A financial consulting company that miscalculated multiple years of water rates in 2012 should pay for its mistakes, which cost Glendale more than $9.3 million, according to a lawsuit city officials filed Wednesday in Los Angeles Superior Court.
The $9.3 million includes $9 million in lost utility revenue, about $108,000 paid to Willdan Financial Services to calculate the rates in the first place, roughly $130,000 given to Bartle Wells, another consultant, to fix the rates and $83,000 for the cost of sending new rate notices to customers.
The lawsuit, which alleges professional negligence and breach of contract, was filed just days before the City Council is slated to review new water rates, which have angered customers who say they have lost trust in Glendale Water & Power.
The bungled rates — which overcharged some customers and undercharged others — were approved by multiple layers of city officials and no one caught the errors until months later.
"We are trying to rebuild that trust. We feel the same way that the people feel in a lot of ways. We feel very embarrassed by what happened," said Councilwoman Laura Friedman. "We are trying to make it right and we are trying to hold those responsible, responsible."
Willdan Financial Services had offered to update their water rates and pay for the administrative costs of sending customers notice in October 2012, but the Temecula company did not offer to reimburse Glendale for its lost revenue, according to court documents.
A message left for Crescent Wells, Willdan's senior vice president, was not returned by publication.
Willdan officials used bimonthly consumption data rather than monthly data when setting single-family and multifamily water rates and incorrectly calculated the cost of providing service to customers with fire lines greater than 4 inches, such as high-rise buildings.
As a result, Glendale Water & Power over-collected $3.4 million from the fire-line customers, who officials plan to reimburse, and under-collected $2.4 million and $6.4 million from single-family and multi-family customers, respectively, according to a city report.
"They were hired to provide professional services and they have provided severely insufficient services," said Mayor Zareh Sinanyan. "To say that their rate plan was woefully inadequate would be the understatement of the century."
Glendale Water & Power General Manager Steve Zurn has said at past public meetings that utility staff didn't catch the consultant's mistakes because officials at the time didn't have the expertise to do so and were relying on Willdan Financial Service's calculations.
This time around, the city assembled a team of experts, including the city auditor, to review the new proposed rate structure.
"We're making sure that all the Ts are crossed and Is are dotted and that this rate plan is the appropriate rate plan and is the right one," Sinanyan said.
Under the proposed plan, Glendale Water & Power would hike rates, on average, by a compounded 21.8% over four years. The rate changes would differ depending on water use, customer type and meter size.
Monthly water bills for average single-family residences, five-unit multifamily complexes and commercial customers would increase by $17.98, $46.04 and $16.67, respectively, by fiscal year 2017-18.
The City Council is set to meet at 6 p.m. on Tuesday at City Hall, 613 E. Broadway, to discuss the rates.