — isn’t retroactive. Our transfer has been in the charter since the 1940s.”
For decades, the city’s charter has called for a 25% transfer from Glendale Water & Power to the General Fund every year unless the council finds a lesser amount is necessary to preserve the financial soundness of the electric utility, Garcia said.
At Tuesday’s meeting, the council approved a lesser amount of about 10%, which Garcia said has been the cap for the past few years.
The transfer was added to the charter as a requirement with the intent that it would keep taxes low, Garcia said.
Glendale officials are arguing that because that requirement was in the city charter before Prop 26 passed in 2010, the law does not apply to the city.
Glendale officials consider adjusting electric rates about every five years anyway, Garcia added, because of increasing costs.
“It’s true that if you took out that transfer, then for the next four to five years, there would be no rate increase,” he said. “But that’s true of any cost. We can’t operate under the fiction that we can just take something out and our costs aren’t going to go up.”
Council members debated the transfer during the meeting, but ultimately decided 3-2 to move forward with it as they have done annually.
“The problem with cutting a hole of $20 million in the General Fund is that, if spread out equally, our police department and our fire department are going to take a huge hit,” said councilman Ara Najarian. [It would mean] reducing our force by 30%, and that’s just not acceptable to me.”
Council members Vrej Agajanian and Paula Devine opposed the transfer, saying it is unlawful and leads to electric rate hikes for residents.
“We went to court and we lost,” Agajanian said. “We transfer the money and raise the rates. Who is paying for that? The general public.”
Agajanian also said when cases lose in the superior court, they have a 75% chance of losing appeals.
The city of Glendale filed its appeal in April 2017 and estimated the appeals process to take between 18 and 24 months.
alejandra.reyesvelarde@latimes.com
Twitter: @r_valejandra
