Legislation Could Cost Anaheim $11 Million : Finances: An Assembly bill would bar cities from moving revenue from utilities to the general fund. L.A. is the intended target.

ANAHEIM —  A bill that would prohibit cities from transferring money from their water and power departments into their general fund could end up costing Anaheim $11.4 million, city officials said Tuesday.

The proposed legislation, sponsored by Assemblyman Richard Katz (D-Sylmar), is expected to reach the floor of the Assembly on Thursday or Friday. Anaheim officials said that if the bill becomes law, they intend to launch an aggressive legal battle against it.

“This is bad legislation,” City Manager James D. Ruth said. “It would be terrible for us. If that bill passes, we would be out $11 million and I don’t know how we would ever balance the budget.”

Katz said he drafted Assembly Bill 318 because he thinks the Los Angeles Department of Water and Power is overcharging customers by making them pay a surcharge that goes into the city’s general fund.

The bill would force Los Angeles and other water and power agencies to collect only enough money to cover the costs of providing water and power.

“I don’t think people in most cities are aware that their city may add a surcharge to their water bill,” Katz said Tuesday. “If taxpayers are paying a tax they don’t know about, they are getting hurt.”

In 1976, Anaheim voters amended the city charter to allow the city to transfer as much as 4% of utilities revenue into the general fund. Anaheim officials said the city would be unfairly penalized by the legislation.

“It’s in our city charter and we think we have the legal authority,” Ruth said. “We don’t need Sacramento telling us how to run our utilities department. We think it’s an L.A. issue, not an Orange County issue.”

City officials said $11.4 million of the $132.6-million general fund is from utilities revenue this year.

“I’m sure public safety would be impacted by that kind of cut,” said Kristine Thalman, the city’s intergovernmental-relations officer. “If you translate that money into police officers, it equals 142 police officers.”

Katz acknowledged Tuesday that a city such as Anaheim, which got approval from its voters to transfer the money into the general fund, is not part of what he considers a statewide problem.

“Anaheim is not who I wanted to go after,” Katz said. “They at least had the good sense to take it to the voters. They are actually in a different situation from other cities.”

Katz said he is exploring ways to exclude cities such as Anaheim but he said there would be no changes in the bill before today. If the bill passes the Assembly, it would then go the floor of the Senate for consideration and then to Gov. Pete Wilson.

The bill comes at a bad time for Anaheim, which was forced to absorb an $18-million loss when the county’s investment pool collapsed late last year. The city’s proposed 1995-96 budget includes the elimination of 31 jobs and other cuts in spending to make up for an $8-million shortfall.

Thalman said Katz’s bill is the last thing Anaheim needs.

“It’s sort of a sleeper issue that no one is paying attention to,” she said. “But it could be devastating.”