The City of Glendale (“City”) announced today that it has filed a lawsuit for professional negligence and breach of contract against Willdan Financial Services (“Willdan Financial”) and its parent company Willdan Group, Inc. (“Willdan”).  The City alleges that Willdan Financial made fundamental errors when preparing a cost-of-service water rate study that resulted in the City collecting significantly less revenue than Willdan Financial projected.

“It is appalling that Willdan could make such an error and not own up to its responsibility,” said Mayor Zareh Sinanyan.  “This egregious error by Willdan has put a financial burden on our utility that has a direct impact on our residents.”

In 2011, the City retained Willdan Financial for consulting services to develop a comprehensive Cost of Service Analysis (COSA) for the City’s consideration of a new water rate plan in 2011-12.   Based on Willdan’s COSA, the Council adopted a water rate structure and rate increase in the spring of 2012.  Glendale staff subsequently noticed that the revenues collected by Glendale Water and Power were significantly less than Willdan Financial’s projections.  After reviewing the matter closely and conferring with Willdan Financial, the City determined that the loss of revenue is directly attributable to Willdan Financial’s error in using the City’s historical bi-monthly water usage data as monthly usage data.  This costly mistake led to Willdan Financial incorrectly calculating how much revenue would be generated from single family and multi-family rate customers.

Willdan Financial suggested that the City simply go back and charge its customers for the lost revenue.  City Attorney Mike Garcia commented:  “While the City is considering a plan on July 22, 2014 to correct the rate structure going forward, the Council believes that it is simply unfair to ask its residents to foot the bill for a consultant’s mistake.”  As a result, the Council authorized the City Attorney to file this action to recover the revenue lost by Willdan Financial’s errors, which is approximately $9 million.  The City is also seeking recovery of the amounts the City paid to Willdan Financial, as well as the costs to implement a new rate plan to correct Willdan’s flawed model, including costs associated with noticing the public hearing for the new rate plan and the new consultant.