City Council Rejects Another DWP Water Rate Hike Proposal : Utilities: After rebuffing plan for an 11% boost this week, members turn down a new plea seeking an increase of 6.85%.

After demanding a reduction in the 11% water rate increase requested by the Department of Water and Power, the Los Angeles City Council on Friday rebuffed a 6.85% increase that would have cost customers $18 million a year in increased rates.

Council members made it clear that the cut was not enough, thus continuing its protracted fight with the city-owned agency. The council delayed until Wednesday a final vote on both the water rate and a less-controversial proposal to increase electric rates by 7%.

“We’re at the end of our rope,” said DWP General Manager Dan Waters after the council vote. “Both the water system and the power system are basically on the verge of going bankrupt. We just don’t seem to be able to get that point across.”

DWP commissioners met in emergency session early Friday to cut an additional $75 million from their budget, in a last-minute attempt to appease council members and win approval of the politically unpopular rate hike.

Their meeting followed the council’s rejection this week of the proposed 11% increase, which DWP officials requested to erase a deficit caused by a 30% drop in water sales brought on by conservation efforts.

Facing a $98-million deficit, the DWP has cut more than $45 million from the current year’s budget and more than 170 DWP staff positions have been eliminated under an indefinite hiring freeze.

To help close the budget gap with the proposed 6.85% water rate increase, more than $65 million was to be cut from next year’s capital projects budget, and $10 million out of operating and maintenance costs.

During more than an hour of debate, City Councilman Zev Yaroslavsky said the DWP was trying to resolve the crisis in the wrong way. “Clearly they have a revenue shortfall,” he said. “What we are saying is the way to bridge the gap should not come totally at expense of the ratepayers. Significantly more of the gap should be absorbed from within the department.”

Yaroslavsky asked the city’s chief legislative analyst and administrative officer to review the DWP and find ways to make more cuts while limiting the rate increase to no more than 3.6%. Both officials supported the proposed 11% rise.

“The council still is very reluctant to say the cuts have been as deep as they can be. We may need to have further proof of that,” said Councilwoman Joan Milke-Flores, head of the council committee which had recommended that the department keep its rate increase proposals under 7%.

The 6.85% increase was based on steep reductions in water system improvements and maintenance that department officials predicted would significantly delay new projects as well as hurt efforts to combat rust, taste and odor problems.

That outraged Councilman Joel Wachs, who accused DWP managers of “making threats to the public,” instead of dealing with council suggestions that they trim high salaries and duplicative jobs. “It’s the height of irresponsibility to say, ‘Give us our rates or we’re going to give you rusty-colored water, bad odor and service outages.’ That shows the management attitude that has been at the heart of this for so long.”

Waters said DWP has already trimmed more than “20% out of the water system this year and next year to bring this thing down. That’s far in excess of what any other city deartment has been required to cut.”

In the coming days, he said, “We’re going to attempt to provide them with more information. There’s no more room to go without getting into a serious financial situation we may not be able to recover from.”

Some council members seemed to support an increase, saying additional cuts and delays in capital programs could irreparably harm the system. “You know the old expression pay me now or pay me later,” Council President John Ferraro said. “It’s going to be a lot more later.”

The rate battle began last summer when the revenue shortfall became clear. Residents have cut water usage by 30% since April when rationing was instituted. Most council members argued that any rate hike would penalize customers and send the wrong message about continued conservation.

The other proposed increase of 7% in electric rates would be the first power rate rise since 1988. The proposal, which has not incurred much council opposition, is expected to raise about $132 million annually, and would boost average monthly electric bills by about $2.90 to $43.60.