Running the City Efficiently Is Easier Said Than Done

The experience of Mayor Richard Riordan’s bureaucracy-cutting task force illustrates the rough road facing outsiders trying to reduce the size of government and make it more efficient.

The Mayor’s Special Committee on Fiscal Administration, composed of business executives, came up with controversial and far-reaching proposals for Riordan’s first budget. Some of the committee’s suggestions were included when the budget was adopted last month. But the big ones were turned down.

The rebuff left the committee chairman, Michael E. Tennenbaum, frustrated and unhappy. On Wednesday, when the committee issued a follow-up report, he told Times reporter James Rainey that “the mayor, together with the City Council, failed to do what they needed to do.” He said city finances are “worse than a kindergarten PTA.”

Tennenbaum, senior managing partner of the Bear, Stearns & Co. brokerage firm, who hasn’t had many dealings with the press, suddenly and painfully learned the awesome power of a sound bite.

In addition to defaming PTA finance chairs, Tennenbaum also upset the mayor’s new chief of staff, Bill Ouchi. The next day, sounding a bit surprised by all the fuss he’d stirred up, Tennenbaum told me: “What I tried to say was that the lack of charter reform means that the city is run” in an inefficient manner. “The city is very lucky to have Dick Riordan as mayor, and they ought to let him be in charge,” Tennenbaum said.

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Tennenbaum got involved early in the Riordan Administration when Ouchi asked him to lead a study of how the city could save money through improved leasing and debt financing practices. Tennenbaum felt that a deeper look was needed--a study of all city finances and operations.

The task force was created and divided into subcommittees. A major task was to figure out how the city treasury could get more money from the three big departments that produce revenue--airports, harbor and water and power. The latter department went to a subcommittee headed by Dick Roladian, a managing partner for Arthur Andersen, an accounting and business services firm.

It was a formidable job because of the size and political power of the DWP, a department whose history is intertwined with that of the city.

The DWP, the nation’s largest municipally owned utility, built the aqueduct that brought water to Los Angeles in the early 20th Century, permitting a metropolis to grow on what had been arid land. Along with the water, the department generated electricity for the metropolis’s homes and industries.

In an irony of history, this government enterprise was wholeheartedly supported by the businessmen who built Los Angeles, for it provided them with cheap water and power for their businesses and subdivisions. The department became the pride, and economic engine, of the city’s power structure, a status symbolized by its Bunker Hill high-rise headquarters and reflecting pond, looking down on City Hall.

“They are quite autonomous and don’t feel part of the city,” said another committee member, Linda Griego, president of RLA, the nonprofit rebuilding agency formed after the riots.

Roladian told me that his subcommittee compared the DWP’s operation to that of Southern California Edison, a private power company, and found that the city department could be run more efficiently, and earn more money.

The electric utilities, he said, will soon be deregulated, and companies such as Edison will cut prices to big industries. “The DWP will have to put a tremendous effort on competitiveness to retain its industrial customers,” Roladian said. A more efficient department, the task force said, would not only keep its customers, but would save enough money to contribute $118 million a year to the city treasury. A separate study, done for the City Council, put potential savings at more than $223 million.

The department rallied its own friends in the business community and on the City Council. Other departments targeted by the task force also fought back. With the task force report under attack, the mayor decided to drop the most controversial proposals, including the DWP economies.

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Eli Broad, another task force member, told me attorney Bill Wardlaw and others advised the mayor against going for the entire task force package his first year in office. “The mayor got conservative political advice on what to go ahead with this year and what to do next year,” Broad said. “He and his advisers felt that to put it all on the table in the first budget would be a self-defeating strategy. I don’t think it was a lack of will; it was a question of doing it at the proper time.”

This is the task facing the mayor’s reshuffled team--Ouchi as chief of staff and his predecessor, Bill McCarley, who is now acting general manager of the DWP.

They’ll go about it with a heightened awareness of the difficulty of achieving change.