BURBANK AUDIT FAULTS MWD RATE-HIKE PLAN.

Byline: Lee Condon Daily News Staff Writer

Metropolitan Water District rates are expected to climb by 10 percent over the next five years, but auditors hired by the city of Burbank contend no rate hike is needed at all.

The audit by Barrington Wellesley Group, an Orlando, Fla.-based firm, claims the MWD is collecting $100 million a year more than it needs to operate and does not need to raise rates for 10 years.

City officials hope a concerted lobbying effort will convince the agency to reconsider the rate increases, which would come on the heels of a 21 percent increase in 1992-1993, 18 percent in 1993-94 and 7 percent in 1994-95.

``It's hard to find in there that they care much about ratepayers,'' said John Heaton, managing director for the auditing firm.

``It's a combination of policies that are more aimed at preserving the finances of the utility than they are considering the needs of the ratepayer,'' he said.

Heaton said MWD's financial strategy does give the agency a good profile on Wall Street, noting that the district enjoys excellent bond ratings.

Antoinette Christovale, the MWD's assistant chief financial officer, confirmed that the agency has had a more than $100 million surplus for each of the last three years as a result of unexpected credits from the state Department of Water Resources.

She said the MWD is concerned about ratepayers, but said that the price of its wholesale water to 27 member agencies in Southern California must be raised to pay for expensive construction projects. She dismissed the auditor's conclusions that a rate hike wouldn't be necessary for a decade as unrealistic.

The MWD is a public agency and a ``quasi-municipal'' corporation created in 1928 by several agencies and cities, including Burbank.

As Southern California's primary supplier of wholesale water, the MWD serves cities in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties.

Burbank Councilman Bob Kramer said the MWD board will be lobbied with the audit findings.

``Nobody in the past has questioned MWD. They have been this high and mighty agency,'' Kramer said. ``They don't respond to ratepayers. They show no concern for mom and pop at home trying to pay their water bill.''

Christovale said the MWD already has begun revising its rate strategy, and plans to impose smaller, regular rate increases rather than the large jumps that shocked customers in the early 1990s.

MWD is facing multibillion-dollar expenses, including construction of the massive 4,400-acre Domenigoni Valley Reservoir, new pipelines, water reclamation and other conservation projects.

Also under way are projects to meet new legislative requirements for the treatment of drinking water.

According to Heaton, the MWD should be financing major projects with more long-term debt which would be paid off by future users, rather than relying on current users who may not realize the benefits of the construction.

But Christovale said the MWD has only spent 20 percent of its money from ratepayers on capital projects since 1988 - a threshold set by the board.

Christovale said a parallel audit of the Burbank audit, performed for the MWD by KPMG Peat Marwick, is slated to be completed today.

Both the Burbank audit and the KPMG Peat Marwick report are scheduled to be discussed by the board's 51 directors at their September meeting.

Jerry Gewe, an engineer for the Los Angeles Department of Water and Power, said that many of the recommendations from the Burbank audit have been addressed in the MWD's recent rate refinement process.

While he said he agrees with some of the Burbank auditor's findings, he said some are ``overstated.''

``The MWD has substantial surpluses, but they have a massive undertaking coming up over the next 10 years,'' Gewe said.

Still he said the MWD has to do a better job of predicting how much they need to raise from ratepayers.

``They have a tendency to overestimate their expenses,'' he said. ``They certainly need to tighten up their act.''