SEWER FEE SURPLUS RILES COUNCILMEN.

Byline: Patrick McGreevy Daily News Staff Writer

Two San Fernando Valley city councilmen Monday challenged Mayor Richard Riordan's plan use sewer funds to balance the city budget, saying if there is a surplus, the sewer rates should be cut.

Riordan's proposed budget released Friday projects a $101 million deficit in the general fund and proposes closing it in part with $15 million taken from the fees residents pay for sewer service.

``If there is a $15 million surplus, it just shows that what we have been saying all along is correct, that people are being charged too much,'' said Councilman Hal Bernson.

The funds come from a sewer service charge that many residents have claimed does not accurately reflect the use of the system by residents.

Councilman Joel Wachs said he believes the $15 million is the ``tip of the iceberg'' in surplus money that could be found through efficiencies.

The councilman said it is a legitimate debate about whether the money should go to close a budget deficit or be returned to the ratepayers.

The city general fund already receives about $80 million annually in reimbursements from the wastewater system for overhead costs involved in city workers overseeing the system.

Riordan said a new audit found that the city general fund put $266 million into the wastewater system in land, personnel and bond revenue during the 1940s, '50s, '60s and '70s that never was reimbursed.

Riordan proposes that the general fund investment should be paid back at $15 million a year over a number of years.

``These are legitimate costs for reimbursement,'' said Chris O'Donnell, the mayor's budget director.

Bernson said he plans to raise the issue during the City Council debate over the mayor's proposed budget.

``The real question is, if there is a surplus, should it be given back to the ratepayers?'' Bernson said.

The question is an easy one for Ivan Shenkle, a North Hollywood resident who is one of a group of residents that has sued the city to challenge the sewer service charges.

``It bothers me,'' Shenkle said of the mayor's proposal. ``We're paying the sewer service charge, so if there is surplus money they should reduce our rates first before they do anything else.''

In addition, a co-author of the tax-limitation measure Proposition 218, which took effect Jan. 1, questioned whether transferring the sewer funds to the city's general fund is legal.

Joel Fox, president of the Howard Jarvis Taxpayers Association, said Proposition 218 prohibits the use of funds raised by rates and fees for anything but the service that the rate and fee was created to finance.

``They can't skim anything off the top for general fund programs,'' Fox said. ``It's not legal.''

O'Donnell said the city administrative officer and city bond counsel both have indicated it appears the transfer is legal and not affected by Proposition 218.

The sewer service charge has raised objections because the city Bureau of Sanitation doesn't actually meter sewer use, but estimates it based on the amount of water a homeowner uses.

Valley residents in particular have objected to the escalating charges, saying because of larger lots and hotter weather they use more water on landscaping that doesn't go down the sewers.

The council modified the sewer service charge earlier this year in response to Valley complaints, but the charge remains a major portion of the city utilities bill.

The city collects about $110 million a year in sewer service charges from 720,000 households, which is nearly half the money raised for the expansion, maintenance and operation of the city's massive sewage treatment system.