Hahn raids DWP funds (electric prices going up to cover 3% raise for employees and no layoffs)

LA Daily News ^ | 4/21/04 | Rick Orlov

[BurbankKarl]

Hahn raids DWP funds $300 million shortfall covered with utility's profits, 300 job cuts

By Rick Orlov Staff Writer

Mayor James Hahn proposed on Tuesday a $5.3 billion spending plan for the coming year that will be balanced by taking $239 million -- including an extra $60 million -- from the Department of Water and Power and drawing down $134 million from this year's reserves.

Overall, the budget is 3 percent bigger than the current year's but employee payroll and related costs have risen sharply and state funding likely will be cut, so Hahn faced a shortfall of up to $300 million, which has led him to propose sharp cuts in some popular programs and elimination of 300 city jobs.

"Despite tough economic years, we have a balanced budget that reflects my priorities and the priorities of the people in the city," Hahn said at a City Hall news conference.

Hahn said the budget relied on input for the first time from neighborhood councils and incorporated a new program his staff developed using cost analysis to set a benchmark for how much it costs to provide a service.

"We determined how much money we would have to spend, we determined the programs we wanted, and when the money ran out we stopped funding programs."

The budget now goes to the City Council for consideration. Hearings are scheduled to begin next week by the council's Budget and Finance Committee.

Several council members criticized various aspects of the mayor's proposal. Councilman Bernard Parks, who chairs the Budget and Finance Committee, said all the cuts proposed by the mayor will need to be examined closely.

"In some cases, they might be justified," said Parks, who is exploring a mayoral campaign and has accused Hahn of failing to lead the city effectively. "But before we cut some of these programs, we need to look at the services they provide."

The biggest savings, some $17.1 million, will come by eliminating nearly 300 positions in the budget -- 132 of which are filled. Hahn said other jobs will be found for those workers.

At the same time, Hahn said, the budget includes funds for a 3 percent increase in pay for city workers and increases in pension and workers' compensation costs.

There are some small increases in spending as well.

Among these are hiring 30 new police officers and 30 new firefighters to provide additional staffing at 10 task-force units. Hahn also is proposing to have an ambulance and paramedic at each fire station in the city.

Also, as he did last week, Hahn highlighted his proposals to double to 435 miles the amount of streets that will be resurfaced, increase spending to fully staff the Library Department and its branches, expand the LA's BEST after-school program by $1 million for 500 more kids and provide money for the affordable housing trust fund.

In addition, he said, full funding will be provided to open the new San Fernando Valley police station.

Programs being proposed for elimination, Hahn said, include removing police officers from the DARE program being operated by the Los Angeles Police Department, with the hopes the shortfall will be made up by private groups or in another fashion.

Also, the mayor is calling for eliminating the popular bookmobile program operated by the Library Department as well as bulky item drop-off centers.

In addition, Hahn wants to consolidate the 13-person Environmental Affairs Department within the Bureau of Sanitation into a newly named Bureau of Environmental Services. As part of that, the Environmental Affairs responsibility for overseeing city landfills will be transferred to the Building and Safety Department.

The action drew protests from some City Council members and environmental groups, which were being feted by the council as part of the Earth Day celebration this week.

"I think this is something that needs very close scrutiny," said Councilman Antonio Villaraigosa.

Councilman Eric Garcetti said he also was concerned about merging the agencies.

"A lot of times, the loss of an agency means there will be a loss of interest in their programs," Garcetti said. Officials said the department has an annual budget of $44 million, but only $1 million of that comes from the city general fund.

The mayor, faced with strong protests, dropped his plans to consolidate several other smaller agencies -- Aging, Cultural Affairs, Disability, Children, Youth and Families and Status of Women -- into one new agency. However, the departments will face a 20 percent budget cut this coming year.

Hahn said his own office will take a 10 percent cut in its spending, going from $7.4 million to $6.7 million. However, budgets for the City Council will increase slightly, from $20.9 million to $21.8 million.

Coming into the budget year, the city had projected a $300 million shortfall in revenues. Officials said it was covered through reductions totaling $79 million across city agencies and $227.5 million in extra revenue.

Included in this is a reserve fund of $134 million that was built up over the year and increasing the amount transferred from the Department of Water and Power by $60 million. Another big gain was seen in the hotel bed tax, which brought in $19 million more than expected.

But even with that, Hahn said he believes the city will have to hold off on major revisions to its business tax system.

Saying he did not think the city can afford the loss of massive amounts of tax dollars, Hahn said he would prefer to see the issue dealt with in the future.

Councilwoman Wendy Greuel, who has been pushing business tax reform, said she will continue with her efforts despite the mayor's views.

"My concern is that he continually lists business tax reform as a top priority to make Los Angeles business-friendly and now he says we can't afford it," Greuel said. "I don't think we can afford not to do it.

"We are not going to grow as a city and create the jobs we need and compete with our neighboring cities unless we have business tax reform. It might cost us some money in the short term, but we will make more money in the long run."

Deputy Mayor Doane Liu, who oversaw preparation of the budget, acknowledged an increase in the transfer from the DWP to help balance the spending plan.

"We took our traditional 5 percent from the water side," Liu said. "On the power side, which generates the most revenue for the city, they had an extra $60 million in cash that we are using for the city in addition to the 7 percent of revenue we are taking."

Liu said the DWP could not use the money to offset the proposed 11 percent increase in water rates.

Also boosting the city's prospects this year was the large reserve fund it developed -- primarily through the hiring freeze in effect for most of the year.

"No one has done a specific breakdown, but I think it would be safe to say most of the reserve fund is from salaries we did not have to pay out," Liu said.

The overall number of city workers has dropped from a peak of 35,879 in 2002-03 to a projected staffing level of 35,507 in the coming year, which includes the 300 jobs being eliminated.