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Greuel Warns of a Deeper Deficit Over Carbon Surcharge Fight

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If you thought the $200-million or so budget deficit, and thus the looming threat of 4,000 city hall layoffs, was bad, the recent standoff between the Los Angeles City Council and the Board of Water & Power Commissioners may dig the hole deeper.

Traditionally, the Board, which oversees the Department of Water Power, makes an annual $220 million transfer to the city's general budget, which pays for core services like police, libraries, fixing pot holes, etc. The DWP has already given about $143 million, but has withheld the remaining $73.5 million, enough to pay for 1,000 jobs. It soon turned into a quid-pro-quo situation--if the Council would approve Villaraigosa's carbon surcharge plan, which would raise electricity rates to go towards renewable energy and apparently help save the utility from a downgraded bond rating, the Council would receive the remaining balance and avoid bankruptcy.

The Council this week rejected Villaraigosa's rate hike in lieu of recommending a more modest one. The Villaraigosa-appointed Board in turn rejected that, trying to compromise with a rate hike between the Council's and Villaraigosa's. Nonetheless, the Council turned around and rejected the compromised rate hike.

Today City Controller Wendy Greuel wrote a letter to DWP interim head David Freeman urging for clarity on the DWP's plans. "If the Department does not transfer the full amount, the City's budget deficit for the current fiscal year would be $275 to $290 million." Does this mean that the city will be looking at laying off 5,000 employees?