Katz Weighs Bill to Bar ‘Hidden Tax’ by Utilities : Budget: Assemblyman says the DWP is overcharging users to help cover the city’s fiscal shortfalls. Political observers wonder what’s behind his actions.

The Los Angeles Department of Water and Power has for years imposed a hidden tax on its ratepayers by collecting more than it costs to run the utility, enabling it to transfer $100 million or more annually to help balance increasingly shaky city budgets, state Assemblyman Richard Katz (D-Sylmar) has charged.

Katz is considering legislation to force publicly owned utilities, including the DWP, to charge ratepayers what it costs to provide them water and power--and no more.

The proposal indicates that Katz, who unsuccessfully ran for mayor in 1993 and whose Assembly term ends in two years, is trying to become a player in the city’s ongoing--and grim--budget deliberations, for reasons that remain unclear.

His proposal has triggered speculation that he is seriously looking at the possibility of running for City Councilman Hal Bernson’s Northridge-based seat on a utility rate reform platform or seeking leverage at City Hall to close Lopez Canyon, the city-owned landfill in Katz’s district.

“We’re all scratching our heads on this one to figure out what Richard is up to,” one top city official said Friday.

Katz, in an interview this week, denied any ulterior motives, saying that he believes it is wrong for DWP to make a profit on its operations at the expense of ratepayers.

“A utility owned by the taxpayers shouldn’t be making a profit,” Katz said. As far as his political future, Katz said he is looking at several options but would not elaborate.

The target of Katz’s proposal is a yearly transfer of funds to the city budget from the city-owned Department of Water and Power.

In the preliminary draft of a bill he is considering introducing in Sacramento, Katz would bar municipal utilities from overcharging their customers to pay for non-utility-related financial obligations.

Municipal utilities that continued such practices would be penalized by losing state-controlled revenues in an amount equal to the overbilling, the Katz measure states.

The city’s financial experts are grappling with a $200-million deficit they expect in the 1995-96 budget. Katz’s proposal could aggravate the stark budget picture.

For years, the DWP has transferred $100 million or more to the city’s general fund budget. Mayor Richard Riordan has been trying to squeeze even more revenue out of the utility for the city’s general fund budget, which pays for city services ranging from law enforcement and fire safety to street maintenance.

“It would cripple the city to lose this money,” City Administrative Officer Keith Comrie said Friday.

“I don’t have a clue why the assemblyman’s doing this,” said Councilman Zev Yaroslavsky, chairman of the council’s Budget and Finance Committee. “Richard has known about the transfer for years. He’s either changed his mind about its wisdom or he’s got some other reason for doing this that I’m not aware of.”

Several city officials, speaking on the condition of anonymity, speculated that Katz is using the proposal to gain a reputation as a champion of utility reform as a prelude to running against Bernson.

Bernson is up for reelection next spring, and term limits will force Katz out of his Assembly post in 1996. And if the Republican Party gains control of the Assembly, as appears likely, Katz would play a diminished role in Sacramento in his final two years in office.

Another scenario has Katz using the proposal as a way to force the city to bargain seriously with him as he seeks to close Lopez Canyon. The assemblyman has been a vocal critic of the huge landfill. The landfill’s operating permit expires in 1996 and city officials are seeking a renewal.