Schwartz, Steinsapir, Dohrmann & Sommers

SSDS wins $57 million judgment against the City of Glendale

On August 11, 2016, L.A. Superior Court Judge James Chalfant entered a final Judgment that the City of Glendale violated Article XIIIC of the California Constitution (Proposition 26) when it charged its electric ratepayers for the amount the City annually transferred from its public utility, Glendale Water & Power, to the City’s general fund.  The court found that, since the transfer amount was not part of the cost of providing electrical service, it was a tax that could not be imposed on Glendale residents without voter approval. When judgment is entered, the City will be required to provide rebates of the tax unlawfully collected in the last three fiscal years, approximately $57 million, to the City’s ratepayers and cease charging the utility’s customers for the transfer in the future.

Under Proposition 26, a California constitutional amendment approved by voters in 2010, when a public utility charges its electric ratepayers more than the cost of providing electrical service to them, the excess amount is a “hidden tax” that must be placed on the ballot and approved by the city’s voters.

“The [General Fund] transfer cannot fairly be described as cost of providing electric service,” Judge Chalfant wrote. “Any contrary conclusion would defeat the purpose of Prop 26 by permitting a city to drain monies from its public utility as an alleged cost and then impose that cost on the utility’s customers without a vote from the electorate.”

The lawsuit was brought by SSDS clients IBEW Local 18, the exclusive representative of the employees of Glendale Water & Power, and Juan Saavedra, a resident of the City of Glendale.

Read the LA Times story here.