Metropolitan News-Enterprise

 

Monday, December 31, 2018

 

Page 3

 

C.A. Remands Glendale Power Rate Cases for Further Findings

 

By a MetNews Staff Writer

 

The Court of Appeal for this district has remanded two cases against the city of Glendale challenging its power rates as an improper tax so the trial court can determine if the rate hikes were subject to voter approval.

Acting Presiding Justice Carl Moor of Div. Five wrote three opinions, filed Thursday, in the two cases.

Two of the opinions remand the related cases for further findings but affirm Los Angeles Superior Court Judge James C. Chalfant’s determination that the difference between the cost of running the water utility and the rate charged to residents is indeed a tax. The third opinion reverses an attorney’s fees award to one group of plaintiffs in light of the remand.

The plaintiffs in one of the cases included Juan Saavedra, a Glendale Water and Power employee, and his union; the other case was brought by Glendale Coalition for Better Government, a nonprofit corporation made up of Glendale residents.

Chalfant ruled that the electricity rate hike enacted by the city in 2013 violated Proposition 218, a 1996 amendment to the California Constitution which requires new local taxes to be approved by voters before being implemented, as well as Proposition 26, a 2010 initiative which broadly defined the taxes covered by the earlier amendment.

City’s New Rates

The rate hike was implemented by the city in response to the utility’s downgrade by a credit rating agency in the 2013 fiscal year. The new scheme would allow the surplus monies collected to be transferred to the city’s general fund.

In June 2014, the city budgeted a $20 million transfer for the 2015 fiscal year, a transfer which it authorized a year later.

Saavedra and the union, on behalf of the city’s utility employees, and the coalition, on behalf of Glendale residents, asked for and received declaratory relief and writs of mandate declaring the increase a violation of Proposition 26 and limiting the city’s ability to transfer money to the general fund under the new rate scheme.

A request by the coalition to return monies already transferred to the general fund back to the utility’s surplus fund was denied, as was the union’s request to reinstate employees laid off around the time of the rate increases.

Definition of ‘Tax’

Moor wrote:

“When a charge exceeds the costs of service, the language of the Proposition 218 (codified at Cal. Const., art. XIII C, § 1, subd. (e)) allows for more than one reasonable interpretation of what constitutes the ‘tax.’ One interpretation suggests that when a charge ‘exceed[s] the reasonable costs to the local government of providing the service,’ the entire charge is a tax. A more commonsense interpretation, however, read in the context of the entire article, is that only the portion of the charge in excess of the costs of service is a tax under article XIII C, section 1, subdivision (e).”

He went on to say:

“Referring to the portion of the charge that exceeds the costs of service as a tax is consistent with ordinary usage of the term.…We conclude that the tax in this case was the amount of the rate that exceeded the Utility’s costs of providing service, not the entire rate charged.”

Timing of Tax

The jurist noted that a 2006 change to Glendale’s electric rates, which predated Proposition 26’s expanded definition of a tax, had first implemented a charge beyond the cost of providing service, but because Proposition 26’s definition was forward-looking, that tax had not fallen afoul of the new law.

He said:

“Since the excess charge to ratepayers has no termination date, the 2013 rates did not extend the charge beyond an end date.

“The trial court did not determine from the conflicting evidence about revenues and costs employed in the rate setting process whether the excess amount of the charge was increased in the 2013 rates from the amount of the charge under the 2006 rates. The portions of the judgment declaring the 2013 rates invalid and requiring rebates to ratepayers based on the amount of the annual transfers under the 2013 rates must be reversed. The cases must be remanded for the trial court to determine whether the amount of the tax charged by the City increased under the 2013 rates, such that the City was required to obtain voter approval to impose the increase.”

The cases are Saavedra v. City of Glendale, B281991, and Glendale Coalition for Better Government v. City of Glendale, B281994.

 

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