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Posts Tagged ‘DWP rate increase’

The local press has lately focused on one key controversial element of the proposed DWP rate increase, one which the Mayor, City Council and General Manager Marcie “D’Arcy” Edwards would rather not discuss.

That’s the 8% transfer fee and the utility tax (10% paid by residential users and 12.5% by commercial entities). Together they will absorb around 20% of the gross increase and direct it to the city’s general fund, where it will be used for anything other than upgrading the neglected power and water infrastructure.

While allowed by the City Charter, this practice is unconscionable and the transfer component may even be declared illegal by the courts.

In all, around $250 million per year for the last several years has been diverted from what would be a source of funds available to make considerable headway in long-overdue capital improvements. That alone makes the transfer morally unethical.  It is like siphoning cash from your kids’ college savings accounts to buy a new car.

Yet the mayor, his allies and Marcie Edwards like to call the tax and transfer a dividend.  They say we are the shareholders of the DWP.  We are simply paying ourselves.

I know of no other dividend where the recipient does not have the right to decide how to spend it.

In a recent op-ed piece in the LA Times, Gregory Lippe ( a Valley CPA) and Richard Moss (a former DWP Commissioner) suggested keeping the proposed increase free of any tax or transfer fee. This would allow the additional revenue to flow 100% to improvements.

The two gentlemen pointed to the mayor’s position that the increase has nothing to do with feeding the city’s budget.

Perhaps we should refer to it as a supposed position because the mayor has not shown any indication to end the levy on ratepayers’ payments.

It’s time for the mayor to show his true colors. Will he back Lippe’s and Moss’ very sensible approach?

Garcetti’s track record does not provide cause for optimism.

He has failed to make any reforms at the DWP.  His pick for GM, Marcie Edwards, co-whined a letter with Brain D’Arcy defiling Ron Galperin’s audit of the out-of-control non profit trusts, and she has yet to remove any manager associated with the costly failure of the billing system. It appears the DWP is on a path of business as usual – no accountability, no integrity.

Does this type of management warrant a 20% premium?

It is going to be tough enough assuring the increase will be spent wisely and used appropriately.

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Anyone can run numbers, including the crowd that passes itself off as management at DWP.

Attendees at last week’s Valley Alliance of Neighborhood Council meeting got to listen to Marcie Edwards deliver a dog and pony show about proposed rate increases, owing to the need to replace aging water infrastructure and increase power capacity.

No one is doubting the need, but the DWP was not in a full disclosure mode and offered a litany of excuses for its failure to address the problems over the years.

The utility has been feeding pablum to the public about its rate increase plan in an attempt to silence possible criticism. Characterizing the proposal as a 5-year plan is insultingly disingenuous. The higher rates will not go away after five years. With 20% of water pipes destined to reach the end of their useful lives over the next 15 years, the rate increases for the water portion of our bills alone will continue for years to come.  It took an astute attendee at the presentation to pull the admission out of Edwards.

There will be debt service on new bonds for both water and power reaching out 30 years from the issuance dates, which will also contribute to ever-increasing rates.

Once again, no one is doubting the need for restorative capital investments.

But since DWP and the City Council have neglected upgrading and replacing delivery and generation systems, yet continued to divert an annual transfer of a bogus operating surplus (currently around $245 million) from the utility to the general fund, it is only fair for the public to demand an end to that process.  A large part of the surplus must be retained by DWP, and the rate increase reduced accordingly, to help fund the vital improvements.

Edwards, as her predecessors, likened the transfer as a dividend to shareholders.  Anyone receive a dividend check from DWP in the mail lately?  Ever?

I reminded Edwards that well-run companies do not declare dividends when they have ongoing, significant cash needs.

She did not understand the question, instead falling back on how much money DWP has saved its ratepayers as a result of the last labor negotiations.

Savings?

I suppose so, in the same sense as when a burglar does not steal all of your valuables.

Also, she had the hutzpah to compare LA’s leakage rate as favorable to other major cities, all on the east coast – much older systems, not to mention they are not located in a desert where the importance of every drop is magnified many times.

When I asked Edwards if anyone in management had been fired as a result of the costly billing system debacle and the pathetic response to correct customer accounts, she blamed the civil service system and the fact she can only hire ten managers on her own.

Almost any CEO will tell you that ten well-picked hires can make a huge difference in any organization.

According to Jim Collins, author of Good to Great, “Start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats.”

I think Marcie Edwards missed the bus.

Ten competent leaders can establish and enforce demanding standards.  If their direct reports are not cutting it, they can document their shortcomings and make a case for removal, demotion or termination of the weakest links.

Yes, it takes work, but highly motivated leaders are persistent and will rise to the occasion.  Edwards, herself, must step up and support her direct subordinates along those lines instead of throwing up her hands. Her current approach will preserve a culture that rewards incompetence or mediocrity.

As ratepayers, we need to insist on sound management.

If not, the cost of implementing the very critical capital improvements over the next 15-20 years will be far more expensive than necessary.

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