LA power politics threaten city's financial stability

Los Angeles Mayor Antonio Villaraigosa speaks at a press conference to announce the 'Visit Hollywood 2010' campaign at the Universal Hilton Hotel on April 1, 2010.
Los Angeles Mayor Antonio Villaraigosa speaks at a press conference to announce the 'Visit Hollywood 2010' campaign at the Universal Hilton Hotel on April 1, 2010. Kevin Winter/Getty Images

By most accounts, Los Angeles Mayor Antonio Villaraigosa has lost an extraordinary political showdown. But the City Council’s refusal this week to approve Villaraigosa’s proposed electricity rate hike – and the mayor’s refusal to accept a smaller rate increase – threaten the city’s financial stability.

The morning after the Los Angeles City Council prevailed in a high-stakes standoff, the mayor soldiered to the podium at an event promoting Hollywood.

“We’re also celebrating the introduction of the new King Kong – how about that!"

The crowd clapped politely.

"Come on everybody. I know it’s 10 o’clock in the morning, but wake up," Villaraigosa pleaded.

It had been a late night at City Hall. About 12 hours earlier, the City Council unanimously voted down a power rate hike proposed by the mayor-controlled commission that monitors the Department of Water and Power.

The mayor had said that if he didn’t get the rate increase, the city-owned utility wouldn’t be able to complete a planned $73 million transfer to the city’s cash-strapped general fund.

After the vote, Villaraigosa remained non-committal.

“We are going to seek the advice and the council of the experts at the Department of Water and Power," he said. "I can’t instruct them to do something that would put us on a poor financial footing, that would jeopardize our credit rating."

The DWP’s acting general manager, Raman Raj, has made it clear – no rate increase of the size he wants, no money transfer.

“We recognize our role in assisting the city through this economic and budget crisis," Raj said earlier this week. "But our obligation must first and foremost be ensuring the fiscal health and stability of this utility.”

But during a meeting of the utility’s Board of Commissioners, City Council President Eric Garcetti pointed out that Raj’s own staff had told the council that it could complete the transfer with no rate increase.

"We were told ‘yes’ from this department," Garcetti said.

A DWP commissioner asked who said yes.

“Excuse me. It was me," said Jeff Pertola, the DWP's chief financial officer.

Later, the council president expressed City Hall’s long-simmering distrust of the DWP.

“In February they said, ‘now we can make that transfer.’ But they held it up for two months because they wanted the rate increase," Garcetti said. "That money doesn’t come from the rate increase, that comes from the money that was paid last year, and they need to transfer that.”

Amid heavy lobbying from business groups opposed to a larger rate hike, Garcetti had gathered a bare majority of city council members to support a six-tenths of a cent per kilowatt hour increase in the price of electricity.

That wasn’t enough for the mayor and the DWP. They wanted a seven-tenths of a cent increase. Each proposal on the table would have set aside a small amount for renewable energy projects the utility hasn’t planned yet.

City Councilman Paul Koretz, who said he used to work well with the mayor, said relations between Villaraigosa and the council were deteriorating. He noted that the DWP board approved the rate hike just hours before it would have taken effect for the second quarter of the year.

“I don’t think the mayor and DWP jamming us with this increase and presenting it to at a time when it would be difficult for us to respond – I don’t think it does anything to improve this relationship," Koretz said.

Villaraigosa was hard to pin down when asked whether he had pushed his appointees on the DWP commission to approve a higher rate hike than the city council was willing to approve.

Asked “did you offer instructions to them?”, the mayor responded that his board has worked hard to make the case for a rate hike.

Now that the mayor refuses to commit to transferring DWP money to the city’s general fund, City Council member Jan Perry has introduced a motion to lift restrictions that prevent the council from seizing the money.

The mayor and the DWP plan a return to the drawing board so they can draft a power rate increase that would cover increasing electricity costs and an as-yet-unwritten renewable energy plan.

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