DWP Board Scales Back Water Rate Hike After Paring $42 Million From Budget

Under pressure from community groups and scrutiny from its board and the City Council over the agency’s spending, the Los Angeles Department of Water and Power is proposing a significantly scaled-back rate hike.

The DWP board Tuesday approved a $3.9-billion budget based on a water-rate increase of 2.75% -- nearly a third smaller than the proposed 3.9%.

Board member Nick Patsaouras said in an interview before the vote that he and other board members had spent five days examining the budget, down to $5,000 and $10,000 items and slashing what they considered to be luxury after luxury.

Gone are the agency’s in-house lobbyist, sponsorships of community events and pricey tables at black-tie dinners. Memberships and subscriptions were slashed. And overtime -- which Patsaouras said reached $100 million last year, doubling some workers’ pay -- will be limited to 10% of regular payroll this coming fiscal year, except in an emergency.

“I think we have cut the fat,” Patsaouras said.

DWP Budget Director Jeff Peltola said $42 million was cut from the agency’s budget. But the net reduction was only $16 million because the board wanted to speed up infrastructure improvements, which added $26 million in costs.

The rate increase still needs approval from the board and the City Council. A DWP board hearing is scheduled for July 18.

Community groups reached by The Times said that any increase will hurt, but were pleased that it likely will be smaller.

“When you have to take a medicine, you’d rather have one that tastes good,” said Mary Ellen Crosby, of the North Valley Area Neighborhood Council. “That’s what this is like.”

Mayor Antonio Villaraigosa, who had directed the utility’s board to reduce the budget, was pleased with their efforts, spokesman Joe Ramallo said.

“It’s clear that members went through the budget with a fine-tooth comb, and ratepayers will benefit from their hard work,” he said.

The additional revenue from the rate hike will be used to improve water quality and infrastructure, to secure systems against terrorism and to complete environmental restoration work in the Owens Valley, said DWP General Manager Ron Deaton. The agency also faces higher labor costs from a contract approved in 2004 that increased most workers’ pay by at least 19% over five years.

The proposed water-rate increase would be the first of several totaling nearly 17% that the agency expects will be necessary over the next five years, according to DWP projections.

The new budget, which goes into effect July 1, also calls for potential hikes in electricity bills, as the agency wants to pass on to consumers the increased costs of natural gas for its power plants. If approved, the surcharge would be adjusted quarterly as the rates fluctuate, Deaton said. But if rates stay at their current low level, he said consumers would be spared.

The city’s growing number of advisory neighborhood councils have stymied the agency’s attempts to win rate increases over the last couple of years. And criticism of some agency spending, including an employee fitness center and lobbyists bills, have not helped the DWP’s case.

In 2004, the City Council scaled back -- from 18% to 11% -- a DWP water rate hike after complaints from the neighborhood groups.

Last year, the City Council rejected DWP’s request for a 3.8% increase and hired an independent auditor to review the agency’s books. The resulting 189-page report recommended some belt-tightening measures, but endorsed the proposed 3.9% water rate hike for this coming fiscal year and 3.5% next fiscal year. The report also endorsed electricity service fees to help the agency recover its costs.

In response to the audit, the agency made some recommended cuts, but not enough to please its board, appointed by Mayor Antonio Villaraigosa last fall. The DWP board holed up with budget staff in meeting rooms for five days in May and June, going deep into the mind-numbing line items of 4- to 6-inch budget books--”from 8 a.m. to 7 p.m. with just an enchilada for lunch,” Patsaouras said.

This budget is a defining budget,” he added, “because it sets the culture of how this department is going to operate.”