Council Rejects DWP Rate Hike; Cutbacks Seen

The Los Angeles City Council on Tuesday narrowly rejected a proposed 3.6% hike in water rates--a move that officials say could soon force layoffs at the Department of Water and Power and affect water quality and supplies.

The action may also threaten the giant utility’s ability to make an annual transfer of about $17 million in surplus funds to the city’s general coffers, officials said. And that, they said, would deepen a city budget deficit that already is projected to reach $150 million by June.

However, the council rejected the proposed rate increase, 7 to 7, with many members saying that they were unwilling to raise the price of water while customers have been required to conserve water during the six-year drought.

The water rate proposal is “dead in water,” Councilwoman Joan Milke Flores said. “The council has indicated it won’t go along with an increase at this time.”

The council did give preliminary approval to a 7% increase in electric rates, which would raise the average bill by about $2.90, to about $43.60 a month.

The electric rate hike--the first increase since 1988, when a 4% adjustment was approved--will have to pass another council vote next Tuesday and be signed by Mayor Tom Bradley. It would take effect 30 days after the mayor’s approval. Bradley has not said whether he will sign the measure.

During four months of bitter and politically charged debate over water rates, the DWP scaled down its requested rate hike from 11% to 3.6%, warning that the City Council was taking a shortsighted approach by cutting key capital improvements and maintenance projects.

“It doesn’t seem realistic, it doesn’t seem like good public policy,” said DWP Commission President Mike Gage, who was surprised by the vote. “I hope this is not an indication of a long-term policy.

“If it is not a short-term phenomenon, they will be doing a great injustice to the city” by allowing the security and quality of the water system to deteriorate, he said.

“I don’t see how we can avoid layoffs,” said Dan Waters, DWP general manager. “If I’m involved in layoffs, there’s no way our board could declare a surplus” and contribute funds to the city treasury.

The DWP is a semiautonomous city department that operates its own budget. But for decades, the DWP has customarily sent 5% of its gross revenues to the city treasury as surplus funds, and the city has counted on those funds--about $17 million this year--in calculating its budget.

It is unclear how much of the $17 million, if any, the city will receive now that DWP has been denied its rate increase.

Nonetheless, the department will be forced to cut nearly $200 million in capital projects and other expenses from its own budget, officials said. That amounts to about a 50% cut in capital projects and an 8% cut in its general operating budget.

Officials said they do not know how many layoffs will be necessary among the agency’s 3,000 water system employees. The DWP already has an across-the-board hiring freeze affecting more than 170 jobs.

With water sales down about 30% because of the drought, the utility was facing a $98-million deficit in its water operations, officials said. In addition, the department faces escalating costs because of new state and federal water quality standards and the need to update an aging infrastructure.

The 3.6% rate hike would have raised $11 million. DWP officials said that even with the rate hike, customer bills actually would have dropped because conservation has eliminated surcharges for water purchased from the Metropolitan Water District.

Without the rate increase, the DWP will have to slash key construction projects, including new water reclamation facilities and replacement of aging water mains, officials said.

The rate debate was clouded by the drought, a worsening economy and ambition for higher office, some council members alleged.

Council members--especially congressional hopefuls Flores, Joy Picus and Zev Yaroslavsky--criticized DWP executives for being “fat and sassy” and led the fight against the proposed increases. They demanded that the agency trim its own budget to compensate for drought-related revenue losses.

Flores ultimately supported a reduced water rate request, but Yaroslavsky and Picus voted against it. All three said their pending political races did not influence their vote.

“At a time when people are at an economic low, it makes practical sense to hold the line,” Flores said. “I thought that’s what we were doing in asking for a lower rate.”

But Councilwoman Ruth Galanter, who repeatedly charged that political considerations were overriding the merits of the issue, said, “Remember who put us in this position. . . . Save these lists (of who voted no) for when we face lawsuits years from now” when the water system fails to keep up with demands.

“Be sensible,” Council President John Ferraro said in urging his colleagues to support the water proposal.

Yaroslavsky said: “I don’t believe that security of the system is in jeopardy. All the council is saying is, ‘Don’t look to the customer. . . . Look to your own expenses.’ ”

Picus said it was the department’s arrogance and frivolous spending on public relations, tours and slick publications that led to the rejection of a rate increase.

“With the rain, the people see even less reason to raise rates,” Picus said. “Even the elements are not in sync with you.”

Voting against considering the rate hike were Picus, Yaroslavsky, Nate Holden, Mark Ridley-Thomas, Joel Wachs, Rita Walters and Michael Woo. The yes votes were cast by Ferraro, Galanter, Flores, Richard Alatorre, Marvin Braude, Ernani Bernardi and Mike Hernandez. Councilman Hal Bernson was absent.