Former Department of Water and Power board member Nick Patsaouras announced Wednesday that he has filed suit in Los Angeles Superior Court seeking to force the DWP to give City Hall the $73.5 million it had promised to transfer before it reneged as a result of having electricity rate hikes rejected by the City Council.
“This action is a taxpayer lawsuit … to challenge the legal integrity and propriety of the refusal of the Los Angeles Department of Water (DWP) to honor its commitment to the citizens of the city of Los Angeles and to the Los Angeles City Council to transfer the sum of $73.5 Million to the city's reserve fund from DWP'S total operating revenues …,” the lawsuit states.
The cash became a bargaining chip last week as the City Council rejected the DWP's favored rate hikes in favor of a more modest increase. However, the DWP board rejected the council's increase and imposed its own, which the council then blocked — giving the utility zip in increased rates.
The utility had threatened to withhold a promised second payment of cash — the $73.5 million — and then followed through after the council's vote, saying it didn't have enough “surplus” money without the rate hikes to make the transfer.
The city is facing a nearly $700 million deficit come July and needs the cash desperately. Without it, City Controller Wendy Greuel stated the city will run out of money by May 5. Patsaouras argues that the DWP in fact does have enough surplus cash to honor its promise. The payment, in fact, is based on revenue from the fiscal year that ends in June. The rate hike would have applied starting April 1.
The DWP, Patsaouras says, is essentially obligated to transfer eight percent of its total
operating revenues for a fiscal as long as that amount does not exceed the department's income from the last fiscal year and as long it does not exceed 33.33 percent of the DWP's debt load. ” … Both of these conditions have been satisfied so that the $73.5 million balance can and should be transferred without violating any of DWP's bond covenants,” the suit states.
” … At this moment in time, the DWP has approximately $440 Million in cash reserves, plus over $500 million in debt service reserves, amounts which are clearly adequate for DWP to meet its lawful commitments to the city to complete the power revenue transfer Payment of $73.5 Million,” the suit states.
In other words, the DWP, sour because it didn't get its rate hikes, is bluffing. The suit names the DWP, four members of the Water and Power Commission (the DWP board) and DWP interim general manager S. David Freeman.
Patsaouras is a prominent DWP and City Hall critic who ran unsuccessfully for City Controller in 2009. The lawyer handling the filing, Westsider Noel Weiss, unsuccessfully ran for City Attorney that year as well.