Muni Budget Crisis Affects L.A. City Operations

By Published On: March 20, 2014

A billing system failure at the Los Angeles Department of Water & Power is spilling over into broader operations of the city of Los Angeles, affecting sewer replacement projects and solid waste management. That picture emerged March 19 at a joint hearing of the city council’s Budget & Finance and Energy & Environment Committees. “This is an emergency,” said council member Paul Krekorian. “We need to act on this.” The problem is that the muni collects rates not only for water and power in the sprawling city, but also to cover sewer operations and garbage disposal. Due to problems with a new billing system the department rolled out last fall, the muni ceased billing some 65,000 customers after it found that the system created statements riddled with errors. It sometimes drastically overcharged households and businesses. In the interim, the department has apologized to its customers and has been scrambling to resolve the problems, including hiring more staff to help those with billing issues and to begin to collect money that has been due for as long as six months. Meanwhile, the department has slowed its own spending to upgrade dilapidated infrastructure due to the revenue shortfall. So far this budget year, said muni chief financial officer Philip Leiber, it has spent $415 million less than planned, including deferring $377 million of planned capital spending on its power system. Now, the lack of collections of sewer money has slowed sewer pipe replacement projects halfway done, complained Krekorian, leaving some neighborhoods with dug-up streets. “Within three months, we should make substantial progress,” department power systems planning & development director Randy Howard assured the council committee. Also, due to the billing system problems, there’s a shortfall in collecting utility user tax revenue and transferring money from the muni’s power fund to the city’s financially tight general fund. City inspector general Fernando Campos explained that utility tax collections are falling short by $9-$12 million. The shortfall in sewerage fees is $50 million and under-collections for garbage total $11 million, according to Campos. This fiscal year the muni is to transfer $253 million of power sales revenue to the city’s general fund. So far, according to Campos, it has sent $151.8 million, but the remainder hangs in the balance. At the heart of the problem now is the slowness of the city’s hiring system, department officials told council members. Since the 2008 recession, the city let its personnel department—which handles hiring for the department—shrink since it wasn’t hiring. Now, though, the department needs to hire new customer service representatives and meter readers to resolve the billing crisis. Limited capacity in the personnel department has hampered its efforts, perpetuating the muni’s inability to collect rates. Department officials explained that historically it has regularly estimated bills and then squared them up when meters are read. However, they explained, the new billing system did such a poor job of estimating power and water usage, it now needs to send meter readers to its customers to vet and resolve the errors. The problem is it doesn’t have enough meter readers to make the rounds to 1.4 million households and businesses in a speedy way. Eventually, department officials told the council, they will resolve the problems and collect the money so the city receives what’s due. However, they said that first it’s necessary to make further fixes to the billing system and to hire and train more meter readers and customer service representatives. The council committees told the department to report back on its progress in 30 days.

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