A Full Plate of Higher Taxes Awaits L.A. Voters

Photo courtesy of channone, flickr

Photo courtesy of channone, flickr

Thanksgiving falls on Nov. 24 this year, but for politicians in Los Angeles, turkey day is Tuesday, Nov. 8.

That’s when they will attempt to carve up taxpayers with at least four proposed tax increases – a sales tax hike and three measures that would increase property taxes.

It’s no coincidence that these tax-hike proposals are all on the ballot this year. Political experts believe tax increases have a better chance of passing in presidential elections, when turnout is higher.

So California politicians have been studying the polls and the calendar, and they’ve all reached the same conclusion — it’s fine weather for soaking taxpayers.

This comes on top of the Los Angeles Department of Water and Power’s five-year rate hikes, recently approved by Mayor Eric Garcetti and the L.A. City Council, which will fund a “city transfer” of hundreds of millions of ratepayer dollars to the city treasury every year.

If you think that’s sneaky, wait until you see the surprises in the latest proposed tax increases.

The Los Angeles Metropolitan Transportation Authority wants a permanent sales tax increase of one-half of one percent, plus a permanent extension of the 30-year Measure R sales tax passed in 2008. If voters say yes, Metro will have upwards of $120 billion to plan and build transit projects that are described in a detailed countywide plan.

But, surprise! The detailed plan can be completely changed at any time with a two-thirds vote of Metro’s board of directors. Nothing is guaranteed except a permanent tax increase.

And there’s another surprise. Under state law, this “traffic improvement plan,” as Metro has named it, will trigger super-streamlined approval for massive blocks of apartments within one-half mile of planned “major transit stops.” Transit-oriented developments don’t require studies of the projects’ impact on traffic speed or neighborhood parking. Instead of reducing traffic, we’re guaranteed to get high-density development that jams the streets decades before the transit is ever built.

Another proposed tax increase that’s full of surprises is a Los Angeles city bond to pay for housing for the homeless.

If the voters say yes, the city will be authorized to borrow $1.2 billion dollars and then pay it back by adding a new tax to property tax bills.

The city’s legal experts say the bond money couldn’t be used to pay for supportive services like mental health and substance abuse treatment, but only to buy land and build housing. The city would be allowed to use its powers of eminent domain to acquire land throughout Los Angeles, and then the land could be leased at a low cost to the developers who win the contracts to build homeless housing. …

Click here to read the full article at the L.A. Daily News

To reform DWP, L.A. should learn from other cities

DWPThe Los Angeles City Council is preparing to vote on new water and power rate ordinances that will raise DWP rates annually for the next five years. If Mayor Eric Garcetti signs the ordinances, they will start jacking up your bills within months.

The city has received over 2,000 angry letters of protest about the rate hikes. That may be why Council member Felipe Fuentes introduced a motion for DWP governance reform to be put on the ballot later this year.

The DWP is governed by a five-member board of commissioners, but the utility is really a department of the city, controlled by the mayor. The commissioners are appointed by the mayor and may be removed at any time. The mayor even controls the board’s agenda.

Over the last 15 years, study after study has concluded that the DWP’s governance structure is a problem. There are too many layers of political control, which prevents efficient decision-making and saddles ratepayers with the costs of pet projects, as well as over $250 million per year for general city expenses. DWP salaries are significantly higher than the salaries of L.A. city workers in comparable jobs, and more than double the average salary for comparable jobs nationwide.

Real governance reform would redefine the roles of the board, the general manager and city officials. It would create clear lines of authority and accountability, and it would prevent the kind of political influence or micro-managing that interferes with day-to-day operations.

Instead, city officials have proposed replacing the volunteer board of commissioners with a full-time, salaried board. The mayor also called for more predictable rate adjustments and an overhaul of hiring and contracting practices. Garcetti said he looks forward to a “thorough public discussion” with “stakeholders across the city,” led by Council President Herb J. Wesson Jr.

Wesson sent a letter to the city’s 96 Neighborhood Councils on Feb. 19.

“Dear Neighborhood Council Leaders,” he wrote. “Today marks the beginning of an open and public conversation about making the city’s utility run more efficiently and effectively while ensuring accountability.”

Wesson asks the council leaders to “agendize this item for discussion and action” at their March and April meetings. “This is your time to shine and show the city and its residents the importance and value you bring to city government,” he wrote.

That’s not the way other cities have reformed their utilities.

In 2012, people in Austin, Texas, had some of the same problems with their city-owned utility that L.A. residents have with the DWP.

