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Mayor Riordan Is Bolstering Police by Crippling the DWP : A heavy-handed transfer of funds to fulfill a campaign promise threatens to weaken service and compromise the utility's excellent bond rating.

November 20, 1994|LEON FURGATCH | Leon Furgatch is a retired manager of community relations and educational services for the Los Angeles Department of Water and Power

That loud "sucking sound" you may be hearing is not emanating from Mexico, as Ross Perot is fond of saying, but it is coming from Mayor Richard Riordan's office.

The mayor is siphoning off millions of dollars from the Los Angeles Department of Water and Power to fulfill his pledge to expand the Police Department.

He is accomplishing this task with arm-twisting that belies his modest, nonpolitical public image.

The behind-the-scenes story began earlier this year when aroused employees at the DWP stalled efforts of Riordan appointees on the Board of Water and Power Commissioners to alter the DWP's retirement plan, which would have netted $40 million.

Undaunted, the board was able to identify salable surplus assets through the efforts of General Manager Ken Miyoshi. Miyoshi, a former power system assistant who had been appointed interim general manager when former GM Dan Waters retired in February, had been a pleasant surprise for his managerial efforts to streamline the DWP's operations.

Miyoshi's assistants identified a variety of properties in the power system that were no longer needed. They estimated the sales might bring $74 million.

Unfortunately, inquiries to brokers revealed the assets would bring about half their estimated value, and it would take time to sell everything off.

This was taking place when Mayor Riordan desperately needed cash to pay for a salary increase for police.


In response, a board member moved to advance $10 million to the mayor from the water system's budget. This would have crippled the DWP's ability to make repairs and replace old water mains, such as those that recently ruptured in the southern part of the San Fernando Valley, creating chaos in the streets. An alarmed Miyoshi balked, and the motion failed.

A month later, Miyoshi, who had been expected to keep the job, was demoted, and the board went ahead with the $74-million transfer, half of which would not be recovered from the sale of surplus property. The unusual transfer is noted, without explanation, in a leaflet insert with bills currently going to customers.

The money was in addition to the DWP's annual transfer of 5% of its gross revenues to the city's General Fund. The contribution is a substitute for taxes the DWP would pay if it were a privately owned utility operating in the city. The in-lieu tax this year was $122 million.

Now Riordan has moved his former City Hall assistant, William McCarley, into the GM job. McCarley has announced a plan to cut the DWP's payroll by 2,900 over five years to make the municipally-owned utility more efficient.

The explanation is that the DWP must become more competitive in anticipation of a proposed new state law deregulating utilities.

At this juncture, it should be mentioned that the DWP's residential electric rates are currently about 17% lower than those charged by the neighboring privately owned Southern California Edison Co. and about 5% higher on the commercial and industrial side.

McCarley said the projected salary savings of $160 million would benefit ratepayers. However, the mayor is on record as stating that he would appropriate any savings his appointees uncover from the city's three money-making departments, including the Airport and Harbor departments, for the Police Department.

Since the City Council has also expressed an interest in sharing in this bonanza, it would be naive to believe any savings will be plowed back into the utility to improve operations. It would make more sense to reduce commercial and industrial power rates as a way to attract business and create more jobs in Los Angeles.

The irony is that although the mayor had also pledged never to raise taxes, the reality is that his appropriations represent the addition of an open-ended third city tax on DWP customers. Besides the annual 5% transfer, electric users absorb a 10% tax.

Riordan's aides claim that the appropriations will not impede the DWP's efficiency, since they only represent waste from poor management. They also cite the recent council-sponsored audit that confirms such waste.

Furthermore, they add, the mayor is not pocketing the money, and ratepayers will be repaid with safer streets.


The response, of course, is that the arbitrary $74-million transfer indicates his appointees are cutting sinew as well as fat. If these appropriations persist, even before symptoms of poor service become apparent, the first indication that the DWP is in trouble will come when Wall Street cuts the DWP's present excellent bond rating. This will increase the cost of borrowing money to compensate investors for the added risk of possible default.

On the question of ethics, it is becoming increasingly clear that the mayor is strengthening the Police Department at the expense of the DWP, and the public pronouncements about improving the DWP's efficiency are nothing more than a masquerade.

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