Disparity is wide in cities’ legal costs

A bond sale that hundreds of California cities signed up for two years ago was so streamlined that each city council approved the same set of documents and was not allowed to change a word of it.

But in one aspect of the transaction, there was a great deal of variation among cities: how much each city paid its attorneys to review the documents.

In Mill Valley, an upscale city in Marin County, officials said they paid nothing for legal services relating to the bond sale. Hermosa Beach paid its attorney $93.50 for a half-hour of his time. Upland, on the other hand, paid $746.20, and South El Monte, which is among the poorer cities in Los Angeles County, paid $3,625.

In fact, a Times review found that of dozens of cities surveyed, each one paid a different amount for lawyers to review the Proposition 1A securitization documents and sign off on a letter about them. In general, poorer cities paid more than richer ones, according to a Times analysis. The average bill from the Times survey was $713.

The bond letter offers a window into the byzantine world of municipal legal costs, which are a significant expense but often get little public scrutiny because much of the work is done behind closed doors under the cloak of attorney-client privilege.

Municipal attorneys said cities’ legal costs for a seemingly similar task may vary because each city faces unique legal issues, some requiring more research than others.

But some cities are also much more aggressive than others in reviewing legal billings and pushing to cut costs. The more aggressive cities, and those with more knowledgeable staff and council members, often pay less for routine legal services.

Officials in Upland said they learned that the hard way. The San Bernardino County city initially paid the $746 tab for legal services on the Proposition 1A bond program without comment. But later, officials, concerned that their overall legal costs were too high, began examining their bills and found a number of things they said upset them, including the charges related to the Proposition 1A bond.

They said attorneys with their law firm billed for research no one had asked them to do and spent too much time researching “simple questions,” such as how to sell a golf cart that the Police Department had impounded. The research on that cost $1,000; the city eventually sold the cart at auction for $100, according to a 2010 memo on legal costs.

After a series of discussions about billing practices, the city finally dumped longtime city attorney firm Richards Watson & Gershon this spring. Attorneys from Richards Watson said they had given Upland good, “cost-efficient” legal service for many years.

Amid tough economic times, cities are increasingly scrutinizing their legal costs, and some don’t like what they find.

“The most vigilant clients are going to have lower legal bills. There’s a deterrent effect,” said Ken Moscaret, a legal fee expert who has audited legal bills for cities and helped them come up with cost-control plans.

Moscaret said the organizations that do best at controlling their legal costs put guidelines in place from the start and review their bills monthly, rather than waiting until the high tab becomes an issue and getting into a public fee dispute.

In San Diego, where outside legal costs surpassed $10 million in 2008, a spokesman for the new city attorney said the office has worked hard to bring costs down in part by providing more oversight.

Each time outside counsel is used, the case is also assigned an in-house “oversight” lawyer who makes decisions about whether certain legal moves, such as filing motions, are cost effective, according to spokesman Jonathan Heller.

The “oversight lawyer” reviews all the bills as they come in, and in some cases has negotiated adjustments if the bills are too high.

San Diego’s outside legal costs were down to about $3 million last year.

In Beverly Hills, where high-profile litigation waged by powerhouse attorneys is quite common, officials have in the past hired forensic auditors to pore over some of their legal bills, said City Councilman Barry Brucker.

The audits invariably turn up charges that the city disputes, he said, but more important, they send a message that city officials are looking closely at the bills.

Some law firms treat municipal legal services “like putting your hand in a candy jar,” Brucker said. He added that he believes elected officials in some cities, particularly poorer ones, may not “have the legal expertise or business skills to really call the question on those bills.... That’s why a lot of poorer communities tend to pay more for certain functions, and it’s shameful.”

Brucker stressed that Beverly Hills officials have great trust in their contract attorney, Larry Wiener of Richards Watson & Gershon, but scrutinize other firms that are hired periodically by the city.

The Times review of the Proposition 1A program also found that high legal bills sometimes corresponded with how experienced the city’s staff were.

A total of 1,200 agencies signed up for the Proposition 1A Securitization program, a bond sale put together by the joint powers authority California Communities to enable local governments to replace property taxes that the state had diverted to help plug its budget hole. Orrick, Herrington & Sutcliffe, a prominent bond firm, drafted the documents and was paid by California Communities. Each agency that participated then had its own lawyers review Orrick’s work and sign off on the deal.

In some cities, the in-house management and finance department staff had dealt with enough bond issues to require little assistance from lawyers.

“You read the documents and it’s all the same boilerplate that you’ve done before,” said Moorpark’s finance director, Ron Ahlers, whose city paid $127 for 42 minutes of legal work.

In Mill Valley, Finance Director Eric Erickson said he handled all aspects of the deal except for the letter, which the city’s lawyer signed without charge.

But in other places, city staffers peppered their attorneys with questions, for which answers were billed by the hour.

South El Monte, for example, switched finance directors in the middle of the process. The old and new directors each had many questions about the transaction. The result: The city’s attorney spent 14.5 hours reviewing documents and fielding questions, for a total cost of $3,625.

Calimesa incurred $2,058 for 14 hours of work because no one could figure out whether its fire department was a separate legal entity.

Many of the cities that paid relatively high costs for legal research said the tab didn’t bother them.

In Irvine, which paid $2,340 for legal work on the deal, city spokesman Craig Reem said that the city expected “diligent research” and that the deal paid off with $4.7 million in funds to the city.

But Upland City Manager Stephen Dunn, who was finance director at the time, said it made no sense to him that cities across California had to pay individually to sign off on the boilerplate work of another law firm, which was also paid in the deal.

“I think Orrick is who did the letter initially -- they’re attorneys and they did all the work. It was simply cut and paste and put it on your letterhead. If it takes $700 to do that, I’m in the wrong business,” he said.

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abigail.sewell@latimes.com

jessica.garrison@latimes.com