City Hall's 2010 DWP Debacle 

How Beutner, Carr, Carson, D'Arcy, Freeman, Greuel, Raj, Santana, Szabo, Villaraigosa & Co. pushed L.A. to the cliff edge

Thursday, Apr 15 2010

In the past 31 days, Mayor Antonio Villaraigosa has taken one of the most tumultuous rides in the annals of municipal power politics. On the subject of the DWP rate hike, Al Gore weighed in by satellite, City Controller Wendy Greuel wrongly declared the city would go broke in May, the mayor called for a partial government shutdown and the city's credit rating and reputation took a very public beating.

Yet City Hall watchers cannot agree on what the drama is really all about.

Is it a capitulation to DWP union chief Brian D'Arcy, who for years fought against going green but now purportedly sees rate hikes paired with green initiatives as the best way to amass greater political power? Is it the first unsteady effort by a party-boy mayor who has shown little interest in the workings of city departments to now finally get tough fiscally by seeking a sacrifice from residents? Or is it none of the above?


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One thing is clear, whatever their intentions, the mayor and his key advisers — Austin Beutner, Jeff Carr, Jay Carson and Matt Szabo — won a prize they almost certainly did not seek: intense public scrutiny of the Department of Water and Power monopoly, its long and failing saga to attract a top-flight general manager, and its union leader, D'Arcy, who has showered City Hall elected leaders with campaign cash.

The utility wanted a rate increase of up to 28 percent that would have hit homeowners and small businesses hard, largely to fund unspecified "renewable energy" projects that are still well down the road. Instead, the secretive DWP is right where it doesn't want to be, under a public microscope.

Villaraigosa and Greuel, who took major campaign funds from D'Arcy's union, are quietly trying to deflect criticism that they caused the city's credit downgrading this month by credit-rating service Moody's. Greuel had declared that L.A. would run out of money on May 5, only to be forced to quickly retract her claim. Villaraigosa had warned that L.A. could face bankruptcy, and days ago ordered a plan to shut government two days a week, then quickly changed his tune and insisted that things weren't nearly so bad.

The chaotic proceedings, in which the Los Angeles City Council was hardly uninvolved, set off a round of mocking newspaper editorials in other cities. The council temporarily backed away from a utility rate increase and then approved one Wednesday, April 14, which takes effect July 1.

"We have heard plenty" from angry, recession-slammed Angelenos, one in eight of whom are unemployed — a fact that has often gone unmentioned during the feud, notes City Councilman Dennis Zine.

In the past few days, former mayor Richard Riordan has told Rick Orlov of the Los Angeles Daily News that the City Council needs to create a bankruptcy plan in case City Hall's current $212 million general-fund deficit worsens; former DWP commissioner Nick Patsaouras filed a suit several days ago against the cash-rich DWP to force it to hand over $73.5 million in surplus money it promised months ago to give to the city's maxed-out general fund; and the L.A. City Council has taken steps toward enacting a police-hiring freeze and forcing the DWP to open its books.

"Yes, it's all interrelated, deeply, deeply interrelated," says City Councilman Bernard Parks, chairman of the council's Budget Committee. "That's a sobering thing."

Parks, who, as the former L.A. chief of police, oversaw a sizable budget, is one of only five City Council members widely seen as capable of grasping the vast citywide budget and complex fiscal issues. He has frequently joined with Zine to warn the rest of the City Council that the city employs thousands of workers it cannot afford. Parks and Zine have not garnered much response to their views, until recently.

Instead, the City Council and Villaraigosa have continually underestimated the severity of the economic downturn in each approved budget since 2007. Under Villaraigosa, in fact, the city's employee count has grown by more than 3,000 to roughly 49,000 government workers.

The situation has left L.A. with a worsening "structural" deficit that makes City Hall increasingly reliant on the DWP's practice of collecting more money than it spends, then sending a fat chunk of that money to the city's deficit-ridden general fund each year. Those transfers of cash, which once amounted to 5 percent of DWP annual revenues, now stand at 8 percent.

The increasing amounts act as something like a drug, making City Hall more reliant on the utility monopoly, even as Parks concedes that elected leaders have grown more and more afraid to upset D'Arcy and his aggressive union, the International Brotherhood of Electrical Workers (IBEW).

Now, in the wake of the past several weeks' controversies, and led by Jan Perry and others, the council is considering seeking voters' help at the ballot box to wrest some of the DWP's autonomy and rein in the city utility's growing role as a political kingmaker.

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