Glendale water rates found to be severely flawed

After discovering that water rate increases approved by the City Council in 2012 are riddled with errors, city officials this week decided to scrap the current rate system and start over.

The flawed rates, which were supposed to span four years, caused Glendale to overcharge some commercial customers and undercharge some residential customers, resulting in Glendale Water & Power to lose out on at least $8 million in expected revenue, even though the utility sold more water. This does not count any refunds or credits for overcharges, and city officials don’t yet know the total impact.

“There is a host of problems that exist in [the rate] models,” City Manager Scott Ochoa said during a City Council meeting Tuesday night. “We do sincerely apologize.”

The about-face comes after several business customers and city critics complained that the water rates proposed by a consultant in 2011 seemed off the mark and burdensome.

Yet, in March 2012, the council approved the rates on a split 3-2 vote, with former Councilmen Rafi Manoukian and Councilman Frank Quintero dissenting. The four years of rate increases were supposed to increase Glendale Water & Power revenue by less than 1% the first year, 2% the next and then 4% and 5% in the next two years, charging customers differently depending on how much water they use and the size of their meters.

Commercial customers also had to pay significantly higher rates for fire lines on their properties. Some commercial customers’ fire line rates could, over time, more than quadruple, according to city records.

Ochoa said the water rate problems are due to a consultant’s miscalculations. The city paid Willdan Financial Services of Temecula $107,000 to prepare the new water rates and City Atty. Mike Garcia said he is looking into legal remedies to recoup Glendale Water & Power’s loss.

“We believe they are responsible legally for all the short revenue,” Garcia said.

When Harry Zavos, a long-time Glendale Water & Power critic and former law professor that effectively halted a multi-million dollar transfer from the water-side of the utility to the city’s General Fund, attempted to speak on the water rate debacle at the council meeting on Tuesday, he was blocked by Mayor Dave Weaver, who said he turned in his card requesting to speak too late.

Before the council approved of Willdan’s water rate last year, Zavos outlined several flaws, noting that the consultant’s use of numbers could not be trusted at public meetings.

On Tuesday, Zavos turned in his speaker card as one council member began the process of voting on the matter, but the council often allows people to speak even though they may turn in their cards right before a vote.

“I’m not here to play the role of schoolboy on the playground saying ‘I told you so.’ Little is gained by that,” Zavos wrote in a statement he planned to read at the public podium before he was stymied. “I’m here because what the city did is part of the pattern. Whenever members of the public criticize what the city says or does, they at best are ignored or at worst what they have to say is distorted and they are personally treated with disrespect. Is our city government so perfect it has nothing to gain from citizenship criticism?”

Judee Kendall, executive director of the Glendale Chamber of Commerce, which also pointed out that the rates prepared by Willdan did not fairly charge customers last year, said in a statement Wednesday that Glendale Water & Power should refund overpayments and include business customers in future rate discussions.

“Complete transparency and inclusion of the business community on the part of GWP throughout this process will be of the utmost importance in order for [Glendale Water & Power] to restore our trust and gain our support,” Kendall wrote.

Councilwoman Laura Friedman said the utility should stop overcharging commercial customers with fire lines larger than 4 inches—mostly Glendale’s top 100 businesses—and Councilman Zareh Sinanyan said Glendale Water & Power should not go back and rebill residential customers who were undercharged.

“Go after Willdan, they should own up to their mistakes,” Sinanyan said.

The council voted unanimously to stop the fire line charges completely by Jan. 1 and continue to implement the other rates as they currently are until a new cost of service analysis is completed by a new consultant, Bartle Wells of Berkeley. The city plans to pay Bartle Wells about $100,000 to create a new water rate system, which may come before the council by the spring of 2014, Ochoa said.

It’s unclear how much more the new water rates will cost customers, Ochoa said, adding that won’t be determined until their analysis is complete. But he vowed that city officials will closely work with Bartle Wells to prevent another debacle.

“Hopefully we can restore confidence to all of our customers,” Ochoa said.

The water rate increases were supposed to help the water side of Glendale Water & Power dig out of a $21 million deficit prompted by installing new equipment even as the utility didn’t have the money to pay for it.

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Follow Brittany Levine on Google+ and on Twitter: @brittanylevine.

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