Los Angeles could be broke by June 30 following the Department of Water and Power's decision to withhold its final annual transfer of $73.5 million to the city's general fund, the city controller warned Monday.

Calling it the city's "most urgent fiscal crisis" in recent memory, Controller Wendy Greuel asked for swift action from Mayor Antonio Villaraigosa and the City Council.

"It is imperative that you act now," Greuel said in a letter. "That is why I am asking you to immediately transfer $90 million from the city's reserve fund so I can continue to pay the city's bills and to ensure the fiscal solvency of the city."

The general fund, which covers city payroll and contracts, would be empty by May 5 without the transfer, Greuel said. But using cash reserves to pay salaries and contracts would deplete the emergency reserve fund by June 30, she said.

Interim DWP General Manager David Freeman DWP said the independent utility had to take the rare action of withholding the transfer payment - which is made in lieu of property tax payments to the city - because the city council did not approve a recent rate hike request.

Without the increase in the Energy Cost Adjustment Factor, Freeman said the DWP will not have enough of a surplus to meet all of this year's promised $220 million transfer to the general fund.

While it appears there is little the city can do to force the independently run DWP to make the payment, Councilman

Bernard Parks has a motion before the City Council today to do just that.

"This is retribution for the council's refusal to approve that increase," said Parks, who chairs the council's Budget and Finance Committee. "Last year, when we asked them to tell us what their surplus would be, they said $220 million and we budgeted for that.

"They never said it was contingent on this rate hike. They told us what they could give us. It is disingenuous now to change their story."

The City Council last week refused to approve a 6 percent increase - or .8 cent - on the Energy Cost Adjustment Factor. Councilmembers suggested the ECAF be raised by .6 cent, while they had time to assess the impact of the increase.

The DWP board countered with a request to raise it .7 cent - a move rejected by the council by a 13-0 vote. Meanwhile, the deadline for imposing the increase expired. The next time the DWP can seek an increase is for bills in July.

The ECAF is used to absorb the rising costs of supplying energy, but it has been frozen for the past several years. The DWP this year asked for increases totaling 28 percent over the next year to cover cost overruns of about $6 million a week.

Because the City Council vetoed the rate hike, Freeman said the utility will not have enough cash to pay the city and also fund its programs.

Freeman said the DWP has $1.2 billion in its debt reserve fund, but needs to hold on to that money to finance its $5 billion in bonds expected to be issued for its future infrastructure building program.

"In this financially challenging environment, we cannot recommend any additional transfers during the current fiscal year," Freeman said.

Councilman Greig Smith, who also serves on the budget panel, said the DWP was leaving the city in an awkward position.

"There is not much we can do at this point in the process," Smith said. "We cannot lay off workers quickly enough to make up that kind of loss."

Greuel said the DWP move will further complicate things for already cash-strapped city.

"The question I have been asked most often during the budget crisis is: "When will the city run out of money?'," Greuel said. "Unfortunately, we finally have the answer. Without the full transfer, I now project... the city's general fund will be out of money - in fact it will be negative $10 million - on May 5."

Without a transfer from the city's reserve fund, Greuel said the city will have to shut down because city workers could not be paid.

She added that reserve funds, usually about five percent of the city budget, would likely be used up by June 30.

The city has begun the process of laying off 1,000 workers by June 30 and plans 3,000 more layoffs next year.

Freeman said this was not the first time the DWP was unable to make its promised transfer. In 1992-93 and again in 1995 and 1998, the utility was unable to make payments.