DWP PAYS DOUBLE ON LAB MOVE FIXES COST $10 MILLION ABOVE PURCHASE PRICE.

Byline: James Nash and Kerry Cavanaugh Staff Writers

The Department of Water and Power's managerial troubles mounted Tuesday when Los Angeles officials disclosed that the utility paid $10 million - twice the purchase price - to make functional the Pasadena building where it set up a temporary water lab.

The disclosure came as the DWP's massive rate hike faces a legal challenge and on the same day that the board overseeing the DWP voted to accept a settlement of $4.7 million for construction defects in its $70 million Sun Valley water-testing facility that became mold-infected, allegedly causing illness to dozens of employees.

Millions of dollars were spent in an effort to fix the Anthony Building's mold problem so it could be sold to the Los Angeles Unified School District for use as a school but officials eventually found that the problem could not be fixed and decided to tear the building down and then relocated the water lab to Pasadena.

The water-testing lab, which the DWP occupied last year, had a price tag of $4.8 million and needed some repairs, but the costs have ballooned by at least $10 million because of inadequate cost analysis and underestimating the scope of the project, according to a DWP internal audit conducted this year.

``They get into a building and they make certain assumptions and certain decisions, and who ends up holding the bag? It's the taxpayers and (DWP) ratepayers,'' Councilman Tony Cardenas said.

The added costs come as DWP officials work to settle a series of lawsuits resulting from the mold-plagued Anthony Building in Sun Valley, which housed the water-quality lab and hundreds of employees.

Many of the workers in the four-story building fell ill due to mold that grew when water seeped through a stair tower due to construction defects, according to the DWP's lawsuit against the builders and architects.

A total of 143 employees also sued the builders and architects.

On Tuesday, the DWP commission approved settlements of $4.75 million with the builders and architects - a fraction of the building's $70 million construction cost.

The proposed settlement disheartened some city officials, who said the DWP is taking a huge loss on a building for which it should have had more legal protections.

Cardenas drafted a motion directing city officials to undertake more detailed environmental assessments of buildings the city is buying or leasing for long periods. He questioned whether city park or library buildings might also experience mold outbreaks without any recourse for the city.

DWP officials declined to comment in detail about the settlement, which is scheduled to be approved by a Los Angeles Superior Court judge by Friday.

The Anthony Office Building housed the utility's state-of-the-art water lab, and the DWP would have leased the lab back from the LAUSD under a sale agreement between the school district and the city utility.

However, the agreement changed in March 2003 after the DWP discovered the mold contamination and LAUSD officials decided they wanted to tear down the office building and construct a new school on the site.

Because of the change, the DWP lowered the sale price from $50 million to $37 million.

DWP critics say even the $4.75 million settlement - of which nearly $4 million comes directly from the builders and architects and an additional $775,000 from their insurer - still shortchanges utility customers.

``It seems to me there was clearly a loss ... and to get only $5 million means ratepayers are paying,'' said Sen. Richard Alarcon, D-Van Nuys, a candidate for mayor.

``This again calls into question whether it's appropriate to be raising water rates when you can't handle your affairs in the most effective manner as possible.''

Alarcon has organized an effort to roll back the DWP's 11 percent increase, which was approved by the council and Mayor James Hahn, as illegal. The DWP is expected to seek rate hikes of up to 33 percent in the next few years.

After abandoning the Anthony Building, DWP officials moved their water-quality lab to Pasadena but assured city officials they would be there for only a few years. But with cost overruns bedeviling that project, they now concede they will stay in Pasadena for at least an additional 10 years.

Councilman Tom LaBonge, who advocates moving the water-testing lab back to Los Angeles, said he understands the DWP's dilemma.

``I'm not disappointed,'' LaBonge said. ``I always want to get it done right and sometimes it takes time to do that.''

Jerry Gewe, the DWP's water operations chief, said he expects the lab to remain in Pasadena for 10 years to 15 years.

``It cost a lot more than we anticipated at the time of the sale,'' Gewe said. ``The board told us to get out. The only other option was to set up (a) trailer camp at Van Norman Reservoir.''

James Nash, [phone]

james.nash(at)dailynews.com