L.A. City Council grills DWP executive, asks agency for help in budget crisis

With the city’s financial solvency hanging in the balance, the Los Angeles City Council called on Mayor Antonio Villaraigosa on Tuesday to corral his appointees on the board of the city’s public utility and convince them to hand over $73.5 million in “surplus funds” that the city was counting on to balance its books.

In a unanimous vote, council members demanded that the board of the Los Angeles Department of Water and Power “honor their commitment” to transfer the money by mid-April to help counter a $212 million shortfall.
  
City officials are scrambling for a backup plan a day after the head of the utility, S. David Freeman, told council members in a letter that he was urging the DWP board to withhold the money because the agency has no surplus.
 
His recommendation followed a dramatic standoff last week between the council and the DWP over planned electricity rate hikes that officials at the utility, along with outside consultants, said were critical to cover rising coal costs and renewable-energy contracts. Initially, Villaraigosa had pushed for rate hikes that would have ranged from 9% to 28%.
 
Public outcry led council members to reject rate increases of that magnitude. They approved a more modest rate hike of 4.5% last week to help ensure the fiscal strength of the utility. But instead of agreeing  to the council’s more modest action last Wednesday, Villaraigosa’s appointees on the DWP board voted for a 5.7% increase over three months, which was rejected late that night by the council.

During a testy exchange with council members Tuesday, Freeman said the failure to green-light an electricity rate increase had “decimated our financial future.” On Monday, one of the nation’s top bond rating agencies withdrew a “AA-" rating on two DWP bonds worth $720 million.

Freeman said he understood that city officials need every “nickel that you can get,” but added that the utility's board “has a responsibility for DWP not to get in a situation where we can’t borrow money and our bond rating goes down, down, down.
 
“I think there is unanimity that we need a sizable increase to pay our bills and that hasn’t happened,” Freeman said. “So I don’t see how you can expect the department to declare a surplus when we have a deficit on our hands.”

Council members, however, said the agency’s reversal on this year’s transfer from the utility’s Power Revenue Fund did not make sense. Several noted that when DWP officials promised the $73.5 million transfer as recently as March 1 -- as part of a total transfer of $220 million this year -- they never linked that move to a rate increase, which would have provided a modest amount of additional revenue.
 
Members asked the mayor to work with the DWP board to find $73.5 million from within the utility’s $1 billion in cash assets.
 
“The people of Los Angeles and the ratepayers deserve better, they deserve more honest analysis and they deserve this being depoliticized,” Council President Eric Garcetti said. “...Something fishy is going on here.”

-- Maeve Reston at Los Angeles City Hall

Comments

[james andrews]

Why are our electric rates suppose to keep city services running. Utility bills are for the use of the energy and not a slush fund for city employees. Raising utility fees for general fund use is a TAX increase. If the city wants to raise taxes then go on record and see how the voters react. Changing the name doesn't mean it isn't a tax increase and should have to be voted upon.

The council and the administration are lying to us with this game and should all be voted out in November.

[Maria C.]

DWP is a city department. How can they withhold $1 BILLION in cash assets from the city?

Find out more by watching "The Price of Power" on the Our LA org website. Search "KCET DWP" on that website and choose the third link, a recording of KCET's SoCal connected, which explains more about what's going on.

[Mike]

They have $1 billion in cash assets and continue to fight to raise rates. Looks like the DWP is need of a top to bottom review as to it's real priority's.

[Enoughalready]

Stop supporting all the illegals with funding for schooling, medical and rent so the budget can be ballanced!!!!

[JayCeezy]

Close the other agencies. Citizens won't even miss it. Like the DMV, people adapt and the reality of how unnecessary so many city agencies and services are will become clear.

[Scam City]

This scam has been going on for years. Its time for federal prosecuitors to step in and an investigation immediatly. The DWP should have no surplus of funds that go back to the city. Thats the peoples money. If nothing else the DWP is charging the people too much and we should see a rate decrease not a rate increase. Next we need to see a pay cut for all including the DWP if people want to keep their jobs. The pay rate for all these employees is way too much for the job they are doing. The retierment they stand to get is not substainable and is the other big time bomb.

[NotSurprised]

So, a few days after a wake-up call on natural disasters, the city is going to drain its reserves.

AND they cut the fire department paramedics.

AND they are abandoning police hiring.

It is quite a gamble.

Of course, what did the city council think? DWP has sent all surplus funds into the city instead of renewing its infrastructure (as does SCE). DWP has a multi-billion dollar infrastructure upgrade deficit. And there's more...

At the same time, the city has transferred large numbers of jobs to DWP, the airport and the port. Did they expect to double-dip?

Did they want to get the savings for the transferred jobs AND ALSO expect the other entities to send over the same amount of revenue despite having taken on more payroll?

Also, let's not forget that when Garcetti said "Something fishy is going on here,” he simply needs to look in a mirror.

When the council approved big-time salary increases for big-time campaign contributors IBEW, they have no right to wonder why DWP has less money.

Not one city council member has an MBA. Not one. Any wonder that this multi-billion dollar corporation is being run into the ground?

[jt]

One billion in cash assests, and the DWP is pleading poverty?! This is what happens when "our leaders" let a dept. or agency call their own shots for years.

[Craig Milo Rogers]

It seems unethical for the DWP to be borrowing money on the one hand, and declaring a "surplus" on the other. Why isn't this practice illegal? The DWP should declare a surplus only when it doesn't have any debt.

[Ben Franklin]

Wow. City Council Garcetti says something "fishy" is going on. It was the council who shoved hundreds of city employees from the general fund to the DWP, Airport, and Harbors several weeks ago.

What is smelling "fishy" is the fact that the council got caught. Instead of moving all these employees into jobs most were not qualified for, the City should have had the back bone to let some employees go.

[Carl]

Hang onto that money DWP otherwise the city council will waste it.....

[mwgab]

As a retired DWP employee and a resident of Los Angeles, I'm saddened by the current situation. It seems that those currently running DWP have lost their sense of civic duty and believe that their primary responsibility is to protect the financial interest of the Department as if it were independent from the rest of City government.

The purpose of the DWP is to provide a reliable power supply and a sufficient and safe supply of water to the city's residents and those businesses operating in the City. Because of the DWP's status as a municipal utility, it enjoys several advantages over privately owned utilities ( e.g. SoCal Edison) that enable it to provide service at a lesser cost to its customers.

The Department transfers "profits" in lieu of taxes and franchise fees to the City to fund services like police service, fire protection, street maintenance, etc. that do not provide their own sources of funding . If DWP management is unwilling to transfer money to the City in favor of protecting its own interest, then the Board of Commissioners has truly lost its way. If the City can't make payroll, who picks up trash at the Commissioners' houses? who provides safety services?

I know most of the top managers at DWP are not city residents, but presumably City residency is still a prerequisite for a seat on the DWP commission. Has anyone over at DWP taken any courses in public administration or do they just not care about the City they are supposed to work for?

[Tornadoes28]

Here's a thought. HOW ABOUT RESCINDING THOSE PAY RAISES AT THE DWP! Why do they think we are all fools?