Glendale officials will have to redo the city’s residential water rates, following a recent appeals court ruling that the rates are not based on the cost of service, therefore violating state law.
“The city concedes it developed its rates without any data that gave it the analytical capability to develop the underlying costs of service for each tier,” Justice Carl Moor wrote in an opinion for the Second District Court of Appeal, released Dec. 27.
With the help of a consultant, Glendale officials divided the city’s single-residential family water rates into four tiers based on customers’ levels of consumption.
Customers who used more water were placed into the higher tiers, and the heaviest users were charged more for their usage, partially as a means to promote conservation, according to Michael Colantuono, an attorney for the city.
While tiering isn’t prohibited under national water standards, an industry manual recommends using information such as customers’ bills to determine average past usage and use that data to make the tiers’ base costs. Instead, the city tied the base costs to the amount of water available to each customer, according to Moor’s opinion.
As a result, that part of the system violates Proposition 218, passed by voters across the state in 1996, according to Ben Benumof, attorney for local watchdog group Glendale Coalition for a Better Government. Proposition 218 mandates pricing be based on “analysis of cost.”
Colantuno said he doesn’t think past sales are necessarily a good predictor of future sales, pointing to the yet-unknown impact climate change and more efficient plumbing technology will have on water usage.
Unless the City Council decides to file for review by the state Supreme Court by Feb. 5, officials will need to hire a consultant, conduct another cost-of-service analysis, notify customers and hold a 45-day protest period. “[It will be] the whole drill that we went through to get here,” Colantuno said.
“There will be another table filled with numbers prepared by a consultant that has a slightly different theory, and my impression is it probably won’t change the rates very much,” Colantuno said.
Benumof said the most important aspect of the case was decided in January 2017, when an L.A. Superior Court judge ruled that the city incorrectly placed itself in a lower-cost tier. The city did not appeal that ruling.
“That was the thrust of our case, which we won at trial,” Benumof said. “The issues that were on appeal were important, too, but they’re sub-issues within Prop 218.”
In its most recent opinion, the appeals court upheld other aspects of Glendale’s water rates that were challenged by the coalition in its 2014 lawsuit, including the city’s decision to charge customers a fire-protection fee.
Reversing a 2017 trial court decision, the three-justice panel determined that the fee did not violate Proposition 218, which prohibits energy customers from being charged for a service that benefits the general public, because the fire hydrants supported by the fees primarily benefit property owners.
“Although the fire department could conceivably use any available measure to extinguish a fire unrelated to real property, including hydrant water in the absence of an alternative, hydrants are not located, designed or intended for all fires that happen to occur in public places,” Moor wrote.
A separate appeals court opinion, also issued Dec. 27, concluded the city had levied a tax on its electricity ratepayers beginning in 2007 by charging them more than the cost of service.
That case, also brought by the coalition, is slated to return to trial court to determine whether or not that tax increased after 2010, which would violate Proposition 26. That law requires two-thirds voter approval to hike or adopt taxes.
The same opinion invalidated a trial court’s $60-million judgment against the city, based on its finding that the city had overcharged customers. It could still be ordered to repay customers a to-be-determined sum if the trial court judge finds the tax increased after 2010.