Rates were going up. Austin Energy had just spent $80 million on a new billing system which was riddled with problems. And the city required the utility to transfer $155 million a year of the money collected from ratepayers to cover general government expenses.

Austin set up a commission to figure out how to make Austin Energy run more efficiently. The commission reviewed research papers on the governance of municipal utilities around the country, studies by the University of Florida, Price Waterhouse, Navigant, the American Public Power Association and the RAND Corporation, and comparisons of utility governance in San Antonio, Denver and Jacksonville.

Sacramento is another city that reformed the governance of its municipal utility. In 2002, the board of directors of the Sacramento Municipal Utility District (SMUD) brought in John Carver, an Atlanta-based expert on nonprofit governing boards. Carver gave the board a presentation of a model he calls Policy Governance, which is designed to make a board effective by balancing independence and accountability.

Ultimately the SMUD board brought in another specialist in governance reform, Leading Resources Inc., to create customized policies for improved efficiency.

Between 2006 and 2011, SMUD’s electricity rates went up by 3.78 percent per year, while LADWP rates rose at an annual rate of 5.67 percent.

Colorado Springs reformed the governance of its public utility in 2011 with a wide-ranging study of reports from consultants and citizen commissions going back to 1993. Researchers looked closely at the city charter, the rate-setting authority, the governance of similar utilities, alternative governance structures, and factors affecting credit and interest rates.

But Los Angeles will reform DWP governance simply by adding it to the agenda of the Neighborhood Councils and discussing it at the March and April meetings.

That’s not how you reform the governance of the nation’s largest municipal utility if you’re serious.

That’s how you do it if you’re trying to fake seriousness just long enough to get a five-year rate increase passed.

Scout Troop’s Christmas Tree Lot Gets a Shock From DWP Fee Hike

Christmas-tree-lot-unloading-DSC_0115In Mission Hills, it’s an annual December tradition: Boy Scout Troop 104 opens a Christmas tree lot on Devonshire Street, the troop’s one big fundraiser to pay for the upcoming year’s camping trips and other activities, like volunteer work with senior citizens and the police department.

Local businesses are very supportive. Primestor, the company that owns the vacant lot just east of Sepulveda Blvd., donates the site. Andy Gump donates the fencing, portable toilets, a temporary power pole, overhead lights, and the labor to dig the holes for the posts from which the lights are suspended.

The parents of the scouts donate their time, a requirement of being in the troop. Everyone is assigned a schedule of mandatory three-hour shifts, and some put in extra hours. And, of course, the scouts volunteer at the tree lot, even the Cub Scouts.

Guess who doesn’t donate or volunteer.

The Los Angeles Department of Water and Power.

Amanda Lovett, whose son Keith is a scout, is the treasurer of Troop 104. Every year for six years she has gone to the local DWP office and paid a $100 deposit, plus a $300 fee for connecting an overhead power line to the power pole that Andy Gump installed earlier, at no charge.

But this year, the DWP informed Amanda that the fee for connecting the temporary overhead line has been increased.

Guess how much.

It’s now $1,000.

LADWP’s newly hiked fee for “temporary overhead service of 200 amps or less” is posted on the utility’s website under “Construction Services.”

Of course, Boy Scout Troop 104 is not in the construction business. It’s a nonprofit that teaches kids the importance of service to others. This year the troop donated ten Christmas trees to MEND — Meet Each Need with Dignity — an organization in Pacoima that provides food, clothing and assistance to people living in poverty.

Keith showed a visitor a certificate of appreciation from MEND and talked about scouting’s emphasis on volunteer work. “Every Eagle Scout has to do an ‘Eagle project,’” he said, which involves a significant effort at “giving back” to the community.

None of that mattered to the DWP. The city-owned utility is an unregulated monopoly, merrily spending money and raising rates, and now taking the campfire marshmallows out of the mouths of Boy Scouts.

This month, Los Angeles City Controller Ron Galperin released a new study of the DWP prepared by Navigant Consulting, Inc. It devotes a chapter to problems with the utility’s “governance structure,” reporting that while the DWP is overseen by the mayor, the City Council, the City Attorney and a five-member Board of Commissioners, “no single entity has enough insight into or authority over Department operations and finances to hold it fully accountable.”

A more plausible explanation is that they’re all in it together.

While you were busy getting ready for the holidays, you may have missed the Ratepayer Advocate, Fred Pickel, blessing the proposed five-year hike in water rates as “just and reasonable” a month after a consumer group called for him to be fired and Mayor Eric Garcetti responded by defending him during a radio interview.

