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DWP Backs Down on $73.5 Million Transfer to the City General Fund

DWP Interim General Manager Austin Beutner and other top utility
officials have recommended the Board of Commissioners approve the transfer next
Tuesday of $73.5 million from power revenue to the city general
fund.

Withholding
the promised money, part of the DWP’s commitment to turn over $220 to
the general fund this year, was used as leverage to force the City
Council into approving a permanent power rate hike of nearly 5 percent
starting July 1 — the first of what is likely to be increases that
total 20 to 30 percent for many customers in the following months.

The
action relieves some of the pressure on the city to end the fiscal year
with at least a modest reserve fund and suggests that the $257 million
proposed surplus power revenue transfer expected for next fiscal year
which has a $484 million deficit that has been cut down to $80 million
thanks to $153 million in one-time revenue plus furloughs and possibly
some layoffs.

Here’s the item from the board’s agenda:

Item 19.
(Recommended by Chief Operating Officer and Chief Financial Officer)
(Approved
by General Manager)
Resolution consenting to the adoption of an
ordinance by the Council of the City of Los Angeles transferring from
the Power Revenue Fund to the City during the 2009/10 fiscal year, the
sum of $73,475,000.

Council
approval by ordinance is required.

LADWP BOARD APPROVAL LETTER



PURPOSE



IF YES, BY WHJCH- CITY
CHARTER SECTION: 344



 



To
authorize the adoption of an Ordinance by the Los Angeles City Council to
transfer
surp
lus money from the
Power Revenue Fund of the City
Of Los Angeles
Department of
Water and Power (LADWP) to the Reserve Fund of the City of Los Angeles (City)
dur
ing the
2009/10 fiscal year, ln the amount of $73,475,000. This amount is
available for transfer
based on a review of the Power System’s operat
ions as of the close of the 2008/09 fiscal
year. This amount is in addition to the
$147 million approved by this Board on

February 2, 2010.

BACKGROUND

The
Power System transfer being recommended is based on the f
inancial results of
the
Power System. This
$73,475,000
will bring the total
transfer to the City to eight percent of
the prior fiscal year’s (Le. fiscal year
2008/09) audited gross operating revenues. The
transfer is subject to the following bond covenants:

1)      
No transfermay exceed prior fiscal year’s net income;
and

2)      
No transfer may result in prior fiscal year’s surplus less the 2009/10 transfer amount
being less than thirty-three and one-third percent
(33-1/3%) of the total
indebtedness (including the current portion) outstanding not more than ten days

prior to the date of such transfer.

Based
on the calculat
ions
as shown
in
Attachment A, the LADWP recommends a total
transfer of
$220,475,000 during the 2009/10 fiscal year, which is
in compl
iance with the
bond covenants. Of this amount,
$147,000,000 was approved by this Board on
February 2, 2010. Approval is being requested for the
additional
$73;475,000.



Board of Water and
Power Commissioners
Page 2

April 28, 2010

This Resolution
provides for
$73,475,000 to
be transferred within 10 days after the effective
date of the Ordinance in one lump sum payment. This transfer is contingent upon
the City’s
payment to the Power Revenue Fund of all monthly charges for power services for
which
the LADWP has billed the City.

COST
AND DURATION

$73,475,000 paid during fiscal year 2009/10.
FUNDING SOURCE

Fiscal Year: 200911 0

Functional Item No.:
Not Applicable

Location in Budget: Power Revenue Fund of the Los Angeles Department
of Water and Power

The Financial Services
Organization reviewed and validated funds on
April 27, 2010.

FISCAL
IMPACT STATEMENT

Approval of this
resolution wilf decrease the fund net assets of the Power System by
$73,475,000.

LOS ANGELES CITY COUNCIL APPROVAL

Per Charter Section 344, City Council approval is required. A City Administrative
Office

                                                                                                        Report is not required.    

