Illegal Transfers to General Fund Require Public to Pay Twice

From my past law practice I remember that condominium developers needed approval from the California Department of Real Estate ("DRE") before they could sell any units. To get it they were required to submit a homeowner association ("HOA") budget that included an account that funded normal depreciation repairs; DRE required that certain amounts of HOA monthly fees be credited to that account. Thus, when, after many years, a new roof was needed it could be paid for from that account, rather than by a special assessment imposed on the then condo owners.  

Glendale's charter is equally prudent.  Art. XI, sec.17 establishes a Depreciation Fund "to meet the normal depreciation" of the waterworks -- to pay "for the repair, replacement, betterment and extension of the plants and equipment of the waterworks". It requires the City Council annually, from waterworks revenues, to pay sufficient monies into the Fund for this. Obviously, over the years Councils have failed this Charter duty and like an HOA where DRE requirements were ignored this Council is considering a special assessment in the form of a rate hike to pay for needed improvements.

Over the same years Councils, pursuant to the Charter, have transferred millions from the waterworks to the General Fund even though Art. XI secs.17, 20 and 22 provide such transfers can only be made from excess water revenues, “if any", after the requirements of all other Funds (which includes the Depreciation Fund) have been met. In 2006 the Supreme Court held that water fees are governed by Proposition 218 thus rendering such transfers unconstitutional. Nevertheless, Councils continued to make $20.5 million worth of transfers.

Beginning with this years purported $7 million General Fund surplus, this Council can vote to return the $20.5 million illegal transfer to its rightful place -- to the Depreciation Fund. That could obviate the need for a rate increase and save ratepayers from paying twice for waterworks improvements -- once with fees that should have gone to the Depreciation Fund, but were wrongfully diverted to the General Fund, and again through a rate increase.

Harry Zavos