You may have missed the Board of Commissioners voting to approve the water rate hikes, and Commission President Mel Levine declaring with relief that higher rates will protect the DWP’s bond rating. That signals Wall Street investors to keep loaning money to our city-owned utility, which already has more debt than its peers.

You may have missed reports earlier this year that LADWP salaries are as much as two and a half times the salaries of comparable jobs nationwide, and that most LADWP workers pay nothing for their health insurance.

You may have missed Mayor Garcetti and the City Council promising raises to city workers in 2017, vowing to hire 5,000 new employees, and throwing out the 2012 pension reforms that were supposed to achieve modest savings for taxpayers.

In Los Angeles, money grows on power poles.

Every year, LADWP transfers 8 percent of the power system’s gross revenues — hundreds of millions of dollars — to the city general fund, to be spent on expenses like salaries and pensions.

Next year, $56 of that money will have come from the extra $700 LADWP charged Boy Scout Troop 104 to run a wire from a nearby power pole to the Christmas tree lot.

Ebeneezer Scrooge would be impressed.

But the Grinch must be upset that he’s lost his job to a more experienced Christmas stealer.


Ratepayers Lose in Game of DWP Monopoly

DWPIt’s easy to say the Los Angeles Department of Water and Power is bloated and inefficient, but it’s even easier to prove it.

All you have to do is read the “Benchmarking Analysis” produced in February by LADWP’s Corporate Performance Division with the help of two outside consultants, PA Consulting Group Inc. and PwC’s Strategy&.

The report on the first phase of the multiyear, three-part “benchmarking effort” recommended that LADWP conduct an “enterprise-wide examination of labor and benefit costs, including the administrative and general function.” The “ultimate goal,” the experts concluded, “will be to identify specific areas/process with the highest potential for improvement and/or cost savings.”

Translation: They are wasting so much money that it will be 2017 before they even figure out where to begin to address it. However, LADWP doesn’t intend to let this leisurely beard-tugging exercise delay its five-year rate increase, which could be approved in just a couple of weeks.

It’s an outrage.

The benchmarking study reveals that LADWP spends more money on payroll, measured by total payroll dollars per customer, than more than 75 percent of comparable utilities. LADWP also spends more on pension and health benefits than other utilities.

The report notes that wages in the L.A. metro area are 13 to 33 percent higher than wages paid by “peer utilities.” But a report in March from the California Policy Center found that “the average DWP employee receives compensation that is 155 percent greater than their non-DWP counterpart.”

The DWP also lagged its competitors in its debt ratio, having borrowed more money than comparable utilities. Is this a problem? Not for investors who buy the bonds and collect the interest payments. In August, Moody’s gave a positive rating to $300 million in LADWP power system revenue bonds, with an admiring nod to “LADWP’s strong flexibility as an unregulated monopoly providing an essential service to the city of Los Angeles.”

Translation: LADWP can always pay the bondholders by forcing its customers to pay more for water and electricity.

Bond ratings analysts at Moody’s, Fitch and Standard & Poor’s all lamented the slow and politically charged process for raising base rates, but they were cheered up by the presence of “cost adjustment mechanisms” that enable LADWP to quietly add extra charges to everybody’s bills. “About 50 percent of costs can be automatically passed through to customers without City Council action,” Moody’s explained to investors.

And that number could go higher. Fitch analysts said the new rate hike proposal “includes revenue stability features that would enhance the consistency of cost recovery.”

Translation: The “adjustment mechanisms” are about to be adjusted upward.

You can’t blame investors for wanting the money that was promised to them, but it’s fair to ask why LADWP has borrowed so much money – more than $23 billion over the last 30 years, according to data from the California state treasurer – while comparable utilities seem to be able to pay their bills more easily.

The problem could be that every year, LADWP transfers 8 percent of the power system’s gross revenue for the previous year to the L.A. city treasury. The city grabbed $247 million in 2013, $253 million in 2014, and $266 million in 2015. Standard & Poor’s projects that by 2020, the city transfer will be more than $320 million.

The annual transfer equals or exceeds the $270 million in annual revenue that would be raised by the five-year rate increase. Without the city transfer, the rate increase would not be needed.

Although L.A.’s city charter allows the transfer of surplus revenue, there is no surplus revenue, not while LADWP is raising rates and planning to borrow billions more. Is the city transfer even legal? Maybe not. Three lawsuits challenging it were recently consolidated into one case and set for trial.