RECOMMENDATION

It is requested your Honorable Board adopt
the attached Resolution recommending the
Los Angeles City Council’s approval of an Ordinance authorizing the transfer of
surplus
funds to the Reserve Fund of the
City.



 



AMS:II
Attachments

e-clatt
Austin 8eutner
Raman Raj
Richard M. Brown
Aram Benyamin
James B. McDaniel

               Cecilia K.T. Weldon
               Lorraine
A Paskett
              Jeffery L. Peltola

               Maria Sison-Roces 
              
Ann M. Santilli


                                                             Attachment A

Power System

City Transfer Calculation
For Fiscal Year 2009-10
and Bond Covenants Compliance Tests

Based on Audited
Financial Data for Fiscal Year Ended
June 30, 2009
(amounts in thousands)



 



Gross Operating Income

Transfer percentage

City Transfer A.mount for
fiscal year 2009110

Transfer Amount already
approved by the Board

Remaining transfer to be approved

Test 1:No transfer may exceed
prior fiscal year’s net income.

Net Income for fiscal
year ended June
2009

Conclusion: Transfer amount is
less than Net Income.

Test 2: No transfer may result in prior fiscal year’s Surplus
less
the
2009110 transfer
amount being less than thirty-three
and
one
-third percent (33-1/3%) of the total indebtedness
(including the current portion) outstanding not more than
ten days prior
to the date of such transfer.

Surplus as of June
30,
2009
            $4,557,311                                                         Less: 2009/10 City Transfer Amount $220,475

Adjusted Surplus $4,336,836

Total debt outstanding
including current portion as of
June 30, 2009  $5,459,735
Debt issued since June
30,
2009

Total Indebtedness

Thirty-three and
one-third percent

33.3% of
Total Indebtedness

Adjusted Surplus less 33.3% of Total Indebtedness

Conclusion: Adjusted Surplus is greater than 33.33% of
Total
Indebtedness





                               RESOLUTION NO. _______ _

BE IT RESOLVED:

1.        
That
the Charter provides that this Board may, after the close of a fiscal year,
consent to a transfer of surplus money from the Power Revenue Fund to the
Reserve Fund of the City based on audited financial data; and

2.    That this Board finds and determines after first considering, and subject to, all
covenants made by the Department with respect to transfers from the Power
Revenue Fund, that there is surplus money in the Power Revenue Fund as of
the close of fiscal year 2008/09, and consents to the transfer of $73,475,000 of
said surplus money to the Reserve Fund of the City during fiscal year 2009110
and pursuant to the terms of this resolution; and

3.     That this Board does further consent that the Council of The City of
Los Angeles adopt an ordinance in words and figures substantially as follows,
to wit: 

ORDINANCE NO.
An ordinance directing the transfer of surplus money from the Power Revenue Fund of the Department of Water and Power to the Reserve Fund of The City of Los Angeles during Fiscal Year 2009/10.
THE PEOPLE OF THE CITY OF LOS ANGELES DO ORDAIN AS FOLLOWS:
Section 1. Subject to audited financial data for fiscal year ended 2008/09, and all covenants made by the Department of Water and Power (Department) with respect to transfers from the Power Revenue Fund, and subject to there having been and only to the extent that there was surplus money in the Power Revenue Fund at the close of the 2008/09 fiscal year and subject to the declaration of consent adopted by the Board of Water and Power Commissioners, it is hereby directed that $73,475,000 be transferred from the Power Revenue Fund of the Department to the Reserve Fund of the
    City during the 2009/10 fiscal year.     .
Section 2. The City Clerk shall certify to the passage of this ordinance and have it published in accordance with Council policy, either in a daily newspaper circulated in the City of Los Angeles or by posting for ten days in three public places in the City of Los Angeles: one copy on the bulletin board located in the Main Street entrance to the Los Angeles City Hall; one copy on
the bulletin board located at the Main Street entrance to the Los Angeles City  Hall East; and one copy on the bulletin board located at the Temple Street entrance to the Los Angeles County Hall of Records.
BE IT FURTHER RESOLVED that after the adoption of an ordinance as set forth in (3) above, the Chief Accounting Employee of this Department is directed, upon certification by the General Manager, to cause to be transferred $73,475,000 within
10. days after the effective date of the ordinance in one lump sum payment from the Power Revenue Fund of the Department to the Reserve Fund of the City. Such transfer shall be made only after the CUy has paid the Power Revenue Fund all monthly charges for power services for which the City was billed by the Department.
I HEREBY CERTIFY that the foregoing is a full, true and correct copy of a resolution adopted by the Board of Water and Power Commissioners of The City of
Los Angeles at its meeting held on
Secretary
. APPROVED AS TO FORM AND LEGALITY
CARMEN A. TRUTANICH. CITY ATIORNEY





