Harbor Panel to Help L.A. Fight Legal Challenge to Fund Allocation : Law: Commissioners approve $100,000 toward the city’s defense even though the suit could force return of $69 million to the port.

The Port of Los Angeles finds itself in the awkward position of fighting a suit that would enrich the port by millions of dollars.

The city of Los Angeles faces a lawsuit that could make it return $69 million to the port.

But, ironically, harbor commissioners agreed last week to contribute $100,000 toward the city’s defense.

The city will pay another $100,000 to retain two Los Angeles law firms, said Winston F. Tyler, the port’s chief lawyer.

Raymond Veltman, a retired trucking company owner from West Los Angeles, is suing port cities throughout California for the money the cities took from their respective ports under state law during the past two years.

A special bill passed by the state Legislature during the 1992-93 budget crisis permitted cities to take excess funds from their ports.

Veltman argues that the law is unconstitutional and hopes to force the cities to repay the $140 million diverted to the cities’ general funds between 1992 and 1994.

The class-action suit was filed in Los Angeles Superior Court last month.

The suit also names the State Lands Commission, the Department of Finance, Lt. Gov. Leo McCarthy, state Controller Gray Davis, the cities of Long Beach, Oakland, San Diego, San Francisco and others.

Veltman’s attorney, Richard I. Fine, said transfer of the money violates the California Tidelands Trust.

“You can’t give the money as an outright gift,” Fine said. “It’s against the California Constitution.”

He argues that port authority trust funds were established specifically for navigation, commerce, fisheries and other harbor uses. The funds, contributed by taxpayers, cannot be used to balance city budgets, he said.

The $69 million the Port of Los Angeles transferred to city coffers is the most money paid out under the state law.

In Long Beach, the city diverted $21 million. Harbor commissioners there have also agreed to help pay legal fees to fight the suit.

Other ports in the state handed over a total of $60 million to their cities.

In San Diego, however, the port refused to give money to the five cities in its region on advice from its attorney, C. Michael Cowett, who said the law is unconstitutional.

Cowett said he expects San Diego to be removed from the suit.

Fine said it could be a conflict of interest for the Los Angeles and Long Beach harbor commissions to help pay for the defense. They are now spending more money to block the ports from getting back the funds that they are entitled to.

But Los Angeles harbor commissioners do not see it that way. Commissioners Carol R. Rowen and Leland Wong said the board agreed to pay the $100,000 because the port, too, is named as a defendant.

The board’s decision to pay half the initial legal fees does not commit it to paying more money as the litigation proceeds, she said.

However Tyler, the port’s attorney, said the intent of the cost-sharing between the city and the port is to continue sharing costs to fight this suit.