CITY BACKS OFF SETTLEMENT IN SEWER OVERCHARGES.

Byline: Patrick McGreevy Daily News Staff Writer

City officials have balked at a proposal to pay more than $64 million in refunds to Los Angeles residents to settle a lawsuit alleging overcharges on the city's sewer service bills, officials said Thursday.

As a result, two San Fernando Valley residents, who sued the city over the issue last year, took steps this week to advance their lawsuit against the city.

North Hollywood residents Ivan Shinkle and Barbara Crawford asked a judge Monday to certify a class of about 247,000 residents, mostly in the Valley, who allegedly were overcharged for city sewer services during the past four years and should share in $85 million in refunds, according to Richard I. Fine, an attorney for the plaintiffs.

The motion for class certification was filed after talks broke down between the residents and the City Attorney's Office over a possible settlement that would have provided $64 million to all 535,000 residents who pay city sewer service charges in Los Angeles, according to an attorney handling the lawsuit.

``The message we're sending the city is these (city officials) can run around in as many circles as they wish, but they are not going to stop the suit from going forward,'' Fine said.

Shinkle and Crawford sued the city in July 1996, claiming they and thousands of other residents had been overcharged for years for sewer service because the formula was based on a percentage of the water used each month.

The formula penalized residents in the Valley who have large lawns to water and pools to fill in summer months because they were billed for water that was not going into the sewer system, Shinkle claimed.

The City Council agreed to revise the formula used to calculate sewer service charges to more accurately reflect the amount of water going down the sewer system, by basing it on the lowest water bill during the winter, when less water is used for irrigation and pools.

Many sewer service bills went down, but Shinkle and Crawford sued the city to receive refunds for overcharges in previous years.

``We've all been overcharged,'' Shinkle said Thursday. ``It affects a lot of taxpayers out here in the San Fernando Valley.''

Fine estimated that the city overcharged about 274,000 residents by about $85 million during the past four years, but offered a settlement in which the city would refund only $64 million to all residents, not just those that were overcharged.

The proposal to settle the case by refunding some of the overcharges was initially looked on by the City Attorney's Office as having ``substantial merit,'' according to city records.

In a May 22 letter to Fine, Deputy City Attorney Michael Claessens wrote, ``I will be recommending that the proposal receive favorable consideration.''

However, Claessens said at the time that some issues still needed to be resolved, including the need for city analysts to determine how much the refunds would cost.

In a letter to Fine this week, Claessens said he could not recommend the settlement.

``Based on the results of the city's analysis, the costs of your offer are too high - way too high - to cause a favorable recommendation to the council by this office,'' Claessens wrote in a letter Monday, the same day the proposed settlement was pulled off the City Council agenda and sent back to a committee.

Fine accused Claessens of using stall tactics, by indicating a settlement was likely and then backing off.

``There's absolutely no question we've been misled,'' Fine said. ``They knew from the very beginning that we were dealing with a substantial amount of money.''

Claessens said in an interview that he acted in good faith and that the decision had to await an analysis of the cost.

Paying $85 million in refunds, even spread out over several years, would be a severe burden on the city's ability to make federally mandated improvements to and operate the city's extensive sewage treatment system, Claessens said.

``It would have forced the city to raise sewer service charges, forgo capital improvement projects, or borrow more money,'' Claessens said.

In addition, further analysis by city engineers has caused Claessens to be convinced that the city did not overcharge anyone for sewer service. The fee calculating system was the best available before advances in technology allowed the city to measure usage better.

``There was a good system in place,'' he said. ``We don't think anyone has been overcharged.''

Responded Fine, ``That's absolute balderdash. They knew at the time they put this formula in that it was high and that it was going to work against people with big lawns.''

He questioned why the City Council changed the formula last year if it believed nobody was being overcharged.

Absent a settlement, Fine said, the lawsuit will go to trial in about six months.

The motion to certify the class of those eligible to share in any judgment is scheduled to be heard in Superior Court on Nov. 19.