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Los Angeles Times Interview

William McCarley

On 32 Years as the Ultimate City Hall Insider

March 30, 1997|JODI WILGOREN | Jodi Wilgoren covers City Hall for The Times

When William R. McCarley started in the Los Angeles Bureau of Street Lighting in 1965--his first full-time job--he planned to spend a couple of years and then "look for a real job." But he never left City Hall, instead climbing the Civil Service ladder to the highest levels.

A decade as chief legislative analyst, the top policy aide to the City Council. A year as chief of staff to Mayor Richard Riordan. And 2 1/2 years as head of the behemoth Department of Water and Power, the nation's largest publicly owned utility and the city's largest department, with a budget of $2.5 billion and about 9,000 employees. He even met his wife at City Hall.

A sign that his era had ended, McCarley said, is the city's plan to build a new sports arena on the site of the Convention Center's North Hall--one of the first projects he worked on. "I'm like an old NFL quarterback," McCarley said during a conversation at his Mission Viejo home the first Sunday of his retirement. "My bell's rung, my knees are shot, but I do have everybody's playbook."

The native California son of an Irish truck driver, McCarley arrived at City Hall when it was the tallest building downtown. In 1984, he became CLA, considered one of the city government's toughest posts because of the politics involved in serving 15 separate lawmakers. When Riordan--a lawyer-venture capitalist with little government experience--was elected in 1993, he picked McCarley as his chief aide in an effort to complement his outsider perspective. The relationship was rocky, lasting only a year.

Close to the three decades of service required for a full pension, McCarley was named head of the DWP--a move many believe was simply a holding place until his retirement. But instead, McCarley--the first non-engineer to run the city-owned utility--attacked the new job with vigor. Responding to a private study showing the department rife with waste, he cut $100 million from its annual budget by slashing 2,000 jobs, partly through a controversial buyout plan. Then he reduced the rates for DWP's large industrial customers, which bring in nearly half the department's revenue.

All this was to prepare for 1998's deregulation of the utility industry, when DWP will, for the first time, have to compete with private companies for customers. The city faces a staggering $7.9 billion in debt because of its investments in the water and power system. Now, leaders must figure out how to pay that debt off while continuing to lower industrial rates--or risk a politically unpopular rate increase for residential customers.

McCarley, 57, decided to leave this spring, after a spat with the City Council over whether to boost his salary. He has had job offers, but vowed to spend at least 60 days at home, some 52 miles from Los Angeles, where he says he left his heart.

The garden needs attention, and it's been a long time since he worked on his beloved photography. The first weekend of his retirement, he baked banana bread. "I've been riding the tiger a long time," he mused. "I need a little rest."


Question: You're leaving DWP at a time when the department faces its biggest challenge ever: competing in a newly deregulated marketplace. How can the city best adjust to the changing environment and avoid a huge rise in residential rates?

Answer: It's never a good time to leave, there's always something going on.

To the people within the department: Learn how to work differently. This is no longer a utility where hardware is the answer. The system is not king. The customer is king or queen.

One of the more controversial things I did at the end was suggest that the dividends [rate discounts and subsidies to other city departments] be reduced . . . [Other utilities], over the past several years, they've been cutting dividend, and the price of their stock went up. They were using those dollars to buy out their debt to make themselves competitive.

During that same period, Water and Power--at least until I got there--was going on issuing debt, business as usual, and the dividend was high. Our dividend is 17%. Now what utility's commission would allow it to pay out a dividend of 17%?

It's a fool's paradise to think that rates don't need to be adjusted. The higher industrial rates need to be brought down to a competitive level, and I think it's possible to keep the residential rates substantially and significantly below that of Southern California Edison and still pay the debt. It's possible to keep rates below Edison's . . . but higher than they are now.

All of this is very complicated when you get into it, but it's really simple when you back off: Whose ox is going to get gored?

Q: You were the first person to run DWP who was not an engineer. What challenges did you face as an outsider, and how did you overcome them?

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