Mayor Eric Garcetti and the City Council have the power to approve or block the DWP’s rate hikes, upcoming salary raises and transfers of “surplus” funds. At the very least, the city transfer should be halted until the legal challenge is resolved, and LADWP’s rates and salaries should be frozen until the “enterprise-wide examination of labor and benefit costs” is completed and made public.

It’s a disgrace that a publicly owned utility that is also an unregulated monopoly operates like a political slush fund. Feel free to call the mayor at 213-978-0600 and your City Council representative at 213-473-3231, and ask them what they plan to do about it.


Susan Shelley is a columnist for the Los Angeles Daily News. Reach her at Susan@SusanShelley.com or follow her on Twitter, @Susan_Shelley.

Water: Get Used to Paying More While Using Less

Shower head water droughtCalifornians may need to get used to paying more for water, despite and because of their successful efforts at conservation, according to state water officials at a recent Assembly committee hearing.

Californians exceeded the state’s 25 percent water conservation mandate in October for the fourth month in a row. That might be good news for a parched state, but it’s also drying up the coffers of many water districts, some of which have raised rates to help make up the loss.

Ratepayers are in essence being punished for obeying the state order to conserve water – something they thought would save them money. That has officials like John Laird, secretary of the California Natural Resources Agency, scrambling to explain.

“In some places people see costs go up, and think they conserved and did a great job, and yet the fixed costs are the same. And it is very confusing,” Laird acknowledged at a Nov. 17 hearing by the Select Committee on Water Consumption and Alternative Resources.

“It flies in the face of the public’s general view that if you pay more you should get more, as opposed to you might have to pay more to get what you get now,” Laird continued. “As opposed to if the system collapses because there’s no investment you might have to pay more to get a lot less. And that is a very hard concept to explain to the rate-paying public in a way that they get it.”

Water and Power Departments’ Budgetary Woes

Los Angelenos have reduced water use by 18 percent, according to the Los Angeles Department of Water and Power, which has resulted in a $110.7 million hit to the agency’s budget. LADWP is now proposing a $57.6 million rate hike to recoup a little over half of its losses.

Other districts that have passed or are considering conservation-related rate hikes include the Contra Costa Water District, the East Bay Municipal Utility District and the San Diego Public Utilities Department, according to Reuters.

“It doesn’t seem intuitive that I’m using less water, but I’m paying more,” said Assemblyman Rich Gordon, D- Menlo Park, who chairs the committee. “How do you explain that to the public?”

Mark Cowin, director of the California Department of Water Resources responded, “I would agree that getting this message across that we’re going to expect ratepayers, and taxpayers for that matter, to pay more to hopefully not lose more than they would have otherwise, it’s a tough message,”

He cited the proposed $15 billion Delta pipelines project, known as the California WaterFix, which is expected to be funded largely through rate hikes.

“Why would we expect water users in southern California, the Bay Area and the Central Valley to pay more to get the same amount of supply they are now?” said Cowin. “Well, we have to make the case that sustainability is worth the price we are asking people to pay for.”

Climate change can actually help state officials make that case to the public, he said.

Messaging to the Public

“I think we have as good an opportunity now as we ever have,” Cowin said. “We’re in this unique opportunity right now where we’re messaging to the public: keep conserving water because we might have a fifth year of drought, plus prepare for a potential Godzilla El Nino flood event. That really is what we are looking at as the new normal for California extremes.”

Cowin continued, “So we have got to be able to message better that global climate change leads to these extremes, [which] means that the typical inexpensive sources of water are a thing of the past. And more expensive options are a part of the future.

“We’ve been lucky for decades or generations that we’ve had relatively inexpensive water throughout California, some more expensive than others. But, moving forward, water is going to be more expensive and we’re going to have to pay for it.”

Increasing Water Use Efficiency

One way to keep costs down is to use water more efficiently. Currently, much of California’s treated wastewater ends up dumped in rivers and streams. California should follow Israel’s model and instead spread that treated effluent on farms and orchards, said Eilon Adar, a professor at Ben-Gurion University of the Negev, via Skype.

“Water is still being used in non-responsible ways,” he said. “You waste water. Cities in the Bay Area, they produce a lot of effluence that cannot be used in the Bay Area. However, if diverted about 150 miles to the south there are places in California that can appreciate this water.”

The state definitely can do more with recycled wastewater, said Peter Gleick, president of the Pacific Institute. Only about 13 percent of California’s wastewater – 600,000 acre-feet – is currently recycled. He believes the state will meet its targets of annually producing 1 million acre-feet of recycled wastewater by 2020 and 2 million acre-feet by 2030.

