Valley VOTE Opposes LADWP Rate and Wage Increases

The Executive Committee of Valley VOTE opposes the proposed five-year increase in LADWP water and power rates and calls for a continuation of the salary freeze that is set to expire in 2016.

The “Benchmarking Analysis” produced in February by LADWP’s Corporate Performance Division with the help of two outside consultants reveals that LADWP spends more money on payroll, measured by total payroll dollars per customer, than more than 75 percent of comparable utilities. LADWP also spends more on pension and health benefits than other utilities.

LADWP’s analysis notes that wages in the L.A. metro area are 13 to 33 percent higher than wages paid by “peer utilities.” But a report in March from the California Policy Center found that “the average DWP employee receives compensation that is 155% greater than their non-DWP counterpart.”

The CPC’s analysis makes clear the DWP’s primary motivation in setting employee compensation is political in nature–specifically to accommodate the union and its members at the expense of ratepayers. Particularly alarming is that, as an unregulated monopoly, the DWP is able to pass increased payroll costs to its 4 million customers through higher rates and charges for the essential services of water and power. Consequently, millions of Los Angeles residents are being forced to subsidize lavish compensation packages that dwarf their own incomes.

Also pointed out in the report by author Robert Fellner is that LADWP made national headlines in 2012 and 2013 when Bloomberg reported LADWP garage attendants were making nearly four times the national average.

The Los Angeles Times found that the average pay for DWP employees was over $100,000 in 2012, approximately 50% higher than other city employees.
Bond ratings analysts at Moody’s, Fitch and Standard & Poor’s have reassured investors that while the process for raising base rates is slow, the presence of “cost adjustment mechanisms” enables LADWP to add extra charges to its customers’ bills.

Over the last 30 years, LADWP has borrowed more than $23 billion, according to data
from the California State treasurer, and LADWP’s benchmarking analysis found that its debt ratio is far worse than comparable utilities.

This is related to the indefensible transfer, every year, of 8 percent of the power system’s gross revenue for the previous year to the L.A. City treasury. The city received ratepayer funds of $247 million in 2013, $253 million in 2014, and $266 million in 2015. Standard & Poor’s projects that by 2020 the city transfer will be more than $320 million. The annual transfer equals or exceeds the $270 million in annual revenue that would be raised by the proposed five-year rate increase. Without the city transfer, the rate increase would not be needed.

Although L.A.’s city charter allows the transfer of surplus revenue, no reasonable person could conclude that LADWP has even one dollar of surplus revenue, not while it is pursuing rate increases and additional bond sales of billions of dollars. The city transfer may be illegal. It has been challenged in three lawsuits, recently consolidated into one case and set for trial.

Valley VOTE calls on Mayor Eric Garcetti and the City Council to oppose the DWP’s rate hikes, upcoming salary raises and transfers of “surplus” funds. The city transfer should be halted until the legal challenge is resolved. LADWP salaries should be frozen until a full examination of labor and benefit costs, a study recommended in the benchmarking analysis, is completed and made public.