Los Angeles City Council Approves Water Rate Ordinance

May 17, 2004

The Los Angeles City Council recently approved an amended water rate ordinance -- representing an 11% increase in water rates—proposed by the Los Angeles Department of Water and Power (LADWP) to ensure that LADWP can continue providing a reliable supply of high quality water to the city's 3.9 million residents.

The increase, which passed by a 10-4 vote, will go into effect 30 days after Mayor Jim Hahn signs the amended water rate ordinance. The new rate will represent about $2.94 of a typical customer's average monthly bill and will generate approximately $60 million in revenue annually. The water rate action will enable LADWP to pay for increased security, upgrading or replacing aging infrastructure, and complying with increasingly stringent state and federal water quality regulations.

"I recognize that this was a difficult decision for the City Council, and I applaud their action today," said Mayor Hahn, who had previously expressed support for the amended water rate ordinance. "Together we recognize that an increase is necessary to sustain and secure something as critical as our water supply. I also want to thank the many stakeholders, especially Neighborhood Council representatives, for being such an important voice in this process."

Councilman Tony Cardenas, who chairs the Committee on Commerce, Energy, and Natural Resources (CENR), supported the amended rate ordinance, which represents the first water rate increase in more than 11 years.

"This is a tough vote, but I'm voting 'yes' because it is the right thing to do," Cardenas said. "Clean, reliable water is costly, but not making the right decision can cost more in the long run."

LADWP had engaged Deloitte & Touche LLP to undertake an independent financial review of the proposed rate action. Deloitte concurred that the increase was necessary to comply with water quality regulations, upgrade or replace aging infrastructure, recover debt service costs, and incorporate cost of living and inflation adjustments.

LADWP officials said the one-time increase of 11% will meet the Department's near-term financial requirements. Within six months, LADWP will provide an updated five-year water system financial plan, subject to an independent financial review, that includes detailed projections, expenditures and any additional rate adjustments that may be necessary to ensure LADWP's current high bond rating, said Frank Salas, acting general manager. Salas said LADWP will also develop a communication plan with Neighborhood Councils and other stakeholders to solicit their input.

"We listened and we listened well," Salas said, noting that LADWP will engage in a grassroots public outreach campaign. "We greatly appreciate the support from the Mayor and members of the City Council in moving this rate action forward."

The amended water rate ordinance establishes a new water security surcharge, increases the existing water quality surcharge to meet state and federal standards, and expands other current surcharges to cover operation and maintenance expenses. It also modifies a water procurement adjustment or surcharge to include pumping expenses as part of the cost of purchased water, including water purchased from the Metropolitan Water District of Southern California.

LADWP services approximately 659,000 water connections, covering about 465 square miles.

Source: LADWP

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