“That’s an enormous amount of water,” Gleick said. “That’s water that we already have, that we already capture and treat and throw away into the ocean. Let’s put that to use.”

Gleick said he’s also concerned about “massive over-pumping of the groundwater. There’s been this long-term inexorable drop in groundwater. Groundwater is a resource, but we’re over-tapping it. And that’s unsustainable, and we know that that’s a problem.”

He continued, “There’s been enormous progress in capturing water use efficiently and developing local supplies. We are, however, still living beyond our means. We are taking too much water from our rivers and streams and especially in our aquifers. Even in wet years we over-pump our aquifers. That is unsustainable.”

FarmOn the plus side, nearly doubling the amount of groundwater pumping has helped the state’s $54 billion agricultural industry weather the drought, according to Jay Lund, director of theCenter for Watershed Science at UC Davis. About 70 percent of the lost surface water was made up by groundwater.

As a result, despite four years of drought, state agriculture has lost only about 4 percent in net revenue and about 10,000 jobs, he said.

“It’s amazing to have this drought with this relatively small effect,” Lund said. “We will always have drought in California. It’s like the East Coast having hurricanes.”

He agreed with Cowin that weather extremes like drought have the benefit of reminding the public about the state’s ongoing water needs.

“Droughts bring attention to where water management is not keeping pace,” said Lund. A Dutch engineer told him “in the Netherlands they need to have a threatening flood every generation to remind them that they have water problems. California is a dry place susceptible to floods. It’s useful for us … to see droughts and floods from time to time.”

The committee plans to hold a hearing in December in Los Angeles on desalination and one in January in Sacramento on recycling and reclamation issues.

Originally published by CalWatchdog.com

DWP Demands Could Uproot Two Plant Nurseries

PlantWhy is the Los Angeles Department of Water and Power forcing two San Fernando Valley nurseries out of business?

Green House Nurseries in Arleta and Live Art Plantscapes in Northridge are small, owner-operated businesses. They have employees. They pay taxes. They comply with all applicable regulations. And like many nurseries in Southern California, they’re located on utility-owned land that is directly underneath power transmission lines.

These wholesale nurseries supply indoor plants to hotels, retail stores, office buildings and commercial designers. Some of the lush, tropical plants that decorate the Wynn and Encore hotels in Las Vegas were grown in Arleta. Some of the spectacular red bromeliads that will be in the Bellagio’s Chinese New Year display are growing right now in Northridge.

Green House Nurseries was a new business venture when owners Mark Whitten and Paul Needleman began renting land from LADWP in 1998. Whitten, a geologist, and Needleman, a horticulturist, built two climate-controlled greenhouse structures with the full approval of LADWP. In 2003, they received approval to build a third greenhouse on the property. Small-business loans helped to cover the cost of construction, which ran into the hundreds of thousands of dollars.

“These are engineered structures that will withstand 100-mph winds and earthquakes,” Whitten said, pointing to a thick steel support post sunk deep into the ground. “They were built to LADWP’s specifications.”

But about a year ago, LADWP’s real estate department sent Needleman and Whitten a letter stating that the 15-foot-high greenhouses would have to be dismantled and replaced with smaller structures no taller than 10 feet.

That would put Green House Nurseries out of business. The heating and cooling equipment in their greenhouses can’t be cut up and segmented into smaller modules.

Live Art Plantscapes received a similar letter and faces the same grim situation. Owner Larry Tabeling has built a business that depends on the climate-controlled greenhouses approved by LADWP 11 years ago.

Too bad, says LADWP.

But why?

They won’t say.

There’s no question that the city-owned utility has the legal right to control the use of the land under its transmission lines and to withdraw permission for any structures or activities. But neighbors are concerned about the kind of structures and activities that could return to the sites if the nurseries are kicked out.

The Arleta Neighborhood Council pleaded with City Councilwoman Nury Martinez in September to help keep Green House Nurseries under the power lines. “We do not want to see them go,” wrote council president John Hernandez. “We fear that if they do go, the property will revert to an empty lot attracting illegal dumping, drug traffic, homeless, etc.”

Like Live Art Plantscapes, Green House Nurseries is located in a residential neighborhood, surrounded by quiet streets of single-family homes. “They are the perfect neighbor,” Hernandez wrote, “This is the kind of business that any city would be happy to have, and we do not want to lose them.”

