L.A. officials want to attach strings to DWP-linked nonprofit funds

L.A. Department of Water and Power union leader Brian D'Arcy said the union was still reviewing the proposal made by five City Council members about making payments to two nonprofits affiliated with the DWP.

By Emily Alpert Reyes and Jack Dolan

Aug. 12, 2014 7:55 PM PT

Los Angeles lawmakers want to hitch more than a dozen conditions to a planned $4-million payment to two controversial nonprofits affiliated with the Department of Water and Power, including giving city auditors “unfettered access” to their records and abandoning the courtroom battles raging over the trusts.

More than $40 million in ratepayer money has been directed to the nonprofits for employee training and safety over the years, but DWP executives say that they have scant information about how the money has been spent.

For months, the International Brotherhood of Electrical Workers Local 18 has been locked in a legal dispute with the city over transparency at the nonprofit trusts, which are run jointly by labor- and management-appointed trustees. The union has so far blocked attempts by city leaders — including Mayor Eric Garcetti, City Controller Ron Galperin and City Atty. Mike Feuer — to gain access to detailed financial records for the nonprofits.

Under a plan proposed by five City Council members on Tuesday, the nonprofits would have to submit to city fiscal and performance audits of the last five years, along with annual audits in the future, before millions could be transferred to the trusts. If the audits found “any indication of illegality,” the money could not be spent.

The proposal would also resolve a running dispute over who can represent management on the nonprofit boards, allowing utility managers and supervisors to replace two picks allied with the mayor but opposed by union officials. And the plan would require both sides to drop lawsuits that they filed against each other.

“We’re saying, ‘Here’s a path....Walk with us down this path. Put down your lawsuits. Put down these arguments. This is what you can get,’” said City Councilman Bob Blumenfield, one of the five council members who presented the proposal.

Earlier this year, Galperin said he would not make the anticipated $4-million payment to the trusts because he couldn’t write the checks in “good conscience.” Under the city charter, that decision goes to the council, which could overrule or sustain his objection to making the payment. That decision has yet to come before officials, but Council President Herb Wesson said the five council members put forward their proposal Tuesday to explain where they stand.

The council is scheduled to take up the plan Wednesday at a special meeting. Galperin called it “an important step” to support his own call for a thorough audit and urged union leader Brian D’Arcy to cooperate. Garcetti publicly declared his support for the proposal at a news conference Tuesday afternoon alongside Galperin, Wesson and other city leaders.

“It is essential to each one of us that every ratepayer dollar be accounted for, that we are bringing transparency and sunlight,” Garcetti said.

He later added, “This hasn’t happened in a vacuum, there have been ongoing discussions …with Mr. D’Arcy and union officials.”

D’Arcy said the union was still reviewing the proposal. In a written statement, he said Tuesday that the nonprofits provide “critical functions to benefit the work force at the Department of Water and Power,” and that the mayor and council had upheld funding the trusts when they approved a new contract for utility workers last year. Union officials earlier warned that not making the $4-million payment would violate that contract.

At a news briefing, Councilman Felipe Fuentes said that if the city was found to be in violation of that agreement, it could jeopardize other parts of the deal that saved money for the city, such as workers forgoing raises for three years. City officials have estimated the agreement will save $456 million over four years.

Lawmakers behind the plan argued that they had hammered out a set of conditions that, if agreed to, could avert that risk and protect the city and its ratepayers. In addition to the audit requirements, any trust payments would go into an escrow account and remain unspent for 120 days, according to the proposal — a lag time that would hopefully give auditors enough time to check for anything that is “not kosher,” Wesson said.

The proposal also tries to settle a fight over who represents management on the trust. Union trustees have so far refused to meet with two management appointees allied with Garcetti and chosen by the DWP board — mayoral counsel Richard Llewellyn and DWP board member Michael Fleming. A Superior Court judge recently rejected union arguments that the two appointees were hostile to the nonprofits and ruled that the union appointees had to recognize them.

Under the new proposal, however, the city would drop its demand that Llewellyn and Fleming join the boards. The management trustees would be replaced by DWP General Manager Marcie Edwards, who was hired by Garcetti, and other utility managers or supervisors she chooses.

The mayor said he would make sure the new management appointees were not also union members, or executives with strong ties to the union, which has been the case under prior administrations. “That won’t happen again,” Garcetti said.

The future of another suit remains uncertain. In a written statement Tuesday, Feuer said he plans to proceed with a lawsuit “to establish a receivership over the trusts in order to protect ratepayer dollars,” but added that if the city’s transparency goals were achieved, “we would of course re-evaluate the need for a receiver.”

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