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DWP official tells council: approve rate hike or get no budget contribution

March 24, 2010 |  5:54 pm
The Los Angeles Department of Water and Power accelerated its game of chicken with the City Council on Wednesday, saying it would indeed renege on a promise to provide $73 million to the cash-strapped city budget if a package of rate hikes is rejected.

DWP acting general manager Raman Raj told council members in a letter that if the rate hikes are not in place by March 31, the utility’s fiscal stability will be so adversely affected that it will not be in a position in this fiscal year to provide any additional money to the general fund, which pays for public safety, parks, libraries and other basic services.

Raj said the DWP’s credit rating depends on the influx of additional money that would come from rate hikes. But Councilman Greig Smith, who serves on the council’s Budget Committee, said he was not persuaded that the DWP’s numbers were as dire as its officials said.

“If they’re going to play hardball, we’ll play hardball,” he said.

City officials are already contemplating as many as 4,000 layoffs as they try to eliminate a $484-million shortfall expected on July 1. Losing $73 million could result in the elimination of more than 1,000 jobs.

Former DWP commission President Nick Patsaouras described Raj’s letter as “blackmail,” saying the council should be allowed to judge the proposed rate hikes on the merits.

Raj’s letter came two days after Mayor Antonio Villaraigosa issued his own policy statement warning that the city would run out of money by June 30 if the council rejects the DWP rate hikes, which range from 9% to 28% depending on where a household is located and how much it consumes. That warning – and his use of the word bankruptcy – drew denunciations from council members earlier this week.

The DWP typically provides more than $200 million per year to the city’s budget. This is the first year, however, that the payment was broken into two installments. DWP Interim General Manager S. David Freeman told The Times in February that he saw no connection between the transfer and the utility’s desire for a rate hike.

Councilman Bernard C. Parks said DWP officials never divulged that they were in such serious financial shape in previous appearances before the council.

-- David Zahniser and Maeve Reston at Los Angeles City Hall