Loyce Lacson, who heads an Arleta neighborhood watch group, wrote to Martinez asking for her help to get Green House Nurseries “grandfathered” for another five-year extension of their license. “Previous to Green House locating to Arleta, DWP was not maintaining the property,” Lacson wrote. And crime was a problem. A cluster of candles and flowers still marks the site of a shooting before the nursery moved in.

The Arleta Neighborhood Council made inquiries to see if other utilities were implementing new height limits for greenhouses. They were not. “We found that nurseries under power lines in other parts of Los Angeles and Orange Counties with similar structures have not been asked to make any modifications to their structures,” John Hernandez wrote in his letter to Martinez.

Given the cost of land, these businesses are unlikely to reopen in Los Angeles if forced out of their current locations. The city will lose the tax revenue, the employees will lose their jobs, and the communities will lose a good neighbor.

But why? If the greenhouses met all applicable LADWP and building code requirements at the time they were approved, what has changed?

Before two small businesses in the San Fernando Valley are destroyed, someone at LADWP should answer that question.


New Water-Saving Technique: Public Shaming

Shower head water droughtAfter a wave of new rules, regulations and crackdowns, many water-conserving Californians have evaded formal and informal punishment. With no end in sight, however, others have begun to face both forms of penalties.

The mood of the public and officials alike has tilted hard against outsized consumers. Although “water providers such as the Los Angeles Department of Water and Power have refused to divulge the names of California’s top residential water users,” the Los Angeles Times reported, “the DWP is now considering changes to its water conservation ordinance that would impose ‘substantial’ fines for excessive use and make the names public.”

Pressed by “public outrage, and questioning by Los Angeles City Councilman Paul Koretz,” the Times noted, DWP would follow in the East Bay’s footsteps, where agency overusers recently confronted “an excessive-use penalty ordinance that allows it to fine and name water customers who consume more than four times the average household.”

From nagging to snitching

In the Bay Area, a culture of water shaming has developed from the ground up. In a report on “the domestic water police,” the New York Times recently identified “moms and dads, spouses and partners, children, even co-workers and neighbors” as among the residents “quick to wag a finger when they spot people squandering moisture, such as a faucet left running while they’re brushing their teeth, or using too much water to clean dinner plates in the sink. And showers? No lingering allowed.”

More nagging has gone hand in hand with more snitching. The Times reported that “state water agencies issued more than 70,000 warnings for overuse and more than 20,000 penalties” this June and July, with many issued when “someone’s neighbor ratted on them,” according to State Water Resources Control Board climate and conservation manager Max Gomberg.

Although those penalties landed on a relatively small group of die-hard squanderers, the state has now leveled substantial fines on whole cities that failed to meet conservation targets. “While most communities continue to hit mandated conservation targets, a few have consistently missed,” the Sacramento Bee noted. “All four were in Southern California: Beverly Hills, Indio, Redlands and Coachella Valley Water District. Each was fined $61,000.”

These sums could be only the beginning. “The penalties are based on the board’s authority to issue fines of $500 per day for violations of its emergency regulation,” according to the Press-Enterprise. “The board could also issue the providers a cease and desist order, which carries a fine up to $10,000 per day for non-compliance.”

A vicious circle

water meter 2The crackdown has come as agencies have hiked rates for users who do conserve. “Water providers in Los Angeles, the San Francisco Bay Area and other parts of the state have recently told customers that rates will go up at least temporarily, as utilities struggle to pay for building and repairing pipes, buying water and other costs, even as customers cut back,” according to Reuters. Agencies have sometimes wound up a victim of their own success. “In Los Angeles, conservation led to a $111 million drop in revenues during the fiscal year that ended July 1, a period mostly before the mandatory cutbacks kicked into high gear, Department of Water and Power budget director Neil Guglielmo said Friday.”

But for now, regulators have tried to emphasize the positive. “Californians slashed their water use 26 percent in September, meeting Gov. Jerry Brown’s goal of 25 percent for the fourth straight month,” the San Francisco Chronicle reported, citing recently released state data. Though encouraged by the numbers, water agencies have strained to strike a messaging balance between threats and warnings on the one hand and encouragement and pride on the other, hoping to give savers a sense of reward without subtly encouraging a return to laxity. Utilities, noted the Chronicle, remained dedicated to “trying to keep the conservation message front and center after four dry years, especially as residents may be tempted to become less diligent with forecasts calling for a wetter-than-average winter.”

Originally published by CalWatchdog.com

California Residents Face Bigger Energy Bills For Using Less

Southern California residents who sacrificed by using less water are now suffering higher prices because the Los Angeles Department of Water and Power has a $111 million shortfall in its latest revenue projections.

