At least four cities, including Burbank, have been sued in roughly the last year for what plaintiffs have called an illegal practice in which cities transfer millions of water fund dollars to their respective General Funds.
The lawsuit filed against Burbank last month comes on the heels of one of the cities, Riverside, settling its lawsuit. Pasadena and Anaheim are targets of similar lawsuits filed last month and last November, respectively.
The lawsuits claim that the water fund transfers violate Proposition 218, a 1996 California law that states that property-related service fees can't exceed the cost of the service.
In a settlement agreement reached in April between Riverside and plaintiffs Javier and Vivian Moreno, the city agreed to return $10 million to the water fund from the city’s General Fund and put a measure on the ballot asking voters to approve the transfer program.
Voters approved the measure in June, meaning the city can continue making the fund transfers.
However, the Riverside settlement served as a catalyst for the multiple lawsuits filed against other cities shortly thereafter, said Eric Benink, an attorney whose firm filed all four cases.
“Just because one case got going and was resolved successfully, it has brought attention to this practice,” Benink said.
On a monthly basis, Burbank transfers up to 5% of water sales to its General Fund in lieu of taxes. Voters authorized the transfer program in a 1958 charter amendment, almost 40 years before Proposition 218 was passed.
Over the last three years, the city’s General Fund has received $3.4 million through the practice, according to the lawsuit.
As a result, “Burbank has been required to impose on its water customers higher charges and fees than it would otherwise have been required to impose had the transfers not been made,” plaintiff and Burbank resident Christopher Spencer alleges in the lawsuit.
Burbank also transfers up to 2% of electric sales to the General Fund for street lighting purposes, though electrical fees are specifically exempt from Prop. 218.
In 2011, neighboring Glendale stopped a similar practice in which the General Fund received roughly $4.2 million annually from the Glendale Water & Power’s water fund after city officials worried the practice could be successfully challenged under the provision.
“As a lawyer, it’s always good to eliminate risk, and that’s what we did,” Glendale City Atty. Mike Garcia said Monday.
Without referring specifically to the water enterprise fund transfers, Burbank City Atty. Amy Albano said it’s appropriate for cities to transfer money to the General Fund from enterprise funds “when it’s to cover the costs of services that (are) provided to that fund.”
The General Fund pays for most public services, including police, fire, libraries and parks.
“It’s not unusual that one city gets sued over something, and the next thing you know every city with similar practices (is) getting sued — that doesn’t mean the cities are in the same position,” Albano said, adding that the city is evaluating its options regarding the lawsuit.
A hearing on the case is slated for February.