Los Angeles Mayor Antonio Villaraigosa called for shutting down non-essential agencies two days a week Tuesday as he and City Council members remained locked in a standoff over the intertwined issues of electricity rates and the city’s worsening budget shortfall.
Villaraigosa’s action topped another day of threats and name-calling at City Hall.
During a morning news conference, the mayor said the council had caused the latest financial crisis by engaging in the “politics of ‘no’ ” and accused it of “the kind of demagoguery you see in the Congress.”
Those were “the kind of scare tactics you saw around the healthcare debate,” he said.
Councilman Bernard C. Parks, who chairs the Budget Committee, brushed aside the mayor’s assertions and said city leaders should be focused on stabilizing city finances.
“I think we have to get beyond the issues of name calling and get to the issue of financial stability of the city,” Parks said. He added: “I’m not going to trade names with the mayor. He can call us whatever he wants.”
The latest escalation of the financial crisis began Monday when the Department of Water and Power took steps to withhold a promised $73.5-million payment to the city’s depleted treasury.
Villaraigosa blamed the action on the council’s rejection of an electricity rate increase, which DWP officials said was necessary to cover the DWP’s fluctuating fossil fuel costs and the mayor’s renewable energy agenda.
City Controller Wendy Greuel has warned that, without the DWP payment, Los Angeles could run out of money to pay its bills and employees within weeks.
The political feud between Villaraigosa and the council -- and the threat to shut down services and stop paying employees -- flabbergasted some officials. Councilman Paul Koretz called the mayor’s threat “bizarre” and warned that Villaraigosa and the council were engaging in “a crazier and crazier game of chicken.”
“It’s absolutely a manhood contest. That’s what it’s been from the very beginning,” said Koretz, who represents much of the Westside.
The mayor directed acting City Administrative Officer Ray Ciranna to prepare to shut down parks, libraries and other general fund services starting Monday. Public safety, trash collection and revenue-generating agencies would be exempt.
“I am duty bound to make sure that I’m not in a position to make people work if we don’t have the cash to pay them,” Villaraigosa said. Union leaders questioned whether the mayor had the authority to enact what amounts to a furlough program in which thousands of city workers would see their paychecks cut by two-fifths.
“We take this absolutely seriously,” said Julie Butcher, regional director for Service Employees International Union Local 721, which represents more than 10,000 city employees. “The mayor’s endangering services and people’s lives.”
As Villaraigosa was addressing the media at City Hall, a few doors away the council was voting unanimously to ask DWP board members to “honor their commitment” to hand over the promised $73.5 million. They also called on the mayor to work with board members, whom he appoints, to find the money within the DWP’s cash reserves.
Council members grilled interim DWP head S. David Freeman about the agency’s refusal to transfer money from the utility’s Power Revenue Fund. Several members noted that as recently as March 1, DWP officials promised to make the $73.5 million payment of “surplus revenue” -- which ultimately comes from ratepayers. At the time, they did not link that payment to a rate increase.
The council agreed last week to allow the DWP to increase bills by 0.6 cents per kilowatt hour of electricity consumed. DWP board members rejected that, however, and said they wanted an increase of 0.7 cents per kilowatt hour instead. The council then killed that proposal.
Both proposals would have provided DWP with 0.5 cents per kilowatt hour to pay for the utility’s existing financial obligations. Any additional money -- 0.1 cents under the council’s proposal, 0.2 cents from the DWP board’s proposal -- would have been directed toward new energy conservation and renewable power initiatives.
Council members said Tuesday that they could not understand how the standoff over the rate increase was preventing the DWP from making the transfer to the general fund. The council’s proposal would have provided $30 million over the next three months to help the DWP pay its bills. The proposed transfer is more than twice that amount.
“The numbers just don’t add up,” Council President Eric Garcetti said.
Freeman told council members that the failure to approve an electricity rate increase had “decimated our financial future.”
He noted that on Monday, one of the nation’s top bond-rating agencies withdrew a AA rating on two DWP bonds worth $720 million, which could increase the agency’s borrowing costs.
Freeman said the utility’s board “has a responsibility for DWP not to get in a situation where we can’t borrow money and where our bond rating goes down, down, down.” The agency is not collecting enough money to cover its costs, he said.
“I don’t see how you can expect the department to declare a surplus when we have a deficit on our hands,” Freeman said.
Villaraigosa said, despite calls by the council, that he does not have the authority to order the DWP to turn over the $73.5 million. The utility’s board has a fiduciary responsibility to make sure the DWP remains solvent.
Hours after Villaraigosa announced his plan to scale back services, the DWP board held off on a pair of expenses that had been planned by the utility. The board postponed a decision to use open positions to hire 11 tree surgeons in line to be laid off from the Bureau of Street Services -- a move that would have saved their jobs and provided relief to the city’s struggling general fund budget.
The DWP board also tabled a plan to purchase renewable power from a wind farm based in Utah at an estimated cost of $9.5 million in the 2010-11 budget year. Both items are being delayed because the utility did not get its rate increase, said Raman Raj, the DWP’s chief operating officer.
Raj said he would also develop a cost-cutting plan to help the utility avert a bond-rating downgrade in the next two weeks.
“None of us enjoy what’s going on, least of all certainly me,” said DWP Commission President Lee Kanon Alpert.