DWP'S PROPOSED METER HIKES TICK OFF COMMUNITY.

Byline: James Nash Staff Writer

Despite broad opposition from neighborhood councils and many unanswered questions, the Los Angeles City Council is moving quickly to approve a controversial 18 percent hike in water rates.

A showdown could come as early as this week if, as many expect, the City Council takes up the rate increase - 11 percent in the first year, 7 percent in the second - with the Department of Water and Power claiming its credit rating is in jeopardy unless the hike is approved quickly.

A bond analyst with a major credit rating firm scoffs at that DWP claim and community groups assert the DWP has offered only flimsy justification for the increase and the council hasn't thoroughly examined the plan or the utility's costs, including its high salaries and funding of public relations and other programs.

The rate hike - needed to pay for securing the water system against terrorism and to upgrade water quality, according to the DWP - will cost the average homeowner about $50 a year but hit the San Fernando Valley hardest because of larger lots and higher summer temperatures.

Community opposition to the rate increase has been building over several months, with some people calling it a tax increase in disguise and others accusing the DWP of ignoring the public and bypassing the city's new system of advisory neighborhood councils. About 30 of the panels have come out in opposition to the rate increase.

``Even if you assume the 18 percent is justified, there is no reason we need the full amount now,'' said Jim Alger, a neighborhood council organizer from Porter Ranch who is spearheading opposition to the increase.

``The DWP has created an emergency situation. By screaming emergency, they've made it so things are not getting vetted properly.''

The DWP insists that the increase is justified by the need to protect the water system from terrorism and to meet new federal water-quality mandates. If the increase isn't approved in the next several weeks, the municipal utility's bond rating will suffer and ratepayers will be socked with higher interest payments in the long term, DWP officials said.

The DWP plans to borrow $1.5 billion over the next five years to improve its reservoirs and network of pipes, said Gerald Gewe, the utility's assistant general manager for water. If the DWP's bond rating is downgraded, it could be hit with interest payments of $2 million a year higher than anticipated.

``If this drags out for a month or two, it's probably going to affect our bond ratings,'' Gewe said last week.

But Peter Murphy, a director at Standard & Poor's who specializes in municipal utilities, said there's no special urgency to the DWP's rate increase.

``They've been discussing a plan to raise rates for over a year. I don't have any requirements as to when that occurs,'' he said.

Councilman Tony Cardenas, who chairs the council committee that deals with the DWP, said the utility had failed to make its case for an 18 percent increase. Cardenas said he could support an 11 percent hike over one year to keep the utility solvent.

``I personally don't appreciate any department putting a gun to the council's head and saying, 'We're out of time and we're coming up against a bond rating.' There hasn't been enough time to come to the council. Vet it out appropriately.''

In fact, the proposed rate hike went to only one of the three council committees that were scheduled to hear it - Cardenas' Energy, Natural Resources and Commerce committee. Two other council panels - Budget and Finance and Environmental Quality and Waste Management - declined to take up the issue.

Councilman Bernard C. Parks, who chairs the Budget and Finance committee, said it wasn't necessary to take the rate increase to three committees.

``In my judgment, there was no need for three separate hearings when this had already been discussed (in Cardenas' committee).''

But Alger, of the Northridge West Neighborhood Council, said the decision to bypass the two council committees was part of a pattern to push through the rate increase with little public comment or scrutiny. He noted that the DWP approached neighborhood councils with the proposal only after city officials scolded the utility for freezing out the public.

Joe Vitti, a member of the Granada Hills North Neighborhood Council, said the process is flawed.

``The general public really wants a lot more justification for this increase,'' said Vitti, president of Valley Voters Organized Toward Empowerment. ``People are really going to be annoyed and upset if (council members) slip it through.''

Councilman Greig Smith said he doesn't support the rate increase and would call for an outside audit of DWP's finances whenever the utility seeks a rate increase. DWP officials are essentially asking the council to trust them on the need for an 18 percent hike, which would generate about $65 million next year, Smith said.

``I have a very hard time believing 18 percent is justified,'' he said.

Gewe said an outside auditor couldn't project the DWP's need for infrastructure or water-quality improvements.

``There are shades of judgment as to what kind of program would be required, and that's not something an auditor could tell you,'' Gewe said.

Cardenas said he'll ask the council to approve an 11 percent, one-year increase while holding off on the second phase.

Dominick Rubalcava, president of the DWP commission, said that idea could jeopardize the DWP's bond rating.

``That proposal is done in a vacuum when considering Wall Street,'' Rubalcava said. ``It creates a real, real problem. What Wall Street likes and what Wall Street responds to is predictability.''

Murphy, the Standard & Poor's analyst, said he couldn't quantify the size of the increase the DWP needs to meet its bond obligations. But he agreed with Gewe that the DWP's planned expenditures - $132 million for security measures and $741 million for water-quality improvements over the next six years - make a rate hike inevitable.

``We're taking a long-term view that the L.A. DWP will continue to make prudent financial decisions and meet its obligations,'' Murphy said.

James Nash, [phone]

james.nash(at)dailynews.com

WHO TO CALL

To comment on the Department of Water and Power's proposed 18 percent rate hike, contact Mayor James Hahn or your City Council member:

Mayor James Hahn - [phone] or [phone]; mayorhahn(at)mayor.lacity.org

District 1 - Ed Reyes: [phone]; reyes(at)council.lacity.org

District 2 - Wendy Greuel: [phone] or [phone]; greuel(at)council.lacity.org

District 3 - Dennis Zine: [phone] or [phone]; zine(at)council.lacity.org

District 4 - Tom LaBonge: [phone] or [phone]; labonge(at)council.lacity.org

District 5 - Jack Weiss: [phone] or [phone]; weiss(at)council.lacity.org

District 6 - Tony Cardenas: [phone] or [phone]; cardenas(at)council.lacity.org

District 7 - Alex Padilla: [phone] or [phone]; padilla(at)council.lacity.org

District 8 - Bernard Parks: [phone]; parks(at)council.lacity.org

District 9 - Jan Perry: [phone]; perry(at)council.lacity.org

District 10 - Martin Ludlow: [phone]; ludlow(at)lacity.org

District 11 - Cindy Miscikowski: [phone] or [phone]; miscikow(at)council.lacity.org

District 12 - Greig Smith: [phone] or [phone]; smith(at)council.lacity.org

District 13 - Eric Garcetti: [phone]; garcetti(at)council.lacity.org

District 14 - Antonio Villaraigosa: [phone]; villaraigosa(at)council.lacity.org

District 15 - Janice Hahn: [phone]; hahn(at)council.lacity.org

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WHO TO CALL (see text)