City OKs Buyouts for DWP Workers

To ease the pain of downsizing the debt-ridden Department of Water and Power, the Los Angeles City Council on Tuesday quietly approved a $346-million buyout and severance package that provides lucrative benefits for union workers who voluntarily leave the nation’s largest municipal utility.

Meeting behind closed doors in executive session, the council voted 12-1 to offer severance payments of $25,000 to $50,000 or enhanced retirement benefits to encourage DWP workers to quit their jobs or to take early retirement.

If enough members of the utility’s three unions accept the package, the DWP will avoid the trauma of widespread layoffs of up to 2,000 workers.

“We don’t want to out-and-out fire them,” said council President John Ferraro. “It’s important that we eliminate 2,000 employees. What this means is that they’re going to have a severance. Hopefully, some of the people who have a good retirement package will leave.”

The alternative--the largest layoff in the city government’s history--was proposed last fall by the utility’s general manager, S. David Freeman, as the DWP belatedly struggled to confront the coming deregulated market in electrical power.

Freeman said most of the cost of the buyout and severance package would be covered by excess earnings in the utility’s retirement system generated by the sharp run-up in stock prices during recent years.

In the council’s latest package, which was viewed as the city’s last and best offer, employees who are already eligible to retire could receive credit for an additional three years of service if they agreed to leave, a move that would increase their pension benefits.

Employees short of the number of years of service or of the age needed to retire could opt to add five years to either qualification.

And workers not eligible for retirement could receive a minimum of $25,000 to a maximum of $50,000 in cash to leave their jobs voluntarily.

After the council acted in private, Freeman met with representatives of the Engineers and Architects Assn. and DWP managers in an effort to negotiate a new contract.

“We are going to do everything we can to work out an agreement in the very, very near future,” Freeman said. “We’re going to get down to the serious negotiating.”

Otherwise, he said, the DWP will proceed with the planned layoffs early next month. “I’ve gotten very, very clear guidance to wrap up the negotiations,” he added.

The remaining wild card for both sides is what a Superior Court judge will do with a lawsuit filed by the engineers and architects union seeking a court order to block the layoffs.

Councilman Joel Wachs was the lone voice in opposition, believing the deal far too costly. Wachs said the package, which would average about $175,000 per person if it was divided equally among 2,000 workers, is “an obscene amount of money to have to pay.”

Wachs said the $346 million was the price the council was willing to meet to placate city employee unions, including the powerful International Brotherhood of Electrical Workers.

And he argued that DWP customers will end up footing the bill through their electricity rates, if the stock market’s record run turns downward.

Councilwoman Ruth Galanter, who chairs the council’s ad hoc committee on the DWP, said the city must shrink the utility’s work force so it can pay off $4 billion in debt on its plants and compete with other power producers in a free market for electricity.

Galanter has just returned from meetings in New York with Wall Street bond-rating agencies, which have served notice they want to see the council act to prepare for deregulation or risk further downgrades in the DWP’s credit rating. “We really need to get this problem resolved,” she said.

Councilwoman Jackie Goldberg said that severance packages are not unusual in the private sector and that she believes the city is doing the right thing by offering them or buyouts to all employees.

“If you would poll people at random and ask them, ‘Should people who are losing their jobs after 15 years or more . . . just get thrown out the door?’ . . . I think you’d find a majority saying no,” Goldberg said.