City’s Quest for DWP Dollars Could Backfire : Mayor believes efficiency can eliminate waste. But transferring savings to the police makes the effort a rationale for robbing Peter to pay Paul.

It is obvious that Mayor Richard Riordan is achieving some success in his efforts to extract money from the Los Angeles Department of Water and Power to fulfill his campaign pledge to hire more police officers.

However, in doing so, the mayor has triggered a lawsuit that could not only foil this effort but also threaten the multimillion-dollar contributions the DWP makes to the city annually.

The DWP is the largest of the three money-making city departments established by the City Charter as independent agencies whose funds are set aside for their own operations. The others are Airports and Harbor.

City fathers provided this protection to prevent politicians from raiding the till and weakening these departments so they could not compete in the marketplace.

The major differences between these publicly owned “businesses” and private companies are that there are no stockholders to share in profits and most employees are hired through a civil service system.

Historically, Los Angeles citizens have been rewarded with lower rates. In addition, the DWP has been able to contribute 5% of its gross revenues to the city’s general fund and still maintain the competitive edge.

The transfer was initiated years ago to silence critics who charged the DWP was competing unfairly with private utilities because it did not pay city taxes.

The charter allows for such a contribution if the funds are “surplus.” The city budgets for this money and would be in trouble without it. In 1994 it amounts to $122 million.

Mayor Riordan believes he can extract even more money by introducing private-sector efficiencies to eliminate waste. However, his plan to transfer the savings to the police makes efficiency meaningless to DWP bill payers, and it becomes a rationale for robbing Peter to pay Paul.

Unfortunately for this debate, the public’s desire for more police protection and events surrounding last year’s DWP strike have clouded the issue and provided the mayor with the impetus and support for his actions.

City Controller Rick Tuttle’s widely publicized attack on the DWP for lavish spending for catered meals for supervisors during the strike, and the ripple effect on the police and other city employees who requested me-too raises, seriously damaged the utility management’s credibility.

The City Council, which like Riordan is frustrated over its inability to tap into more of the utility’s funds, was so enraged by the strike that it hired a firm to audit the DWP in an effort to find a way to exert more control over the utility.

Valley Councilman Joel Wachs is an outspoken advocate of this goal, but he believes it can only be achieved by amending the charter.

The audit concluded that the DWP was wastefully overstaffed. It called for the DWP to cut its 11,630-person work force by one-fourth through attrition. Interestingly, it also suggested that the projected yearly savings of $223 million could help pay for the expansion of the Police Department.

The audit is suspect because the city’s population has increased by more than 1 million since 1950, with a corresponding increase in the DWP’s services and properties, yet the number of employees has remained at an average of 10,000 during the 44-year period, fluctuating from a high of 12,800 in 1970 to a low of 7,524 in 1980.

However, neither the audit nor Riordan has addressed the constraints that were expressly written into the City Charter to prevent the money transfers they envision.

No one has seriously challenged such transfers until the mayor began a campaign to alter the way the utility manages its pension plan and to siphon off the anticipated annual savings of more than $40 million.

His appointees on the DWP Retirement Plan Board are presently one vote shy of achieving this goal, which is opposed by employee members. The mayor’s newest appointee, William McCarley, is expected to cast the winning vote when he settles into his new job as general manager and chief engineer.

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With this appointment, the mayor has again winked at the City Charter. McCarley’s background has been in the political arena, but the charter calls for a person with broad experience in hydraulic or electrical engineering for the manager’s job. McCarley will be the first general manager in DWP history who is not an engineer.

He is stepping into a fray with employees whose fears have been fanned by numerous stories about industry pension plans that have been raided, leaving retirees with little or no pensions.

The International Brotherhood of Electrical Workers, which represents the largest group of employees, is suing the city. The suit challenges the annual 5% transfer, the anticipated pension fund transfer and the recent transfer of $78 million to the city from the sale of surplus real estate and power plant fuel oil that the DWP had been holding for emergencies.

If the court rules that the charter has been violated, it is entirely possible that all of the funds will be returned to the ratepayers, including the $122 million transferred to the general fund.

If this happens, Mayor Riordan’s actions will have plunged the city into a financial crisis.