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.
PURPOSE
IF YES, BY WHJCH- CITY
CHARTER SECTION: 344
To
authorize the adoption of an Ordinance by the Los Angeles City Council to
transfer
surplus 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)
during 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 operations as of the close of the 2008/09 fiscal
year. This amount is in addition to the $147 million approved by this Board on
BACKGROUND
The
Power System transfer being recommended is based on the financial 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 calculations
as shown in
Attachment A, the LADWP recommends a total
transfer of $220,475,000 during the 2009/10 fiscal year, which is
in compliance with the
bond covenants. Of this amount, $147,000,000 was approved by this Board on
Board of Water and
Power Commissioners
Page 2
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
FISCAL
IMPACT STATEMENT
Approval of this
resolution wilf decrease the fund net assets of the Power System by
$73,475,000.
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
Raman Raj
Richard M. Brown
James B. McDaniel
Lorraine
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
(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
Adjusted Surplus $4,336,836
Total debt outstanding
including current portion as of
Debt issued since
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
Ron Kaye