Water & Power Can Not Be A “Piggy Bank” to Satisfy Budgetary Shortfalls
The Glendale Coalition for Better Government, acting according to its mission to
promote transparency, accountability, integrity and responsiveness in city government,
has filed suit against the City of Glendale for violating Articles XIIIC and XIIID of the
State Constitution as enacted by Propositions to 218 and 26 and for misappropriating
GWP funds in violation of the Glendale Charter.
Art. XIIIC makes a fee charged for electric service a tax if the fee is not
reasonably necessary to provide the service. Because the city transfers over $20 million
of the electric utility revenues to pay for general services–to be used for other than
suppling ratepayers with electricity– electric fees are taxes within the meaning of Art.
XIIIC. Art. XIIIC mandates if such taxes are increased after Nov. 2010 they must be
approved by the electorate. In 2013 the city, in blatant disregard of Art. XIIIC’s mandate,
increased electrical rates–taxes under Art. XIIIC–without submitting the increase to a
vote of the electorate. The city essentially gagged the voice of its citizens–a voice that
Art.XIIIC guarantees. This lawsuit essentially seeks to remove that gag.
Art. XIIID decrees that water fees can only be used to provide ratepayers with
water and expressly prohibits such fees from being used to support general services. In
defiance of this command the city has been transferring revenues from the water utility
to the city fund that pays for general governmental services–for services unrelated to
suppling ratepayers with water. While in 2011 it stopped any further transfers, it has
refused to return these misappropriated monies to their rightful place–to the water utility
where they can be used to pay for needed capital improvements that now must be
payed by rate increases. This lawsuit seeks to restore to the utility what rightfully
belongs to it, going back as far as the law allows.
Glendale’s charter authorizes surplus utility revenues, if any, to be transferred
for use by the general government. Surplus revenues are those revenues left after
providing for all budgeted obligations of the utility, including monies set aside to cover
the need for capital improvements due to normal depreciation. The amount that can be
transferred is measured by 25% of the utility’s operating expenses. There are two limits
on the transfer: (1) it can only come from surplus and (2) only a portion of that surplus
can be transferred. In direct violation of the charter the city has transferred utility
revenues as a budgeted obligation of the utility regardless of any surplus and regardless
of the need that those transferred revenues be available to pay for needed utility capital
improvements. This lawsuit seeks to cause the city to obey its charter by only
transferring utility revenues after all the utility’s needs have first been met.
Perhaps the overarching issue addressed by this lawsuit is best expressed by the
following statement of the 2012/13 Los Angeles County Civil Grand Jury:
“While the Grand Jury understands the fiscal challenges facing cities such as
Glendale, it is not permissible for the City to use Glendale Water & Power as it’s
“piggy bank” to satisfy budgetary shortfalls. Rather, the city should consider
alternative revenue sources and or submit its rate structure for GWP to the citizens
of Glendale for their approval in compliance with…Propositions to 18 and 26.”
The Coalition understands that if the city can no longer use illegal transfers of
GWP revenues to pay for general services unrelated to the utility, it may face fiscal
challenges. It can face those challenges, consistent with the law, by going to its citizens
and asking them to approve increased taxes to support the general budget’s priorities.
The Coalition respects–and seeks to have the city respect–the voice of Glendale’s
citizens as expressed at the ballot box.