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Los Angeles Mayor Antonio Villaraigosa announced a plan Tuesday to cut services at city parks, libraries and other non-essential facilities two days per week in an effort to balance the city’s budget. The plan would not pertain to police and fire department services, but could affect local senior and community centers, and facilities like the Griffith Observatory.
The announcement came after the Los Angeles City Council and the Los Angeles Department of Water and Power (LADWP) came to an impasse last week over rate increases, with the city council calling for a .6-cent per kilowatt hour increase, and the LADWP Board calling for a .7-cent per hour increase. Because the city council blocked the LADWP Board’s suggested rate increase, LADWP general manager, S. David Freeman, notified the city Monday that the utility would not turn over $73.5 million it had previously agreed to provide to the city, money that city council leaders were counting on to balance the budget. Freeman told the council that the $73.5 would now be needed to cover the utility’s operating costs.
Many members of the city council balked at the mayor’s plan to shut down city services. The council is currently looking into ways to force the LADWP to transfer the money, and other ways to make the utility more accountable to city leaders. Currently, the LADWP operates as a quasi-governmental agency, with its own Board of Commissioners making decisions.
Los Angeles City Council President Eric Garcetti said the LADWP’s assertion that it needs the $73.5 million to pay for operating costs is false, and added that the decision not to transfer the money amounts to political posturing.
“The DWP has approximately $1 billion in reserve funds and had committed to making the transfer to the city’s general fund, regardless of whether or not there was a rate increase,” Garcetti said. “The department’s CFO testified before the council in February saying that this was financially feasible. This shouldn’t be about politics or personalities, this is about the ratepayers and the accountability they deserve from the department if they are being asked to pay more. The department should make the transfer.”
City Councilman Paul Koretz, 5th District, said he expects the city will eventually receive the $73.5 million, and added that the mayor’s plan to cut city services two days a week will not occur. Koretz said the city’s Chief Legislative Analyst testified before the city council on Wednesday, saying that the mayor could not impose the plan unilaterally, and that council would have to vote on it. He added that there is little chance the council would approve such as plan.
“[For that to happen] I think L.A. would have to be hit by a meteor, followed by a large earthquake. It’s an incredible proposal, and I am absolutely certain it is going nowhere,” Koretz said. “It is just a tactic to get the council to do what the mayor wants with the DWP.”
City Councilman Tom LaBonge, 4th District, also denounced the mayor’s proposal, and called for the LADWP to transfer the money per the original agreement.
“This is a crisis, there’s no doubt about it,” LaBonge said. “The mayor wants to close the city down two days each week. We can’t let that happen. I support the $73 million fund transfer from the DWP, which is the equivalent of the agency’s property tax to the city. I hope that we can work together to resolve these issues as quickly as possible.”
Koretz explained that large money transfers occur on an annual basis because the city does not charge the LADWP property taxes on its facilities, as outlined in the city charter. Koretz added that if the money is not transferred, the council may try to change the city charter to allow the utility to be assessed property taxes, or may consider litigation against the utility. Los Angeles City Councilman Greig Smith, 12th District, also announced Wednesday that as many as eight motions could be proposed to enable the city council to exert control over the LADWP Board, including changing the process by which the board is appointed. The mayor currently appoints members of the LADWP board, and they are then confirmed by the city council. Smith’s plan would allow the mayor to appoint two members, while two members would be appointed by the city council, and the fifth by members of neighborhood councils. Under Smith’s plan, the city council could also remove the members of the board and the utility’s general manager with a two-thirds vote.
Koretz said, however, that it is more likely the council will return to negotiations with the LADWP Board on an acceptable rate increase. Koretz reiterated that it is not the right time to raise rates more than .6-cents per kilowatt hour, because many residents are already suffering from the effects of the recession.
“The mayor wanted to create an expensive environmental program to lessen the DWP’s reliance on coal, and it is a good program, but at the same time, we are in a near depression, and I don’t think the residents have the money to take that step right now,” Koretz added. “The council did the responsible thing, which was to approve a rate increase that would allow the DWP to pay its bills.”
Villaraigosa has not backed down on his plan to shut down non-essential city services, but also indicated that he would ask the LADWP Board for a portion of the money — probably around $20 million — to keep the city fiscally solvent for the time being. City Controller Wendy Greuel has said that the city would not be able to pay its bills at the end of the fiscal year on June 30 if the $73.5 million is not transferred from the LADWP.
“There are no easy decisions or simple ways to solve this budget crisis,” Villaraigosa added. “But as the CEO of this great city, it is my responsibility to make these difficult but necessary decisions to steer the city out of this crisis and onto solid financial ground.”
The DWP Board is not scheduled to meet again until April 19. Both Garcetti and Koretz said in the meantime, the city would continue to work with the LADWP to come to an agreement. Koretz said the council would address the budget again on Friday.
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