As PWP Prepares to Pitch Rate Hikes, It Asks to Mothball Collections on Controversial Surtax

Published : Tuesday, April 23, 2019 | 4:49 AM

Pasadena's underground utility districts program was victimized by Danny Wooten (at top) who was convicted of stealing millions from it. The project envisions a long, slow pace for putting utilities underground throughout the city, which ultimately would cost $2 billion over 300 to 400 years.

The City’s underground utility districts program, once the target of embezzlers who stole millions from it for a decade before being caught, is so well funded that Pasadena’s Water and Power Department wants to temporarily stop collecting the surtax that pays for it.

That Department proposal goes before a special meeting of a City committee today along with a proposal to hike electrical rates for residents 5.6 to 12.9 percent and businesses 8.9 to 21.3 percent.

Suspending collection of the surtax would partially offset the impact of the new price hikes to local customers by about $33 annually, in most cases.

Faced with pressures to raise prices on electricity, the Department has asked to suspend collection of the undergrounding surtax “to reduce the burden on the City’s ratepayers and taxpayers.”

The Pasadena Water and Power Department is proposing rate hikes for electricity as shown above. At the same time, it is asking the City Council to consider suspending a surtax which would offset the total costs to consumers of the price increases. Chart by the City of Pasadena.

The undergrounding program began in 1966 to pay for underground placement of utility lines. After all these years, more than 200 miles of power lines still need to be buried as part of the program.

In December 2014, former management analyst Danny Wooten and contractor Tyrone Collins were arrested and charged by prosecutors with embezzling more than $6 million from the Underground Utility Program for more than a decade.

City officials admitted the embezzlement continued for so long due to complacency in the department overlooking the undergrounding fund. Two employees were later fired shortly after Wooten’s arrest.

The program was audited after the embezzlement was discovered and City officials instituted new policies to avoid future embezzlement.

The City later recovered millions through its insurance policy.

Wooten was convicted and sentenced to 14 years and ordered to pay the city $3.7 million. The jury sentenced Collins to seven years.

Work on undergrounding utilities has continued unabated.

This fiscal year’s completed work is expected to cost about as much as the surtax collects, meaning the fund could finish the year with as much money — $50.7 million as of last June — as it had at the year’s beginning.

“Suspending collection of the Underground Surtax for three years will eliminate approximately $18-20 million in revenues that would have been deposited into the Underground Utilities Surtax Fund,” according to a City staff report going before the Municipal Services Committee today. “Sufficient funds remain in the Underground Utilities Surtax Fund to fund all anticipated eligible capital projects over the next three years.”

The Committee is scheduled to vote on Tuesday whether to send a recommendation to the City Council to adopt a resolution suspending collection of the Underground Utility Surtax through June 30, 2022.

Councilwoman Margaret McAustin chairs the Committee. Mayor Terry Tornek and Councilmembers Tyron Hampton and Andy Wilson also sit on the committee.

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