Court Rules Against Overcharging of Water Customers

LOS ANGELES -- Some good news in the midst of the recession greeted Los Angeles water customers when, on March 25th, the Los Angeles Superior Court issued a tentative ruling in L.A. v. All Persons finding the City's practice of padding water bills to pay for unrelated City expenses to be unconstitutional.

The City has, for many years, charged its customers more than necessary for their water in order to create an annual multimillion dollar surplus in its Water Fund, which the City Council then spends on other things. For example, in the 2006-07 fiscal year, the City was set to transfer nearly $30 million from its Department of Water and Power (DWP) to the General Fund, to be spent at the Council's discretion.

However, in 2006, the Supreme Court ruled in Bighorn-Desert View Water Agency v. Verjil that the provisions of Proposition 218, the "Right to Vote on Taxes Act" apply to fees for water service.

Proposition 218 requires that fees charged for a property-related service not exceed the cost of providing that service and "not be used for any purpose other than that for which the fee or charge was imposed."

The City filed a "validation action," suing all of its citizens, and seeking a court order allowing the continued transfer of funds from DWP to the General Fund. By filing a validation action against "all persons," the City served its suit by running a small ad in a newspaper, hoping no one would notice. The City chose a little-read trade publication, but the ad was spotted by a concerned taxpayer who contacted the Howard Jarvis Taxpayers Association. HJTA attorneys then jumped to action, appearing in court on behalf of their members who are Los Angeles water customers.

Judge Kenneth Freeman's tentative ruling states, "Proposition 218 prohibits the City and its Department of Water and Power from transferring surplus revenue derived from water service fees to the City's Reserve Fund, General Fund, or any other fund for expenditure on non-water related purposes. The $29,931,300 transfer via resolution number 007-106 and City Ordinance number 178451 is unconstitutional and void." The Judge ordered that the transferred money be repaid.

The City's lawyers have 10 days from the issuance of the tentative decision to challenge it, otherwise the tentative decision becomes final. When finalized, this decision will save DWP ratepayers more than $30 million per year at today's rates ... a big win!