Los Angeles's Department of Water and Power is asking the City Council to authorize creation of a new agency empowered to borrow up to $400 million, which rate payers would have to pay through a new fee on their bills.
If approved, the new Southern California Public Water Authority would be created as a joint powers authority partnering with with Burbank and perhaps some other cities that have 25,000 or more water customers.
The DWP has said it needs to raise more than a billion dollars to replace deteriorating underground water pipes throughout Los Angeles.
However, only the largest pipes that are designed to help store large quantities of water underground would be eligible for funding through the new joint powers authority, said Julie Spacht, a DWP executive managing engineer.
That's because the state law that allows for its creation limits its use for projects that increase the local water supply. It may also be used for water construction projects that are mandated by state or federal government, like moving the city's open-air drinking water storage underground or into tanks.
That 2013 bill was passed by the Legislature at the LADWP's request.
Spacht said the benefit of the new joint powers authority is that it would be able to borrow money at lower interest rates than the DWP can get on the traditional financing market.
The authority would borrow money by selling bonds, provide the cash to the DWP or other partners to build water projects.
DWP bills already include line items to pass along to customers charges for things like conservation programs and buying imported water. They are on top of the base water rate, which is likely to go up later this year after hearings before the City Council.
"We have this off-the-books mechanism, so how do you ultimately account for what the true rate is to the consumer?," Councilman Felipe Fuentes asked at a meeting of the council's Energy and Environment Committee on Wednesday.
The concept was aired before the committee but did not get an official approval because not enough members were present.
Fuentes, who chairs the committee, said he was enthusiastic about raising money for new water projects at less expense.
Fuentes said he was also concerned the new joint powers authority, as proposed, could approve loans for new water projects, bypassing the full City Council. The voting members of the joint powers authority would be the general managers of the DWP and Burbank Water and Power.
Fuentes asked the DWP representatives to return with a plan to include the council in the approval process.
The issue is likely to return for another hearing before Fuentes' committee this month, and be heard in the city finance committee as well, before heading to the full council for approval.