DWP May Balk at $100-Million Transfer to City : Revenues: Agency says that unless rate hikes are approved, it won’t have surplus to turn over to general fund.

The Los Angeles Department of Water and Power may balk at making its annual $100-million transfer to the city’s general revenue fund if the department is denied proposed rate increases, officials warned Wednesday.

After an emotionally charged debate at the City Council, DWP General Manager Dan Waters said, “If we don’t get a revenue increase and have to lay people off . . . there’s no way we can have a surplus” and make the planned transfer of funds to the city.

DWP Commission President Mike Gage agreed. “If we don’t have a surplus, we don’t have a surplus. And if we are laying off people, that means we don’t have a surplus,” he said in an interview.

Gage made his remarks after the council meeting at which most council members spoke in opposition to the proposed 7% power revenue increase and an 11% water rate hike.

The DWP Board of Commissioners has scheduled an emergency session for today in an effort to revise the rate proposals to the council’s satisfaction. A final council vote on the proposals is scheduled for Friday.

A cutoff of the department’s traditional year-end transfer, typically 5% of the DWP gross revenues, would be a devastating blow to the city budget, already rocked by the disclosure on Tuesday by the city administrative officer that a recessionary slump in business has cut deeply into tax revenues.

The report by CAO Keith Comrie said the city could be facing an unexpected $57.1-million deficit that will require a hiring freeze at the Police Department and possibly reinstatement of the controversial program of “rolling brownouts” in which the Fire Department reduces staffing in stations around the city on a revolving basis.

A report released Wednesday by City Controller Rick Tuttle concurred with the CAO’s findings. Tuttle’s report projected a $50-million shortfall in general fund revenues and he acknowledged that it could get worse.

“If the shortfall in revenues continues, and it is difficult to imagine it won’t, it will require a major budget adjustment,” Tuttle wrote.

He also projected that special fund receipts, primarily sewer taxes, could be down by an additional $54.5 million. Comrie said most of that shortfall has been accounted for by budget cuts in the sewer programs and a rate increase approved just last month.

In its annual budget projections, the City Council anticipated receiving more than $110 million from the DWP’s annual transfer.

City Councilman Zev Yaroslavsky, chairman of the Finance and Revenue Committee, said the City Council should attempt to seize jurisdiction of the DWP if commissioners try to stop the transfer.

“I will hold Mayor Tom Bradley personally and politically responsible if his commissioners withhold the funds” that the city needs to pay for police, fire and other essential services, said Yaroslavsky.

A spokesman for Bradley said the mayor would have no comment on the DWP rate proposals or the transfer at this time.

In a highly emotional, 1 1/2-hour debate Wednesday, the council members berated DWP officials for spending millions of dollars on public relations and office furniture. And council members accused each other of political grandstanding on the issue.

“There’s going to be a lot of cheap shots” taken at the DWP, warned Councilwoman Ruth Galanter, one of the few defenders of the DWP. “The first thing you have to ask yourself is ‘who is running for what?’ ” she said, referring to many of her colleagues eyeing races for offices ranging from Congress to county supervisor to mayor.

“I don’t like (a rate hike) anymore than anyone else,” said City Council President John Ferraro. “But it’s something we have to do.”

Ferraro and other officials likened the need for continual upgrading of the city and regional water systems to the Los Angeles sewer system, which was allowed to fall into disrepair in the 1970s and now has to be rebuilt at a much greater cost to taxpayers.

Opponents of the plan said the department has failed to cut expenses as deeply as it should. Department officials said they have pared expenses dangerously low and will face layoffs and cuts in essential services if they do not receive the rate hikes.