Water and Power Chief Quits Amid Pay Dispute

Apparently outraged at the Los Angeles City Council’s failure to hike his pay from $175,000 a year to $190,000, the director of the Department of Water and Power has resigned, leaving the city’s largest and most complex agency with a void at the top as it prepares to enter a newly deregulated marketplace.

William R. McCarley, a career bureaucrat who served as Mayor Richard Riordan’s chief of staff and the city’s powerful chief legislative analyst before taking the DWP post in 1994, was one of 10 general managers for whom salary boosts totaling $121,000 were put on ice last week by the council.

McCarley was in Santa Fe, N.M., on business and could not be reached for comment Monday. His letter of resignation, dated Friday and made public Monday, calls for a “radically new approach” to the “management, operation, financial practices and oversight” of the DWP, and says simply that he has “reluctantly reached the conclusion that it is time to pursue other endeavors.”

But several City Hall insiders said McCarley told them directly that he was quitting over the salary fight. In a confidential memo in which he lobbied for the increase, McCarley pointed to an Arizona public utility that pays its general manager $265,000 a year, and asked that his own compensation equal the $195,000 earned by the chief of the Sacramento Municipal Utility District.

“In 31 years of services with the city, I have never requested a raise, preferring to let my work speak for itself and relying on the ‘system’ to provide rewards,” McCarley wrote in the undated confidential memo to the mayor and council members, which was obtained by The Times. “However, I now find myself frustrated and lacking faith that any recognition of my performance will occur unless I take the initiative.”

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Because he has more than three decades of city service, the 56-year-old McCarley could receive an annual pension of up to $119,000 a year from the city while also working somewhere else.

City Administrative Officer Keith Comrie said McCarley told him he has already been offered a couple of jobs.

“There’s a lot of department heads getting ready to leave,” Comrie said. “We’re at the vulnerable stage.”

Citing the danger of top administrators being lured away by other agencies paying higher salaries, Riordan several months ago proposed “equity adjustments” ranging from $4,614 to $19,210 a year--3.8% to 21%--for McCarley and other high-ranking employees.

City Council members balked at the proposal, noting that several years ago the mayor devised a new merit pay system in which general managers would be compensated based on their performance. But the system has yet to be implemented; mayoral aides say it has simply taken longer than expected.

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Several lawmakers insisted in City Council debates last week that giving 10 general managers raises now would undercut the merit pay system.

“It sends the wrong message,” said Councilman Richard Alarcon, who voted against the raises Wednesday, along with council members Laura Chick and Nate Holden. “I just don’t think we ought to be handing out the taxpayers’ money as if we have so much to spend.”

The proposal failed to garner the 10 votes required for approval either Wednesday or Friday, so it was sent back to committee for a month of study.

Backers of the raises warned that talented managers would leave if they were not paid more; now, they say, that has become a reality.

McCarley is “certainly one we don’t want to lose,” lamented Councilwoman Jackie Goldberg, head of the Personnel Committee. “I’m certainly going to call him to see if there’s any way we can get him to reconsider.”

Council members Rita Walters and Joel Wachs, who opposed the pay hikes, said they were sad to see McCarley depart, but unwilling to reconsider the increases.

“It’s unfortunate that the mayor chose to handle it in the way that he did,” Walters said. “The people who were objecting to [the interim boosts] were calling on the mayor to stick by the [merit pay] process that he established and move it so people would not be put in an untenable position.”

Mayoral spokeswoman Noelia Rodriguez said the proposed increases were always separate from the merit plan, and could have been approved independently.

Other general managers whose pay raises are in limbo said they, too, are considering employment elsewhere.

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“I may stay, but I will be an open candidate until I cash the first check,” said Oscar Peters, director of the city employees retirement system, who would receive the largest increase, from $89,387 to $108,597.

“It makes everybody pause about whether we’re being appreciated or not,” added Cultural Affairs Director Adolfo Nodal, who said he has received only cost-of-living adjustments in the nine years since he took the post, while his department has grown 200%. “It’s pretty disappointing.”

Unlike Nodal, McCarley has received steady increases in his salary since he launched his career as an administrative assistant in the Bureau of Street Lighting in 1965. While he was chief legislative analyst, for example, McCarley received four raises in four years, jumping from $102,256 to $142,109 a year between 1988 and 1991. When he joined Riordan’s staff, the mayor pushed through special legislation to allow McCarley to keep his $149,000 annual salary, 50% higher than the maximum for mayoral aides.

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McCarley spent only a year with Riordan, then moved to DWP, where he slashed the work force by 1,500 through a controversial buyout, saving $86 million a year. With 1.3 million residential and commercial customers, 9,300 employees and an annual budget of $4 billion, the DWP is by far the city’s largest department.

McCarley’s resignation is effective Feb. 1, 1997, one year before the deregulation of the utility industry begins to take effect and the DWP is forced to compete with private companies for customers.

“Much remains to be done,” McCarley warned in his resignation letter. Without radical change, he continued, the DWP “will be unable to fulfill its mission and the financial consequences for the city as a municipal corporation will be extremely serious.”

Riordan, in a written statement Monday, said, “Bill is a man of the highest integrity and a hard-working leader. With him will leave a vast knowledge of how City Hall works and should not work.”