“We have no other way of recovering the revenue to maintain the system for our customers,” Neil Guglielmo, director of budget, rates and financial planning for the DWP, said Wednesday. The Board of Water and Power Commissioners approved a pass-through charge that will be applied to consumers beginning in 2016, according to The Los Angeles Times.

Los Angeles is not alone, however, as agencies throughout California have faced revenue shortfalls from the drought. Some regions in California have instituted a “drought surcharge” while others will simply double their service surcharge, reports The Los Angeles Times.

In L.A.’s case, the DWP’s long-term plan includes instituting an incremental five year rate hike that would increase the average user’s utility bill by roughly 3.4 percent each year. Residents are not thrilled with the action however, according to The Los Angeles Times, with one twitter user saying, “LADWP hikes rates because they aren’t making enough revenue. We’re saving water like we’re supposed to, U mad? I am.”

The paradox of less water use meaning higher costs is just one symptom of the drought that continues to plague California. Resident are hopeful however that the strongest El Nino in decades could bring much needed rain relief, reports Bloomberg. Alan Haynes, service coordination hydrologist at the California Nevada River Forecast Center in Sacramento noted however that, “If the wettest year were to occur, we still wouldn’t erase the deficit we have seen in the last four years.”

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Originally published by the Daily Caller News Foundation

DWP Rate Hikes Look a Lot Like Tax Hikes

DWPWhen is a utility rate increase really a local tax increase in disguise?

The Los Angeles Department of Water and Power is seeking a rate increase of 25 to 30 percent, spread out over five years, in an effort to raise an extra $900 million for power and $230 million for water, a total of $1.13 billion, to fix aging infrastructure and comply with state mandates for renewable energy.

But over the last five years the DWP has taken $1.23 billion of the money customers paid for electricity and transferred it to the city of Los Angeles to be spent on the general expenses of city government. The transfer was $220 million in 2010, $259 million in 2011, $250 million in 2012, $247 million in 2013 and $253 million in 2014.

The Los Angeles City Charter says “surplus money” may be transferred from the DWP to the city’s reserve fund if the Board of Water and Power Commissioners consents. And the Board may withhold its consent if it finds that making the transfer would have a “negative impact on the department’s financial condition.”

Maybe the board wasn’t reading the financial statements, but the DWP’s Power System has been selling bonds to borrow hundreds of millions of dollars virtually every year. As of June 30, 2010, the Power System’s total outstanding long-term debt balance was $5.92 billion. By June 30, 2014, it was $8.165 billion.

How can the DWP transfer a “surplus” to the city at the same time it’s borrowing money and raising rates? Is this an illegal method of raising city taxes, which under Proposition 218 are supposed to be approved by voters?

In 1999, the Howard Jarvis Taxpayers Association sued the city of Los Angeles for overcharging for water and creating a “surplus” of over $20 million to transfer to the city every year. The case worked its way through the courts for a decade, and in 2009 the taxpayer group was victorious.

As a result, the DWP’s 2008-2009 financial statement for its Water System reported, “The court declared the 2007 Water System transfer illegal based on Proposition 218 and allowed the Water System to retain the $29.9 million and use it for water related activities.”

But over on the Power System side, the judge’s ruling didn’t apply.

The 2008-2009 financial statement for the DWP’s Power System reports that in fiscal year 2008, $182 million was transferred to the city, or 7 percent of the previous year’s operating revenue of $2.6 billion.

But for fiscal year 2009, the city transfer was bumped up to 8 percent. The previous year’s operating revenue was $2.8 billion, for a transfer of $223 million. It has been 8 percent every year since.

Taxpayer advocates are fighting mad.

“Notwithstanding our legal victory over the misuse of ratepayer funds, the city of Los Angeles seems hell-bent on finding ways to gouge the city residents,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association. “The increase in DWP’s transfer to the city’s general fund unquestionably violates the principle of ‘cost of service,’ which simply means that ratepayers should pay no more for basic utility services than it costs to provide that service.”

What can be done about it? The Board of Water and Power Commissioners has the authority — subject to the veto of the City Council — to approve the city transfer or withhold it. In May 2009, the board actually rescinded a previously approved transfer.

The Board of Water and Power Commissioners is made up of five people: Mel Levine (president), William W. Funderburk Jr. (vice president), Jill Banks Barad, Michael F. Fleming and Christina E. Noonan. They meet on the first and third Tuesdays of each month at 11:00 a.m. in Room 1555-H at DWP headquarters, 111 N. Hope Street, Los Angeles, 90012. (However, the Aug. 18 meeting has been canceled.) Attend a meeting, or write to the commissioners at that address.

