DOWN THE DRAIN? CITY ATTORNEY STOPS UP SEWER SERVICE AUDIT.

Byline: Patrick McGreevy Daily News Staff Writer

San Fernando Valley residents have long suspected the city is overcharging them for sewer service, but an audit ordered by the Los Angeles City Council that would have provided answers has been quietly stalled by the City Attorney's Office - for five years.

The delay in the audit outrages residents, who say the city is covering up wasteful spending that has sent bills soaring, and it has prompted City Council members to renew demands for the investigation.

Ivan Shinkle, a North Hollywood resident who is part of a separate class-action lawsuit claiming sewer fee overcharging, is convinced the audit would uncover serious financial waste.

``This sewer service charge issue is something that a lot of people are complaining about. They should have done something by now.''

Councilman Joel Wachs, who won council approval of the audit in May 1993, said there is plenty of anecdotal evidence that the city is wasting millions of dollars, forcing ratepayers to make up the difference, but only a full audit would provide answers. Consider:

Sanitation Bureau managers decided to build a new well at the Terminal Island plant rather than a less expensive renovation. The well was budgeted at $3 million, but cost $14 million and was still not complete four years after the project began.

Sanitation Bureau engineers planned to replace three centrifuges used for sewage treatment for $2 million, but the Public Works Department instead bought one new centrifuge, which was so large that the city was faced with spending $30 million for a new building to house it.

Wachs claimed the Public Works Department was circumventing a rule requiring council approval of contracts of three years or more by awarding multimillion-dollar contracts for one year with extensions that kept the firms doing the work for up to eight years.

The councilman noted that an audit done a few years ago on the Department of Water and Power has resulted in reforms that are saving hundreds of millions of dollars.

``The sewer system is in the same mess as the DWP has been,'' Wachs said. ``Historically, they have both been totally bloated and overstaffed and inefficient and wasteful, with no real independent fiscal oversight.''

City defending lawsuits

Despite the City Council order for an audit, City Attorney James Hahn said he delayed the investigation, fearing it would play into the hands of 11 other cities and sanitation districts that were challenging their fees for tying into the city system.

``We were in litigation back in those days,'' Hahn said. ``We didn't want to provide free discovery to the other side and hurt ourselves in the litigation.''

But Hahn and Assistant City Attorney Chris Westhoff disputed Wachs' claim that the city attorney was afraid the audit would expose massive waste.

``I don't think there's necessarily a lot of waste in there,'' Westhoff said.

Shinkle's class-action lawsuit, which is ongoing, claims that the city's formula using water consumption to determine sewer service charges is flawed because many large lots in the warmer climate of the Valley used more water for irrigation of landscaping that never went into the sewer system.

The lawsuit used city records to estimate that 230,000 city residents, many in the Valley, had been overcharged by $65 million or more in the four-year period ending in July 1996.

The lawsuit demands refunds to those who were overcharged.

The sewer service charge for the average single-family home soared from $13 per month in 1989 to $20 in 1992, a hike of 53 percent.

The actual rates went up 70 percent from 1990 to 1992, according to Randy Kuroda, a senior civil engineer for the Sanitation Bureau.

The rate is higher than the average charge because the charges are a function of both the rate and water consumption, and city residents are not using as much water as they have in the past.

Rates are scheduled to go up 2 percent more on July 1, 2001.

As the project to upgrade the Hyperion sewer treatment system winds down, the annual cost of construction and debt service on construction bonds has dropped from $553 million in 1991 to $460 million this year.

However, the cost of operating and maintaining the system has climbed from $226 million in 1991 to $229 million this year.

Sanitation Bureau Chief Judith Wilson said the city has been able to avoid rate increases for the past six years because a joint labor-management committee has identified efficiencies and savings that have cut the operations and maintenance budget, including a $9 million reduction this year.

``That's a lot of money,'' she said. ``What we're trying to do is mitigate against a rate increase.''

The bureau has trimmed the work force from 1,720 in 1995 to 1,424 today and is challenging the $4 million charged to the wastewater system by the DWP for sending out bills.

Wachs gave the Mayor's Office and Sanitation Bureau credit for making some changes, but added, ``There are a lot more that could be made, but everyone remains afraid of going ahead with the same independent benchmarking we did with the DWP. I think we're talking potentially hundreds of millions of dollars.''

Hahn said he advised against the audit because it would have been irresponsible to give the city's opponents legal fodder.

Cities claimed overcharging

At stake for Los Angeles was about $65 million that cities, including San Fernando, El Segundo, Santa Monica, Culver City and Beverly Hills, initially withheld in disputed payments.

The cities believed they were being charged too much for sewage treatment, including a larger than fair share of the cost of rebuilding the Hyperion treatment plant, said Mike Drake, the Public Works Department manager for the city of San Fernando.

``We thought they were overcharging us,'' Drake said.

Los Angeles filed a lawsuit five years ago, but the matter was delayed Rfor some time when political leaders, including Council President John Ferraro, took over the issue to try to negotiate a settlement.

``They took it out of our hands,'' Hahn said. ``I don't think anybody thought it would take this long to wrap this up.''

Many of the cities have since paid the originally disputed bills and are ``a couple of months'' away from signing a 30-year agreement to settle the lawsuit and pay what Los Angeles believes it costs to transport and treat the sewage from those cities, Westhoff said.

Renewed calls for audit

Councilmen Hal Bernson and Wachs renewed their complaints during a packed council meeting a month ago in Encino, where Bernson charged the ratepayers were being ``ripped off'' by the sewer charges.

Westhoff said the council will get its audit once the legal dispute is resolved, but Hahn said he is willing to let the audit go forward now, when the litigation issue appears close to settlement.

``I think it's a good idea to do it now,'' Hahn said.

Hahn has yet to give Chief Legislative Analyst Ron Deaton the go-ahead to get bids for the audit.

Shinkle said city residents have lost five years of savings that might have been possible if the audit had been done in 1993.