Several cities and at least one municipal utility have requested that recent appeals court opinions for a pair of cases involving Glendale’s water and electricity rates be made part of the state’s body of law to simplify lawsuits they are in the middle of or would like to avoid.
Currently, Justice Carl Moor’s opinions released Dec. 27 are unpublished, meaning that they cannot be cited as legal precedent in other cases.
“The Glendale case established useful law at great public and private expense,” Palo Alto City Atty. Molly Stump said in a letter to the court. “Publishing this court’s decision can avoid the need to reestablish those principles in one or more [similar] pending cases — at public expense.”
Almost identical letters have been sent and signed by other stakeholders.
Palo Alto, like Glendale and other cities, has been legally challenged over electric and gas rates set by their municipal utilities, Stump said. Riverside, Anaheim, Alameda and the Modesto Irrigation District are all in the midst of related litigation.
According to the Second District Court of Appeal, Glendale had levied a partial tax on ratepayers in 2007 when it began including in its electric rates an annual transfer of around $20 million from the utility to the city’s General Fund — thereby raising rates above the cost of service.
However, the rates, including the transfer, were adopted before the passage of Proposition 26, under which taxes require two-thirds voter approval. Proposition 26 is not applied retroactively, so the initial inclusion of the transfer cost in the rates is lawful, the appeals court ruled.
The city may still be required to refund ratepayers a yet-undetermined amount if the trial court where Moor ordered the case back to finds the tax increased following the adoption of Proposition 26.
According to the letters requesting publication, the opinion is the first to explain how to calculate whether there has been a tax increase under Proposition 26 when electric rate hikes passed before it was enacted and exceeded the cost of service. It also determined that General Fund transfers are not taxes in and of themselves.
The opinion states, for the first time, “that the correct remedy for a Prop 26 violation in the rate context is not refund of the entire rate, but only that portion which exceeds reasonable cost of service,” according to the letter.
Yolo County counsel Philip Pogleditch wrote that publishing the water-rate case could similarly help his community and other interested parties avoid costly legal battles to reestablish the same principles, noting that there are related cases pending involving the Marin and Goleta water districts.
In Moor’s opinion on that case, he ruled that Glendale’s base residential water rates violated a state law known as Proposition 218 because they exceeded the cost of service and were not based on sound analysis. However, he upheld the notion that rates could be split into tiers based on customers’ levels of consumption — as long as there’s data to back up the calculations.
“Other cities see rules of law that are useful and want the benefit of those useful rules,” said Michael Colantuono, attorney for the city of Glendale.
Whether the opinions are unpublished or not won’t affect Glendale much because the city and its ratepayers are bound by the decision no matter what, he added. But for other cities, “it would matter a lot,” he said.
Benjamin Benumof, counsel for the local watchdog group that brought both lawsuits, called it “a be-careful-what-you-wish-for kind of thing,” pointing out that certain aspects of the opinions might be beneficial to cities, while others might be harmful.
Cities would likely want to enshrine a portion of the water-case opinion that allows them to include fire protection services in their rates — something he thinks the court got wrong, he said.
“I was kind of surprised that they weren’t published to begin with, to be honest,” Benumof added. “These big constitutional issues often do get published.”
The appeals court has until Jan. 28 to respond to the requests, according to Benjamin Shatz, an appellate attorney not working on either case. It has full discretion on whether to publish them or not until then, he said.
If the appeals court doesn’t respond, the state Supreme Court is obligated to review the requests, Benumof said.