Thousands Still Await Sewer Refunds From Los Angeles : Bureaucracy: A state-imposed deadline has passed. Many of those charged for sanitation services they did not receive are poor.

With a July 1 state deadline for issuing refunds long past, the city of Los Angeles only now is gearing up to return as much as $7 million it owes thousands of people who for years paid for sewer services they neither needed nor received.

Many of those awaiting refunds are poor and awaiting refunds of $800 or more, an amount that for Pedro Velasquez, a Pacoima gardener, represents a month’s wages.

“We have been robbed,” said Velasquez, who added that he will use the money, when he receives it, to paint and repair the house where he lives with his wife, Margarita, and nine others. “If we were in a different situation and we owed the money to the city or the county, they would be very quick to exact the money from us.”

A city official said last week that announcements explaining the refund program will go out with 550,000 water bills in two to three weeks and that money should begin flowing to as many as 30,000 people--most of whom live in areas on the edge of the San Fernando Valley--after that.

The city expects to be processing claims and refunds through July, a full year after the state-imposed deadline.

“We recognize that this is a bureaucracy . . . but, on the other hand, we have been waiting for over a year and they don’t have any excuses that make sense,” said Franco Fernandez, a consumer advocate with San Fernando Neighborhood Legal Services, which filed the claim against the city that brought the situation to light in June, 1990.

The poverty law agency filed the claim on behalf of Velasquez and seven other East Valley residents who had been paying the sewer fees--an average of $10.43 a month--for as long as nine years even though their homes are equipped with septic tanks.

The city later said that as many as 30,000 customers--renters who paid their own water bills as well as homeowners--may be owed refunds. City officials will not know precisely how many customers are due refunds until they compare water bills with sewer maps showing which properties are connected to the system.

After the claim was filed, Assemblyman Richard Katz (D-Sylmar) pressed for legislation that set the July 1 deadline for returning the money. Told last week that no refunds had been issued, Katz promised to attempt to withhold state money from city coffers to speed up the process.

“I think it’s outrageous and I think the city ought to treat people better than this,” Katz said. “Had this happened to people who were living in Bel-Air, the city would not be jerking them around like this.”

Fred Hoeptner, the city Bureau of Engineering senior civil engineer who is responsible for setting up the rebate program, said the city told legislators that the July 1 deadline was unrealistic.

“We tried to warn them that it was a big job and it would take a while to do,” Hoeptner said.

The delay angers Teresa Alvarez, who lives next door to Velasquez on Brownell Street, near an industrial area of Pacoima. Alvarez’s home has a septic tank, but she said that when she asked the Los Angeles Department of Water and Power several years ago about the sewer charge, she was told that she had to pay it or else her service would be cut off and the bill would be sent to a collection agency.

Alvarez said she and her husband moved to Brownell Street in 1981, and they estimate that they are owed $1,000 or more. She said they will use the money to repair broken-down family cars and to pay a longstanding hospital bill at the county’s Olive View Medical Center.

The billing problem dates back to 1978 when the city began applying a monthly surcharge to the water bills of all customers in areas served by sewers.

Water customers with septic tanks in those areas had to ask for an exemption to avoid paying the fees. Despite an annual bill insert printed in English that explained the exemptions, thousands of water customers, many of them poor and Spanish-speaking, failed to request them and continued paying for services they were not using.

Under the city’s previous policy, customers who did discover that they qualified for the exemptions could only be refunded the sewer service fees they paid during the previous 12 months. Customers who received such rebates under that policy are now eligible for reimbursement of fees paid in earlier years as well.

In response to the controversy and the legislation, the Los Angeles City Council in March directed the Bureau of Engineering to determine which customers had mistakenly paid for the service and to issue rebates.

Hoeptner’s description of the headaches encountered since then is filled with the gear-grinding sound of a struggling bureaucracy. “The system for issuing rebates had to be created from scratch, which meant forms had to be written . . . we had to get them approved, get the city attorney and controller to approve the procedures . . . and set up a phone answering service to give out information,” he said.

In addition, two computer databases had to be developed--one to keep track of refunds issued and the other to match DWP customer records against the city’s sewer maps. The latter system will enable the city to track down people who are owed money but do not submit applications.

Once refund applications are received, Hoeptner said, city staff members will have to determine how much residents are owed because most will not have kept their water bills. The customers will not be paid interest on the money.

The Bureau of Engineering was to have reported back to the council on its progress by the end of July. City Councilman Joel Wachs, who in March co-sponsored a directive ordering the rebates, said he will ask that the bureau update the situation for the council’s Public Works Committee on Aug. 28.

Assistant City Atty. Christopher M. Westhoff said he did not think that the city was in legal hot water even though it had not complied with the state’s deadline. “The only way it would pose any problems is if the state had any enforcement powers,” he said. Katz’s legislation did not provide a penalty for failure to meet the deadline.

The city intends to refund the money as soon as possible, Westhoff said.

But Michael M. Duffey, who estimates that the city owes him $720, is unwilling to be charitable about further delays. He paid for sewer services for nine years at his older, septic tank-equipped house in Sherman Oaks before learning last year that he was exempt.

“It’s the same mentality going in as coming out--the hell with the customers,” said Duffey, an attorney. “It’s the idea that ‘We’ve got their money now and let them fight us to get it back.’ ”