- Written by Jack Humphreville
23 Oct 2012
LA WATCHDOG - The City Council is considering placing two tax related measures on the March ballot that, if approved by the voters, will result in a cash infusion of $120 million into the General Fund.
These new revenues will be used to fund the massive $300 million escalation in salaries, benefits, and pension contributions that are the underlying cause of next year’s budget deficit of $216 million.
Once again, the City Council and the Mayor are “kicking the can down the road,” relying on one off solutions, and failing to address the long term structural issues that are driving our City to the brink of insolvency.
The City is proposing to institute a Tiered Documentary Transfer Tax that is designed to provide General Fund with revenues of $80 million. Approval of this general tax requires only the approval of a majority of the voters.
The current Documentary Transfer Tax is paid by the seller of a house at the rate of $4.50 per $1,000 of value, the highest rate in the County.
Initially, the City was contemplating doubling the rate to $9, or close to 1% of the sales price. However, to make this 100% increase less unattractive, the City devised a tax with four tiers, where sellers of houses in the lowest quartile ($255,000 or less) would have their rate cut in half to $2.25 per $1,000 of value, while sellers in the top quartile ($585,000 or more) would have their rates doubled to $9.
The resulting 80% increase in this real estate tax is just another assault by City Hall on single family homeowners, which, along with the never ending increases in our in water and power rates that target single family residences and the 77%, 10 year increase in sewer fees, makes it increasingly difficult for hard working Angelenos in this sour economy to meet their mortgage and tax payments.
No wonder that early polling results indicated that over 70% of the likely voters opposed this new tax.
The City is also considering a $39 parcel tax, which, on the approval of two-thirds of the voters, would raise $40 million for the Department of Recreation and Parks.
While our parks are an important part of our civic life, this measure would need to insure that all of the proceeds are dedicated to Recreation and Parks and will not be used to reimburse the City pursuant to its “full cost recovery” program or other devious scheme.
And even then, the likelihood of this measure passing are slim given Angelenos’ lack of trust and confidence in the Elected Elite who are responsible for our City’s precarious finances.
An alternative to this well meaning, but ill conceived revenue generating idea is a ballot measure similar to Measure L, the March 2011 charter amendment approved by 63% of the voters which allocated an extra $50 million to the Library from the General Fund.
A third tax, a 50% bump in the Parking Occupancy Tax to 15% from 10%, would raise an additional $40 million. However, this measure, which would need the approval of a majority of the voters, was pulled from consideration by Council President Herb Wesson as a result of what appears to be significant political pressure from the well financed lobby that represents parking lot operators.
The City’s pitch as to why voters should approve the Tiered Documentary Transfer Tax is that the additional proceeds from this new tax are necessary to maintain public safety (police and fire) and to repair our streets and sidewalks.
However, this is just another fabrication from the bowels of City Hall, and, in reality, is just plain old extortion, playing upon the fears of all Angelenos. We know these new funds will be used to finance the massive $300 million increase in personnel expense that was previously approved by the Executive Employee Relations Committee that consisted of Villaraigosa, Garcetti, Greuel, and Zine.
The claim by the City Hall insiders that they have exhibited bold leadership in restructuring the City’s budget is just another self serving urban myth.
While it is true that the General Fund is now supporting 5,000 fewer positions, 2,400 senior employees participated in the exceptionally generous Early Retirement Incentive Program that will cost $600 million over the next 15 years ($250,000 for each of the 2,400 participants). Another 2,000 surplus City workers were dumped on the Department of Water and Power, the Port, LAX, and other special revenue departments, while less than 500 employees were released.
The campaign funding union leadership will point to the sacrifices of their members: deferral of raises, cost of living increases, and overtime; the banking of police overtime; higher contributions for pensions and post retirement medical benefits; and increased medical payments.
However, since 2005 when Villaraigosa was elected mayor, the salaries of City employees have increased by 24% to date and are scheduled to rise by another 11% by 2014, more than offsetting any sacrifices.
At the same time, benefits and pension contributions have increased by 50% and 150%, respectively.
The City will also have the audacity to claim that the Mayor’s recent pension plan proposal that was adopted by the City Council is real reform. But the savings associated with the Mayor’s “Retirement Security Plan” are peanuts, where the advertised savings of $30 million to $70 million over the next five years are less than 5% of the projected four year cumulative deficit of $1.1 billion.
The politically astute City Council should reject placing these measures on the ballot since the odds of these two measures passing are slim given the City’s poor economy and the complete lack of trust that Angelenos have for our Elected Elite that occupy City Hall.
Rather, Angelenos must demand that the City Council and the Mayor endorse structural reform of its financial affairs by placing on the ballot a measure that requires the City to “Live Within Its Means.”
This common sense amendment would require the City to develop and adhere to a Five Year Financial Plan, approve two year balanced budgets based on Generally Accepted Accounting Principles, and, over the next ten years, provide adequate funding for the elimination of the City’s unfunded $10 billion pension liability and the repair and maintenance of our streets, parks, sidewalks, and the rest of our crumbling infrastructure.
The message is very simple: without real budget reform, Angelenos will not approve any new revenues.
Vol 10 Issue 85
Pub: Oct 23, 2012