City to Take $3 Million of Utility Funds : Government: The municipal power company voices concern about planned improvements, but the mayor says the cash is needed to prevent layoffs and service cutbacks in other departments.

Despite warnings from the city-owned power company that it is falling behind in making needed technological improvements, City Council members said Tuesday that they will transfer $3 million from the utility’s reserves to make up for a city budget shortfall.

The alternative would be harsh service cuts or layoffs in other city departments, Mayor Rick Cole said.

“Taking $3 million without doing irreparable harm to the utility bails us out of some irreparable harm in the community,” he said.

City finance officials expect the state to cut more than $6 million in property-tax contributions and redevelopment revenues earmarked for the city in the 1993-94 fiscal year.

The $3-million infusion of utility money would cover a shortfall during the current fiscal year. The city absorbed a $4-million hit from the state last fall. Without the utility money, Cole said, the city could be forced to close branch libraries or lay off police officers.

But members of the city’s Utility Advisory Commission, the council-appointed watchdog group that oversees the Department of Water and Power, said the planned transfer from the so-called Light and Power Fund continues a dangerous pattern. Because of fund transfers averaging more than $8 million a year for the past four years, the utility has had to defer capital improvements, said Tim Brick, chairman of the watchdog group.

The affected projects range from putting electrical wires underground to developing ways to eliminate pollutants caused by burning fossil fuels, commission members said in a joint meeting with the City Council.

“This undermines the long-term health of the utility,” Brick said.

David Plumb, general manager of the utility, could not be reached for comment Wednesday.

Other commission members complained that using the utility as a “cash cow” could force rate increases, amounting to a regressive tax on low-income power customers. Because utility bills represent a larger portion of a poor family’s monthly outlays, rate increases hit the poor disproportionately hard. The city utility has not raised rates since April, 1990.

“We’re solving our problems again by passing regressive taxes which fall mostly on those least able to pay,” said commission vice chairman Robert Nelson.

Council members expressed skepticism about such claims. Cole noted that the utility had elected not to impose a rate increase for the current fiscal year, giving utility customers “essentially a windfall.”

Pasadena utility rates are already significantly lower than those charged by commercial power companies, Cole added. A monthly billing for 500 kilowatt hours of electricity costs a Pasadena customer $44.36, whereas a customer of Southern California Edison pays $62.33.

Councilman William E. Thomson Jr. suggested that the utility may be holding too much in reserve.

“It’s a rare business that is able to lose $3 million without having some impact,” he said. “In that case, a business may be operating with reserves that are excessive.”

Commission members were less concerned about the one-time loss of $3 million than about the continued use of the utility as “the goose which lays the golden eggs,” as Brick put it.

Commissioner John Brugman produced a spreadsheet showing increasing contributions by the utility to the city’s general fund in the past 16 years.

“Right now we’re at an all-time high,” he said.

In 1977, utility users’ taxes, utility-fund transfers and other utility-related taxes amounted to 12% of the city’s general fund. This year, the total utility contribution to the general fund amounts to almost 33%, Brugman said.

“It’s not a healthy trend,” he said.

“Most of us realize that this year’s cut will happen,” said commissioner Diana Palmer. “My concern is, what about next year?”

City Manager Philip Hawkey said the city had no long-range plans to raid utility funds to balance the city budget.