L.A. officials will get to see books of DWP nonprofits

After a series of drawn-out political and legal battles, Los Angeles leaders approved a deal with the powerful Department of Water and Power union that promises the city its first detailed look at how two controversial nonprofits affiliated with the utility spent millions of ratepayer dollars.

The agreement gives city officials “unfettered access” to financial records — internal ledgers, bank records and other documents — that leaders of the utility workers’ union spent more than a year trying to withhold from city auditors.

Gaining access to the records will enable officials to produce an independent accounting of the groups’ activities and how they spent up to $4 million a year provided to the nonprofits since 2010.

However, the deal does not require an audit of millions spent in earlier years and imposes strict controls on copying and distribution of the records. That means — at least for the time being — the public will not have access to the original spending documents.

The move marks an attempt by both city and union officials to move beyond an embarrassing stalemate that stoked public anger over the secrecy surrounding how money collected from ratepayers was spent.

Wednesday’s unanimous City Council vote paves the way for the transfer of this year’s allocation of $3.8 million to the nonprofits. Earlier this year, City Controller Ron Galperin refused to make that payment.

Los Angeles lawmakers said they feared that continuing to withhold the money could jeopardize a labor agreement that includes a three-year freeze on raises for DWP workers. That labor pact contains provisions requiring annual funding of the nonprofits.

The settlement agreement protects the contract, which “saves the ratepayers a ton of money,” said Councilman Felipe Fuentes. “It brings transparency.... And it lets us get on with the business of the DWP.”

Jaime Regalado, professor emeritus of political science at Cal State L.A., said “the handwriting was on the wall” for the union after it suffered key courtroom defeats in the standoff. In one case, a Los Angeles County Superior Court judge ruled that the city controller has the right to audit the nonprofits and compel testimony from their leaders. The union is appealing that decision.

The union “realized they had to give something,” Regalado said. “They were running against public opinion. Even some in the labor movement have criticized them for their intransigence.”

If city auditors find evidence within four months of beginning the reviews that money has been used illegally, the payment to the nonprofits can still be withheld.

Elected city leaders praised the deal as a step forward. “With this agreement, the city can open the books and follow the money, which is what DWP customers deserve,” Mayor Eric Garcetti said.

DWP union leader Brian D’Arcy said in a statement that the agreement ensures the continuation of the current labor contract “and that the (nonprofit) trusts will continue to operate.”

The nonprofits, the Joint Training Institute and the Joint Safety Institute, were created in the early 2000s and charged with improving relations between labor and management. They also were supposed to deliver safety programs and address other training needs at the city-owned utility. The annual funding directed to the nonprofits is dwarfed by the $117 million the DWP spends on its own training and safety programs.

On the question of whether he has the authority to audit the nonprofits, Galperin insisted he does and said he was confident the appeals courts would side with him. That would force the nonprofits to open their books, making Wednesday’s agreement irrelevant, he said.

In the meantime, he said, the deal approved Wednesday is “a way to finally get in there and do what we have sought to do for the last year.”

Officials demanded the records after The Times reported that DWP executives, who manage the nonprofits with union leaders, couldn’t explain in detail how the groups had spent more than $40 million in ratepayer money received since 2000.

Union officials argued that the nonprofit trusts were independent from city government and therefore not subject to public disclosure requirements.

The clash led to a series of lawsuits and labor disputes. Galperin refused to make this year’s payment to the nonprofits until he gained access to the financial records. The union argued that Galperin flouted the law. And D’Arcy publicly warned that the city was headed for “trouble” if it didn’t release the money.

Under the deal approved Wednesday, Galperin and his staff will get full access to the nonprofit records and be allowed to interview current and former employees as part of an audit covering the five-year period that ended in June.

The city’s top budget official, Miguel Santana, will also get access to the records to perform his own evaluation of the trusts.

Both officials’ reports will be presented at public meetings. However, because of the still-pending court case over access to the nonprofits’ records, Galperin and Santana are barred from copying or removing the nonprofit documents they review, although they can transcribe and share information from the records.

Not releasing the underlying financial records puts the public in the position of “just trusting” that the city officials given access to the information are telling the truth, said Kelly Aviles, vice president of the open government group, Californians Aware.

“The entire point of all of our transparency laws is the public’s ability to verify,” she said. “In this case, how do you know if the controller is doing a good job?”

The agreement also ends a standoff over who should represent the DWP on the nonprofits’ boards, by designating that the utility’s general manager or other utility managers should fill the positions.

The deal approved Wednesday was opposed by the Porter Ranch Neighborhood Council, whose vice president, Patrick Pope, called it “a travesty.”

“There should be a full accounting of the money” for the entire period the nonprofits have existed, Pope said. “The only reason the union would stonewall is that they’re hiding something.”

The settlement deal requires annual audits of the nonprofits and yearly reports to city lawmakers on their finances and activities.

Fuentes argued that the agreed-to five-year audit would yield valuable information.

After the long run up to the audit, Galperin acknowledged “there’s no guarantee that everything will still be there.” But he said his staff can often retrieve missing electronic records, such as emails and financial transactions.

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