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6 Responses to DWP Backs Down on $73.5 Million Transfer to the City General Fund

  1. Anonymous says:

    Does anybody have any idea how we got Beutner as de facto Mayor?

  2. Sandy Sand says:

    Like I said, after Bernie Parks’ magic disappearing act, the 73.5 Mil would more magically appear.

  3. Anonymous says:

    Beutner is the final Hail Mary from this Mayor.
    AV has no ideas left, and is not smart. Most politicians dont know about job creation, and little of finances. This Mayor also wont work hard enough at his job, much preferring glad handing and photo ops in the day, and who knows what at night.
    Beutner has superceded Freeman who now is at most a figurehead, and at worst, a disgraced public servant who has seen his once sterling reputation, absolutely destroyed. Freeman wanted to use DWP and other agencies as ‘job producers’. He never got the time but he also never came up with understandable plans.
    So now we have Beutner, who has never created jobs. In fact, just the opposite; he has shed jobs to make companies more profitable.
    It will be interesting to see what Beutner says after he leaves his job. I figure he has at most a year left befor he gets frustrated and leaves ‘for the private sector’. And because he will want to preserve his reputation( whatever it is) he will start singing about the mayor and this terrible administration.

  4. Anonymous says:

    Paul has really lost it. Now he’s sounding as dumb as Janice Hahn. With the billion budget LAUSD has why isn’t the board of Supervisors fighting for them or UTLA or their Board of Education????? Paul didn’t stand up for the tax payers and people of Los ANgeles but now he’s standing up for LAUSD. I’m wondering why and what’s in it for HIM

  5. James McCuen says:

    Here is a simple explanation:
    The focus on DWP and its management ignores the real players behind the scene, the Mayor (Villaraigosa) and City Council President (Garcetti) – those two are the only real players especially in light of Garcetti’s behavior over Special 1 on April 14th and his handling of Parks.
    Yes, Garcetti didn’t even need “Special 1.” Garcetti has successfully been on both sides on many issues including transparency, free speech rights, and campaign finance reform.
    Instead of making much need budget cuts, Villaraigosa and Garcetti have worked together to get additional money into the City’s General Fund by bypassing voting for a tax or a “fee” increase. Instead they are using the DWP transfer as a clearing account to the City.
    Everything else is just a stage.

  6. Monnie Stief says:

    While I can appreciate the points in DWP Backs Down on $73.5 Million Transfer to the City General Fund – Ron Kaye L.A., I am sick and tired of hearing rubbish about the “US economic recovery”. The Federal government borrowed and spent $6.1 trillion in the last four years to obtain a cumulative $700 billion rise in the country’s GDP. That means we’ve borrowed and spent $8.70 for every $1 of nominal “economic growth” in Gross domestic product. In constant dollars, GDP is flat, we got no “economic growth” at all for the $6.1T. In constant US dollars, the GDP in 2011 might go back to the 2007 level, if the US economy continues “growing” at the same rate reached in the first ninety days of 2011. If not, then the Gross Domestic Product will in reality be below before recession levels. There is no economic recovery, the facts prove this.

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