Grand jury criticizes city for using Glendale Water & Power as 'piggy bank'

A preliminary Los Angeles County civil grand jury report unsealed this week criticizes Glendale for using its utility as a "piggy bank" to cover budgetary shortfalls and heralds a more thorough review in the months ahead.

The report, which was released Monday, comes a week before the April 2 election, when voters will decide whether to approve Measure B, a city ballot measure that would change how the city collects tens of millions of dollars from the electricity fund of Glendale Water & Power.

While the civil grand jury acknowledged the fiscal challenges facing cities such as Glendale, “it is not permissible for the city to use Glendale Water & Power as its ‘piggy bank' to satisfy budgetary shortfalls,” the report stated.

City Manager Scott Ochoa railed against what he called a flawed report and its timing just days before the general election.

“The civil grand jury looks at charter cities like they're the hammer and we're the nails,” Ochoa said, referring to Glendale's status as a city that has its own governing laws. “They're hell-bent on finding a narrative that fits what their perspective is.”

But Harry Zavos — a retired law professor who has long criticized the transfer and filed the complaint with the grand jury that prompted the report — said that after months of degradation by City Council members and city officials, the preliminary findings were gratifying.

“I hope [the report] sends a message to the new council that instead of ignoring or distorting criticisms, or belittling those who make them, it should honestly and fairly engage with them,” Zavos said. “No one likes to be criticized, but in our form of government, the public is best served when the government does not, like the turtle, draw its head into its protective shell.”

For decades, the city has transferred tens of millions of dollars annually from Glendale Water & Power to the General Fund, which pays for police, parks and other public services. While critics have called it a backdoor tax that artificially inflates utility rates, city officials say it is the only way they can maintain the current level of public services.

In 2011, officials stopped transferring money from the water utility because some court cases cast doubt on the legality of the practice, but they continued to transfer electricity revenues.

The grand jury report recommends the city work with an independent attorney specializing in municipal tax law regarding the transfer's compliance with two state propositions that require utility rates not exceed the cost of providing service.

City officials argue that they are immune from those laws because they are predated by the 70-year-old transfer. And one of the propositions exempts electricity rates completely.

Another point of contention centers on the method for making the transfer. Critics say the money should only be transferred from the surplus fund, but city officials contend the money can be pulled from general operating revenues — a practice that would be certified by the passage of Measure B on Tuesday's ballot.

City officials say the measure is about cleaning up arcane accounting language, but Zavos contends it would bring a much more fundamental change.

The grand jury report recommends that the city hold a special election on the utility rates and revenue transfer, a move city officials called unnecessary and premature.

This spring the City Council is slated to review increasing electricity rates by 14.7% over four years — a discussion Ochoa said would not be sidelined by the civil grand jury report. Electricity rates have not been increased since 2006, he said.

Ochoa also took issue with a recommendation in the report that the city use other sources of revenue to pay for General Fund services.

“To offhandedly comment that the city should try to find $20 million someplace else, well OK, where do you say that [should] occur, or where do you suggest we cut?” Ochoa said.

Los Angeles County spokesman David Sommers said that since the civil grand jury's work is confidential, he could not give a timeline as to when the final report would be released.

RELATED

Statement / response from the city of Glendale

LA County Civil Grand Jury preliminary report

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