i'L
ED
LOS ANGELES
SUPERIOR COURT
MAR 2 5 2009
JOHN A. CLARKE,
CLERK
BY E. FAJA DO, DEPUTY
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
CITY OF LOS ANGELES, a municipal
)
)
BC369238
corporation,
)
(TENTATIVE)
Plaintiff,
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)
TATEMENT OF DECISION
vs.
)
)
ALL
PERSONS INTERESTED IN
THE)
MATTER OF THE VALIDITY OF THE )
TRANSFER OF $29,931,300 FROM THE )
WATER REVENUE FUND TO THE
)
RESERVE FUND (FISCAL YEAR 2006- )
2007),
)
)
Defendants.
)
)
ACKGROUND
Plaintiff City of Los Angeles ("City) transferred $29,931,300 from its Department ofWater and Power Water Reserve Fund to the City's Reserve Fund as surplus money. The City
seeks a declaration from this court that this transfer was proper as authorized by Resolution#007-106 passed by the Board of Water and Power Commissioners and City Ordinance #178451.More particularly, the City seeks a declaration that the transfer is valid and not subject to legalchallenge since it conformed with all laws, the Constitution, City Charter and Ordinances and the
(TENTATIVE) STATEMENT OF DECISION
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ommon law; and the action is binding on all parties duly noticed.
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This matter was originally brought before this court as a validation action. After a trial on
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tipulated facts, the court issued a tentative statement of decision, ruling that the lawsuit had not
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been properly brought as a validation action under Chapter 9, Title 10, Part 2 (§§ 860 et seq.) ofthe Code of Civil Procedure, and that the transfer is not an obligation for purposes of
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Government Code § 53511(a).
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Before this tentative decision became final, the parties stipulated to add a cause of action
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or declaratory relief, to dismiss, without prejudice, the validation cause of action and to resubmit
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the matter to the trial court on the same stipulated facts.
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The City argues that the stipulated facts establish that the transfer of funds at issue is
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lawful and complies with the City Charter and Proposition 218, and more particularly:
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(1) The City's water service charges are not imposed as an incident of property
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ownership and therefore not subject
to
Proposition 218; and
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(2) Even if the transfer violated the provisions of Proposition 218, the City's right to
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self-governance under Article XI, §§3, 5 and 9 control the issue and exempt it
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from Proposition 218's provisions.
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Defendants, Howard Jarvis Taxpayers Association and the Apartment Association of Los
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Angeles County, argue that the transfer clearly violates Proposition 218. They assert that the
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City intentionally pads its LADWP water rates, so it will have a surplus to transfer to the City's
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General Fund, and that Proposition 218 prohibits setting rates above the cost of service for the
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purpose of creating a transferable surplus.
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DISCUSSION
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The City concedes that the amount it charges for water service exceeds the costs required
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to provide said service, and that the planned surplus is transferred from the DWP to the City's
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General Fund to help finance, among other things, police, fire, ambulance and library services.
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(TENTATIVE) STATEMENT OF DECISION
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It therefore appears that unless there is a sufficient legal basis to find otherwise,
Proposition 218' precludes the transfer. The court will now examine the City's arguments forwhy Proposition 218 does not apply.
1. Water service in the City of Los Angeles is primarily property-related. In
Bighorn-Desert View Water Agency v. Ve
rjil,
39 Ca1.4th 205, 215, the Supreme Court held that
"a water service fee is a fee or charge under article XIII D if, but only if, it is imposed upon a
person as an incident of property ownership [citations]", but that "a fee for making a new
connection to the system is not imposed as 'an incident of property ownership' because it resultsfrom the owner's voluntary decision to apply for the connection."The City first argues that its water service is not property-related, because it has somecustomers who are not property owners or tenants, such as construction companies that use fire
hydrant water. However, the court must look to the character of the
primary
revenue source:
property owners and tenants. The fact that a minuscule portion of LAD WP's water revenue is notproperty-related cannot defeat the mandate of Proposition 218. If this were so, a municipality
'Article XIII D was added to the California Constitution in 1996 by Proposition 218. Section
6 of that article governs fees and charges for property related services, such as water rates. Section 6(b)provides part as follows:"(b) Requirements for Existing, New or Increased Fees and Charges: A fee or charge shall not
be extended, imposed, or increased by any agency unless it meets all of the following
requirements:
(1)
Revenues derived from the fee or charge shall not exceed the funds required to provide theproperty related service.
(2)
Revenues derived from the fee or charge shall not be used for any purpose other than that forwhich the fee or charge was imposed.
(3)
The amount of a fee or charge imposed upon any parcel or person as an incident of propertyownership shall not exceed the proportional cost of the service attributable to the parcel.
(5) No fee or charge may be imposed for general governmental services including, but not
limited to, police, fire, ambulance or library services, where the service is available to the public
at large in substantially the same manner as it is to property owners."
(TENTATIVE) STATEMENT OF DECISION
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LADWP Decision
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