THE BLOG
06/07/2010 05:12 am ET Updated May 25, 2011

LA's Latest and Most Severe Fiscal Crisis Long in the Making

Somehow, it seems fitting. A city that owes its existence to water and power -- and the manipulation of their flow -- is being brought to its knees by none other than its very own Department of Water and Power. Though that is just on the micro-level. On the macro-level, what we are actually seeing is the full impact and fury of the so-called Great Recession, which we keep being told is now behind us. In reality, it is the recession that just keeps on giving (or taking).

Here in LA, what the City Controller Wendy Greuel has called "the most urgent fiscal crisis that the city has faced in recent history" was seemingly set off by the refusal of the DWP to transfer more than $73 million it apparently had promised into the city's general funds to be used to help pay various city employees.

The reason, insisted outgoing DWP General Manager S. David Freeman at a City Council hearing I attended earlier today, is simply that the agency lacks the money because the Council had earlier refused it a substantial rate hike. At a meeting of the DWP that I also attended, its President and others pointed out the agency is currently losing millions and millions of dollars each week.

Freeman, who also spoke at the DWP meeting, underlined that this latest fiscal crisis for DWP was long in the making, going back at least to 2006, when certain caps were put on increases.

In a "game" of chicken, the City Council voted to "ask" the DWP to turn over the funds. The DWP insists that its financial analysis is correct and it can't do so.

So, where does this leave LA?

Mayor Antonio Villaraigosa, who by now surely is tired of the job, called a news conference to call on non-revenue generating city services to grind to a halt two days each week, starting next week.

"We must act now," says the Mayor.

Perhaps the most sane thing I heard all day was from the mouth of the DWP's President, who reminded everyone present that this crisis was not really caused by the DWP or the City Council or the Mayor; rather, it is caused by a recession that, while perhaps now technically over, is still impacting the nation, the region and the city in powerful ways. Foreclosures in LA are higher than the national average. The unemployment and underemployment rates in LA are higher than the national average.

While the DWP is probably correct about needing a rate hike, one can easily see why politicians are loath to go along, when a rate hike means passing along to voters even more economic pain than they already suffer.

How this will end is, at this point, anyone's guess. But I can tell you one thing for sure. However this crisis is resolved, another for this city lurks just around the corner.

Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour News Cycle." He has covered police and politics in L.A. since 1995 and currently is a regular contributor of investigative reports to KNX 1070 News radio.