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Los Angeles City Council agrees to return millions to ratepayers to settle suit

The Los Angeles City Council has agreed to return millions of dollars to ratepayers of the Los Angeles Department of Water and Power, or LADWP, to settle litigation challenging the city's use of utility rate collections for general fund purposes.

The agreement, if approved by the Los Angeles Superior Court, would return $52 million to utility customers through future rate credits and would require the LADWP to reduce rates by 8%, according to the Los Angeles Times. However, LADWP spokeswoman Carol Tucker said by email that the proposed agreement would not have any impact on LADWP revenues.

The department would continue to send a yearly payment to the general fund, though the settlement would lower the amount sent, the Times said. Apparently anticipating the settlement, which has been in the works for months, Mayor Eric Garcetti's proposed budget called for the power revenue transfer of $242.5 million in the new fiscal year, beginning July 1. That is $48.5 million less than the power revenue transfer of $291 million in the city's 2016-2017 adopted budget, according to city records.

Asked what the department would do with the revenues it would otherwise have to pay to the general fund, LADWP Media Relations Manager Amanda Parsons deferred further inquiry to the city attorney's office from which there was no immediate response.

The council met in closed session on May 31 to approve the proposed settlement. The council conferred with its legal counsel relative to three consolidated cases involving pending litigation that alleges Proposition 26, as codified in the California Constitution, forbids the LADWP's annual transfer of money from its power revenue fund to the city's general fund, according to an item on the council's agenda. (Chapman v. City of Los Angeles, et al., Case No. BS153395; Eck v. City of Los Angeles, Case No. BC577028; and Eisan v. City of Los Angeles, Case No. BC583788)

The Superior Court docket stated the court has set a June 5 deadline for parties to file a motion for preliminary approval of a class action settlement.

Proposition 26, dubbed the "stop hidden taxes initiative" requires that a local government must obtain a majority approval of the voters if revenues are to be used for general governmental purposes, regardless of whether they are collected by a tax, levy, fee or extraction of any kind, but there are exceptions — such as fees imposed for specific government services that have been the focus of legal proceedings and court rulings, according to The League of California Cities.