COUNCIL BLOCKS DWP BOND SALE.

Byline: Dan Laidman Staff Writer

The City Council surprised the Department of Water and Power on Tuesday when it blocked the utility's proposal to sell almost $2 billion in bonds amid concerns about the underwriting process.

The council voted 9-4 to reject the issuance of the bonds, which would pay to upgrade the water and power infrastructure and replenish cash reserves spent on a natural gas field in Wyoming.

Several council members said they wanted the DWP to develop a proposal that provides a greater underwriting role for small and locally based businesses.

``I'd just like them to re-evaluate how they're working with the firms,'' said Tony Cardenas, the Van Nuys-area councilman who introduced the motion that halted the bond sale.

The largest section of bonds, $950 million, would go to upgrading buildings and facilities that are part of the DWP's power system.

A separate $250 million bond would replenish the department's cash after the DWP joined with several other agencies to buy a site in southwest Wyoming that has been providing almost 13 percent of the city's natural gas requirements.

The DWP is also seeking to issue $600 million in bonds to improve water quality and distribution systems.

No impact on rates is expected, according to DWP authorities. However, some officials expressed concern Tuesday that changes to the planned bond issuance could affect the city's credit rating.

``Wall Street pays attention to these kinds of decisions,'' said Councilwoman Janice Hahn.

Issuing the bonds now would save millions of dollars because of favorable interest rates, according to DWP officials. The agency's general manager, Ron Deaton, said after the council vote that he and his colleagues will be watching interest rates to see if the delay will affect finances.

The infrastructure projects should not be affected by Tuesday's decision as long as the bonds return to the council for approval within about six weeks, Deaton said.

A representative of the City Attorney's Office cautioned the council that there would be legal concerns if the panel wanted to set criteria for underwriting participation based on businesses being owned by women or minorities.

While a report from the Commerce, Energy and Natural Resources Committee suggested this may be the case, the council members said they were concerned with fair representation for small businesses and those based in California.

The current proposed underwriters, selected by the DWP after a competition, include four Wall Street powerhouses and two smaller financial services firms with large California presences.

Councilman Bill Rosendahl said that, with such a large amount of money involved, he wants the DWP to clarify how the underwriting process breaks down.

``I want to understand how we make the decisions, and I want to be more supportive of California firms if they have the same track record and viability as the big shots back East do,'' he said.

Dan Laidman, [phone]

dan.laidman(at)dailynews.com