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Thu, Mar

DWP’s Transfer Fee Pours $250 Million Into the City’s General Fund … But is It Legal?

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LA WATCHDOG - The Mayor’s new budget will be released in two weeks (Friday, April 20) and will once again rely on numerous gimmicks to eliminate the $220 million projected budget deficit caused by the out of control escalation in salaries, medical benefits, and pension contributions.


And once again, City Hall will neglect our deteriorating infrastructure (just look at our streets and parks) and underfunded pension plans in order to pay for the $226 million increase in personnel costs.    

Our self serving Elected Elite will also fail to engage in serious pension or budget reform because of the collective fear of alienating the campaign funding municipal unions in the year leading up to the March of 2013 election for Mayor, Controller, and eight seats (five of which are open) on the City Council.

The Mayor’s General Fund budget will no doubt include revenue of $250 million from our Department of Water and Power in the form of the 8% Power Transfer Fee.  

However, this transfer to the City’s General Fund may violate the terms of Proposition 26 (The Supermajority Vote to Pass New Taxes and Fees Act) because there is no direct benefit to DWP or the Ratepayers for making the transfer.

As such, the 8% Power Transfer Fee will be considered a tax and subject to the approval by two-thirds of the City’s voters.

But what are the odds of the City’s voters approving the Power Transfer Fee?

There is no question that our barely solvent City needs the dough.  But do our Elected Elite deserve our trust and confidence?

DWP could certainly use the money to help offset the proposed 50% increase in our electricity rates over the next five years, fueled by $9 billion in capital expenditures and the incurrence of $5.5 billion in debt.

And that is just the beginning as DWP is mandated to have 33% of its power generated from very high priced renewable sources such as solar and wind by 2020.

As it is, DWP is the largest single contributor to the City’s General Fund, providing around $550 million a year from the 10% City Utility Tax ($300 million) and the 8% Power Transfer Fee ($250 million).  

This does not include pet projects, such as the Elysian Park Reservoir, the Los Angeles River, and the Headworks Reservoir Project where the DWP and its Ratepayers are being tagged for an extra $250 million to preserve the million dollar views of selected Silver Lake residents.

Nor does this include dumping 1,600 surplus City employees on DWP, costing hundreds of millions a year in salaries, benefits, and pension contributions.

There is also a $750 million skunk at the City’s budget party that will have a “material adverse effect” on the City’s finances within the next year or two.

The City is currently the defendant is in a class action law suit (Ardon v. City of Los Angeles) that is working itself through the system, where taxpayers are seeking refunds of $750 million in connection with the illegal collection of the Telephone Users’ Tax between 2005 and 2007.  

Our Elected Elite and their cronies in City Hall are going to have to earn our trust and confidence if they want to increase our taxes and fees to fund the City’s operations or pay massive judgments.  

And that starts with the “Live Within Its Means” charter amendment that mandates that City develop and adhere to a Five Year Financial Plan that calls for multiyear balanced budgets based on Generally Accepted Accounting Principles, that funds the repair and maintenance of our failing infrastructure over the next ten years, that reins in the out of control increases in salaries, benefits, and pensions, and that requires designated funding to cover any increases in spending or decreases in revenues.

So stay tuned, especially in June when the City will once again tap the increasingly skeptical, risk adverse bond markets for over $1 billion of Tax and Revenue Anticipation Notes.  

The upcoming City election, the City’s unions, the budget deficit, the structural deficit, massively escalating personnel costs, unsustainable pension plans, failing infrastructure, the $250 million DWP Transfer Fee, the $750 million Ardon class action law suit, the bond market, the need for a vote to raise taxes or fees, and a “Live Within Its Means” charter amendment - all make for a wild and very interesting year in Down Town LA. It will also define the failed legacy of Antonio Villaraigosa, the Mayor Who Broke LA.

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com. He can be reached at:   [email protected]) –cw

Tags: Jack Humphreville, LA Watchdog, DWP, LADWP, Transfer Fee, Mayor’s Budget, General Fund, Prop 26








CityWatch
Vol 10 Issue 28
Pub: Apr 6, 2012

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