$3 Error Costs DWP $333,407 in Tax Penalties

In an embarrassing foul-up that is causing new political fallout for the embattled Department of Water and Power, the agency has been ordered to pay $333,407 in penalties because it failed to put enough postage on its Inyo County property tax bill.

For the want of a paltry $3.40, the DWP’s $3.22-million payment was postmarked three days after the deadline, prompting the Inyo County tax collector to impose a 10% fine plus other penalties required by state law.

Red-faced officials at the DWP on Saturday would say only that the blunder is under investigation. “Until our management can get the story down straight about what happened and who was involved,” said spokeswoman Debra Sass, “we just can’t give you much information.”

The agency’s critics, however, had plenty to say.

“This is inexcusable,” said City Councilman Zev Yaroslavsky. “This is not a natural disaster over which they have no control. This is something so rudimentary that every American taxpayer is intimately familiar with--how and when to pay their taxes.

“Somebody,” he said, “ought to lose their job.”

Councilwoman Joy Picus agreed. “It’s truly very distressing because they make a mistake and we pay,” she said. “This doesn’t make anybody happy.”

Mayor Tom Bradley, through a spokesman, said he will have no comment until he discusses the matter with DWP officials.

The botched payment is only the most recent public relations headache for the DWP.

Last week, after being ridiculed by the City Council, the agency canceled a $25,000 contract with a crisis management center at USC to study why the DWP failed in its latest attempt to get a rate hike. Council members cited the expenditure, which was disclosed by The Times, as a prime example of the DWP’s “inability to keep a lid on unnecessary costs.”

Joked Inyo County assessor Richard White: “Someone here said: ‘I wonder if they’re going to hire a consultant to find out why (the tax payment) didn’t get mailed.’ My first reaction was that somebody’s head is going to roll.”

The DWP drew the heaviest fire in December, when it requested an 11% rate hike. Incensed ratepayers said they were being unfairly penalized for conserving water, which had reduced the agency’s income. The City Council agreed, and approved a hike of 3.6%, also demanding that the DWP stop paying its employees more than other city workers.

Although DWP officials are not commenting on the latest problem, which was reported Saturday by the Los Angeles Daily News, here is the explanation that Inyo County treasurer and tax collector John Treacy said he was given:

Based on its in-house postage meter, the DWP determined on April 9 that the envelope containing the payment needed $2.29 in postage. A DWP employee was dispatched to the post office to send the payment by registered mail to Inyo County.

A postal clerk told the worker, according to Treacy, that the envelope needed another $3.40 in postage. But rather than take care of the matter immediately, the letter was brought back to the DWP, where it sat for four days before someone affixed the proper postage and sent it off.

Treacy said his office received the payment by registered mail on April 15 and notified the DWP the next day that it was late and that he would have to assess the penalties.

Under state law, if a property tax payment is postmarked after April 10, the tax collector must levy a 10% penalty, plus $10 per parcel of land. The DWP owns 1,135 parcels in Inyo County--more than two-thirds of the taxable land in the county.

Nearly 95% of Inyo County’s land cannot be taxed because it is owned by either the state or federal government. The DWP owns 252,830 acres in the county, and must pay taxes on 207,000 acres of that land.

Although the penalty may be appealed, Treacy said he will not budge unless the DWP can prove that the payment was late because of circumstances beyond the agency’s control.

“I have to uphold the laws and I have to administer them in a fair, equitable and uniform manner,” he said.

Treacy likened the situation to a taxpayer trying to get a penalty waived because she wrote the check, put the envelope in her purse and forgot to mail it.

“I’m sorry, but she’s going to have to pay it,” he said. “An intent to pay doesn’t excuse a failure to pay.”

Treacy said he tries to treat all taxpayers equally--even if they own most of the taxable land in the county. “They call me the friendly tax collector,” he said. “No matter how people yell at me, I just smile and do what I have to do.”

If the DWP appeals, Inyo County law places the decision on Treacy alone. County officials said they will not pressure him.

“Whatever he decides, he’s going to get my 100% support, flat-out,” Inyo County Administrator C. Brent Wallace said, adding that he and Treacy talked about how local taxpayers might react if Treacy were to forgive the penalty.

“I said: ‘Hey, think about that last senior citizen who paid three days late and you made them pay the $50 penalty,’ ” Wallace said he told Treacy. “You’re to forgive (the DWP’s) penalty? Those senior citizens will have you strung up from the closest tree as fast as possible.”

If the DWP is compelled to pay the fine, state law requires they do so by June 30 to avoid further penalty. Once it becomes clear that the fine must be paid, Inyo officials said it is unlikely that the DWP will rush to pay before the new deadline.

“They can hang on to the $3.2 million and the penalty and collect interest on it until June 30,” Wallace said. “But that interest isn’t going to be nearly enough to pay the penalty.”

Treacy acknowledged that he thinks the penalties, as mandated by state law, are too high, but added: “That’s not mine to change.”

The fiasco has also created something of a crisis in Inyo County. Under county law, Inyo is not allowed to accept partial payment on tax bills. That means the county cannot cash the DWP’s late-arriving check because the late penalties are considered part of the total amount owed.

Because the DWP pays 30% of Inyo County’s entire annual property tax receipts, government agencies in the eastern Sierra Nevada county may have to borrow money to make ends meet, officials there said.

“There are agencies up here that could conceivably run out of money before the end of the fiscal year on June 30 because they didn’t get their share” of the DWP check, Treacy said.

“They can request interim loans from the county treasury to cover their cash flow problems . . . but state law requires they make that request by April 27,” he said, “so they’re running out of time to analyze what their needs will be.”

Picus said she hopes that the DWP will be able to negotiate a reduced penalty with Inyo County officials, although she said she is aware that some people in Inyo continue to resent the fact that Los Angeles consumes their water.

“I know that the relationships between the DWP and Inyo County have never been wonderful, so this is sort of like sweet revenge for them,” she said. “All I can say is, poor DWP. . . . Everything had been going right for them and this year everything is going wrong.”

Wallace said past disagreements between the DWP and Inyo County will not play a role in Treacy’s decision, but that some locals may enjoy the agency’s predicament. “The old-timers will have a gleeful twinkle in their eye,” he said.