Willdan Financial Services and Willdan Group, Inc. Pays City of Glendale $1,100,000 to Settle Professional Negligence and Breach of Contract Lawsuit Arising From Flawed Water Rate Study
Glendale, CA - The City of Glendale announced today that it has settled its professional negligence and breach of contract lawsuit that it brought against Willdan Financial Services and its parent company Willdan Group, Inc. (Willdan) for errors in a water rate study Willdan prepared in 2011/12. Willdan has paid the City $1,100,000 to settle the lawsuit. In the lawsuit, the City alleged that Willdan made fundamental errors when preparing a cost-of-service water rate study that resulted in the City collecting significantly less revenue than Willdan projected.
In 2011, the City retained Willdan for consulting services to develop a comprehensive Cost of Service Analysis (COSA) for the City’s consideration of a new water rate plan. Based on Willdan’s COSA, the Council adopted a water rate structure and rate increase in spring of 2012. Glendale staff subsequently noticed that the revenues collected by Glendale Water and Power were significantly less than Willdan’s projections. The City determined that the loss of revenue was directly attributable to Willdan’s error in using the City’s historic bi-monthly water usage data as monthly usage data. This costly mistake led to Willdan’s incorrect calculation of the revenue to be generated from single-family and multi-family rate customers. In addition, the City incurred significant costs and expenses to retain a new consultant to prepare a new rate study and start the rate making process over.
Willdan’s suggested method to address the issue was for the City to collect the lost revenue from its customer through an added charge, a solution that would have been costly to Glendale’s residents. City Manager Scott Ochoa rejected the idea and echoed City Council’s belief that “it was simply unfair to ask its residents to foot the bill for a consultant’s mistake.”
City Attorney Mike Garcia commented: “We are extremely satisfied with the settlement, as it compensates the City for a combination of lost revenue and out-of-pocket expenses incurred by the City as a result of Willdan’s error.”
Mayor Vartan Gharpetian added, “I’m happy that our staff’s attention to detail was able to identify Willdan’s error and keep it from affecting the pocketbooks of Glendale residents.”
The $1.1 million settlement between the City of Glendale and Willdan puts an end to legal action authorized by the City Council to recover lost revenue and unanticipated costs arising from Willdan’s study.