Call your City Council representative and the mayor. The DWP’s rates are set by city ordinance, which means the rate hike cannot take effect unless the council passes it and the mayor signs it.

If necessary, a local ballot initiative could amend the city charter to prohibit transfers of surplus money from water and power revenues to the city. Or a statewide ballot initiative could address the problem of utility rates that far exceed the cost of service.

Ratepayers have been abused for too long. It’s time we turned on the power.

DWP Rate Hike Plan Makes Customers Mad as Hell

Today I’m opening the mailbag to share comments from Valley residents about the Los Angeles Department of Water and Power and its proposed five-year rate hike of 25-30 percent:

“The DWP needs to tighten their belts before they ask us for more money.”

“Cutbacks on the least important actions or redundancies should come first before asking for more money. That is how any true business would work.”

“The 8 percent of its gross revenues going to L.A. city treasury boggles the mind.”

“I find this so offensive. … It feels as though DWP is punishing me by increasing the rates because I am using less water. Why can’t the DWP employees take a 5 or 10 percent pay decrease in their salaries or be furloughed for 1 day per 2 week schedule, or maybe lay off a few employees — at least until the drought is over. This is not the time for DWP or the City Council or unions to be greedy at the expense of consumers/constituents.”

“We just celebrated our 50th anniversary and have lived in our Porter Ranch home for over 41 years. Our home is one-story, under 1,500 square feet, no pool and a now-brown lawn because of the drought. We try to avoid using the air conditioning or leave it at no lower than 78 degrees — sometimes 80. However, our DWP bills range from $350 to $400 in the winter to over $850 in the summer. We simply cannot afford those bills now and would be devastated if they were to go even higher. We don’t want to have to choose between turning off the air conditioner to afford our mortgage and medical bills or losing our home where we raised our family.”

“Prior to the installation of the 2nd meter, my domestic water usage was calculated and averaged more than 5 times my true usage. I’m certain that anyone who has not installed a 2nd meter is being inaccurately (almost fraudulently) charged more than 5 times what they are responsible for.”

“It seems like the DWP pays a far greater salary than the private sector and gets better retirement benefits, too. Something is wrong here.”

“The DWP should be run like a corporation, not a cozy club.”

“The DWP should be replaced with a new organization that places great value on keeping spending tight, watching everyone’s overtime, and eliminate waste and fraud. So far, the DWP has proven that it lacks leadership that responds to ratepayers, yet has policies that empower the employees.”

“Roll back all senior level DWP management salaries 10%. Appoint an independent auditing committee to oversee exactly what some of these positions are within the DWP structure and do away with the vast majority of them.”

“For the past four years, I have taken many measures in cutting back on my water usage but I continue to have extremely high bills. I have called DWP 3 times asking for an inspection and have been told that they don’t have time.”

“The DWP replaced our water meter, and the next bill was for $3,277.93!”

“NO matter what the citizens are doing to ‘save the planet,’ the more we do, the more we are punished for our complying with the requests.”

“That there is about $230 million of overcharging being sent to the City is a travesty. Of course, we get to pay a 10% City tax on that overcharging, so it is only compounded. Our DWP should not be a taxing authority!”

“I have been so upset with the excessive spending and loss of funds that have happened with the DWP, and now for them to have the nerve to say they must raise our bills. Why can’t they eliminate some of their unnecessary “management analysts” or reduce some of their outlandish salaries?”

“Giving money to the city of Los Angeles is outrageous … how did this happen??”

“We have lost two pine trees because of not watering in this drought. No rewards for conservation! Higher ‘taxes’ instead. Private business would tighten belt, but our government is increasing salaries!”

“The accumulated effects of continued cost increases and tax hikes are forcing me to leave the state.”

“In my opinion, DWP is nothing but a bloated, redundant, multilayered bureaucracy with little accountability.”

“I am sick & tired of additional fees, taxes, costs, gouging, etc.”

“Could you interview the DWP ‘Ratepayer Advocate,’ Fred Pickel? The public would like to know what he has been doing.”

Email your comments to me at the address below — everyone’s voice should be heard.

Susan Shelley is a San Fernando Valley author, a former television associate producer and twice a Republican candidate for the California Assembly. Reach her at Susan@SusanShelley.com, or follow her on Twitter: @Susan_Shelley.