In the continuing effort to reduce city costs, Mayor Antonio Villaraigosa is expected to announce plans today to fold the Department of Neighborhood Empowerment into another city agency.

A recommendation to the mayor on Sunday calls for placing the Department of Neighborhood Empowerment, or DONE, within the Community Development Department and reducing its staff from 42 to about a dozen.

DONE has a total budget of $3.2 million.

Under the action, DONE General Manger BH Kim is expected to step down as director. Responsibility for the agency will be placed with CDD Director Richard Benbow.

Villaraigosa, who last week folded the city Environmental Affairs Department into other city agencies and ordered the closing of the Human Services Department, is taking the action at the urging of his staff to further save money.

The recommendation was submitted in a memo to Villaraigosa, officials said, and he is expected to formally announce the decision today.

Several Neighborhood Council leaders were briefed about the recommendation last Friday by Deputy Mayor Larry Frank.

The action is not expected to go down easy among the 90 neighborhood councils, which have been increasingly at odds with the city.

Al Abrams, vice chair of the Board of Neighborhood Councils, sent out an open letter over the weekend warning of the impact of the action, especially taking money away from Neighborhood Council elections.

"Their goal: Take the balance of money that is left in the elections account and leave the NCs to 'do their own thing,"' Abrams wrote. "They're hiding behind the statements of 'giving back the elections to the Neighborhood Councils.' This is a false and insincere attempt to gut the NC system.

"The truth is this will be disastrous for NCs. Without a staffed department there to help them, which is about to be 'scrubbed clean' and without any funding for any elections, NCs will be left out in the cold to fend for themselves."

The Board of Neighborhood Councils Commission is expected to remain in place and Abrams is asking the groups to contact council members to keep the election funding.

What is uncertain is how much money will be provided to Neighborhood Councils to fund projects this year. The City Council already has allocated $1.5 million in money it has been holding onto for various other projects.

This year, neighborhood council funding was reduced from $50,000 to $45,000 for each group. Another proposal has threatened to cut that amount further down to $17,500 for the coming year.

Aides to Councilman Paul Krekorian, who chairs the Neighborhood and Elections Commission, said they were unaware of the proposal.

Neighborhood Councils were created in the new City Charter approved by voters in 1999 and began to flourish under former Mayor James Hahn, who provided them with an annual budget.

The councils are composed of volunteer residents and most have been able to operate with little controversy. However, some have had difficulties in conducting their own elections while others were accused of fraud and embezzlement of city funds.

For the most part, the groups were able to band together to fight a number of city proposals, mostly involving the Department of Water and Power. The DWP also created a Neighborhood Council oversight board that has been active in voicing criticism of the agency.

Villaraigosa and the City Council have been moving on a number of fronts to try to save money as the city faces a $212 million shortfall this year and another $484 million next year in balancing the city's $7.01 billion budget.

Among the actions has been the elimination and consolidation of city agencies and a call to lay off up to 4,000 workers.

The decisions came just as Moody's Investor Services warned that the city is being placed on a watch list, its status changing from stable to negative, and a threat that the city's credit rating could be downgraded.

The change in rating would increase the cost of borrowing money to operate.