When Los Angeles Mayor Eric Garcetti unveiled his yearly budget in April, he promised major progress in an area long neglected by City Hall: reconstruction of the city’s worst roads.
Garcetti called for the city to more than double the amount of money it spends on repairs to D- and F-ranked streets, where pavement is so damaged that it frequently needs to be rebuilt — typically at a cost of $1 million or more per lane mile.
Yet a major portion of that work cannot happen unless the City Council increases the fee charged to utilities that rip up and repair the city’s streets. And in recent weeks, business leaders have been pushing back on the idea.
Garcetti’s spending plan calls for the city to collect $70.7 million in Street Damage Restoration Fees in 2018-19, up from the $8.3 million budgeted for the current year. About $30 million of that new revenue would be spent to repair L.A.’s worst roads, with additional money going to maintain streets that are still in decent condition.
The plan has drawn written objections from the Los Angeles Area Chamber of Commerce, AT&T and others, who say it needs more public vetting.
The Central City Assn., a group that focuses heavily on real estate development, warned city lawmakers that the fee increase would have a disproportionate effect on housing construction downtown, where streets are being torn up to provide utility hookups for new residential buildings.
“We do not want to see the Street Damage Restoration Fee become a means by which downtown … becomes the primary funding source for road reconstruction throughout Los Angeles,” Jessica Lall, the group’s president and chief executive, wrote in a letter in May.
About 25% of L.A.’s streets, or about 7,000 lane miles, are considered to be in poor condition, according to the city’s most recent evaluation.
The Street Damage Restoration Fee was created in 1998 to help the city offset the cost incurred when utilities cut into public streets. Public works officials say those cuts, even when they are refilled, cause pavement to degrade at a faster rate, forcing the city to make additional repairs.
Although businesses have been the most vocal, the biggest effect could ultimately be felt by the Department of Water and Power, which frequently performs work on underground water pipes and electrical lines.
If the increase is approved, the city-owned utility is expected to spend nearly $38 million annually on street damage fees, according to an analysis prepared for city lawmakers.
The DWP, whose board is composed of mayoral appointees, has voiced no public objections to the proposal. But Jack Humphreville, a frequent critic of city spending, called the increase a “revenue grab” by the city’s elected officials — one that will result in higher bills for DWP customers.
“They’re ramrodding this thing through, and the ratepayers are going to get hosed,” said Humphreville, who belongs to the Neighborhood Council Budget Advocates, a group that appears before lawmakers each year to present its views on the city budget.
Humphreville questioned whether the fee increase is aimed at making up for funds lost when Garcetti and the City Council agreed to scale back the amount of money the DWP pays the city each year to balance the budget. The reduction was part of a legal settlement backed by lawmakers last year.
Garcetti and other city officials say there’s no connection between the rise in the street damage fee and last year’s reduction in the DWP payment. They say officials have spent years studying the need for the city to recoup all of the costs incurred when utilities dig trenches on public rights-of-way.
“When utilities and telecom companies cut into our streets, they should be the ones paying to fix the damage,” Garcetti spokesman Alex Comisar said in an email to The Times. “Right now, the city has to cover more than 90% of what it costs to fully restore the street after the work on an underground pipe, cable or gas line is done.”
Comisar said Garcetti’s proposal was spurred by a 2014 audit from City Controller Ron Galperin, which concluded that the city had missed out on up to $190 million in damage fees from utilities that performed street work since 1998.
In that report, auditors concluded the fee had not been calculated in a way that reflected all of the costs borne by the city from utility repairs.
“It’s been 12 years since this [fee] has been reset, so we have to catch up,” said Kevin James, a Garcetti appointee who presides over the Board of Public Works, which recommended that the fee be increased and reworked. “I agree with the controller — we should have done it years ago, but we didn’t.”
Still, the City Council is hedging its bets on whether the city will receive all of the fee revenue planned by the mayor for the coming fiscal year, which starts July 1.
When they approved Garcetti’s budget May 21, city lawmakers ensured that more than $19 million in repairs planned for D- and F-rated streets cannot move ahead without another council vote — a move designed to ensure the money is available to pay for the work.
Some council members have declined to commit themselves to the fee hike envisioned by the mayor, saying that they want to study it more closely.
The fee for ripping up residential streets ranges from $5.18 to $7.78 per square foot, depending on how recently a street has been repaired. Under the proposal heading to the council, it would be increased to $8.24 per square foot, Comisar said.
On major streets, such as Sunset, Wilshire and Venice boulevards, the fee would be raised to $19.44 per square foot. That fee currently ranges from $14.18 to $21.26, depending on when the most recent repairs occurred.
Business groups have also questioned Garcetti’s push to change the way the street damage fees would be charged. Under the proposal, utilities would pay a fee not just for an area where a trench is dug, but for any part of the street that sits within 5 feet of that trench.
City officials say that when a trench is cut and refilled, nearby soil underneath the street shifts, reducing support for the pavement. That causes it to become weakened over time, requiring more frequent repairs, they say.
Garcetti’s appointees on the Board of Public Works have also suggested that council members look at charging the damage fee to Southern California Gas Co. Such a step would require the negotiation of a new franchise agreement, mayoral aides say.
The gas company has argued that imposition of the fee would lead to higher construction costs that would ultimately be absorbed by its ratepayers.
“Simply put, these additional fees are passed along to our customers and have the potential to significantly impact new businesses or homes requesting utility service,” Geoffrey Danker, manager of franchise, fees and planning for the utility, wrote in a letter to city lawmakers.