PERSPECTIVE - The roles of the City Controller’s Office include protecting the assets of Los Angeles and promoting efficiency. To that end, audits are used to test compliance to internal controls and best practices, along with assessing the effectiveness of operational processes.
But what if decisions by the City Council lock the city into a bad deal from the start?
Fait accompli – no amount of auditing will change the end result.
Two recent newsworthy events are perfect examples of this: the giveaway of the Encino fire station to an Armenian cultural organization and the IBEW labor contract.
In each case, the Council presented flawed analyses to justify approvals.
The fire station analysis did not offer an alternative to the annual one-dollar lease for the next 50 years that was offered to the Armenian group. At a minimum, an outright sale scenario based on input from independent commercial real estate professionals should have been presented side-by-side with the lease proposal.
Councilmember Koretz should have solicited feedback from the Encino Neighborhood Council. Opportunities should have been given to other non-profit groups to make a pitch for acquiring and using the property. Koretz and his colleagues are incapable of thinking along rational economic lines.
The City Council largely justified its approval of the recent IBEW labor contract on a present value analysis of the agreement. A projected savings of $3.9 billion related to a four-year deferral of upcoming raises was announced in the same fanfare as Neville Chamberlain proclaimed “peace for our time” or in the Bush administration’s assurance that there were WMDs in Iraq. All three shared the same flaw – lack of substance – but were presented as if backed by gold.
The fundamental problem with the present value analysis was the duration of the contract. The analysis projected the savings going out 30 years despite the contract’s 4-year life. After four years, all terms would be up for renegotiation, which would render any prior assumptions worthless.
These types of instances demonstrate the need for Controller Ron Galperin to expand the role of his office.
It is important that city residents are protected from overly optimistic or misleading projections. City Council members are politically motivated to push certain deals. We need the controller to review their assertions before a vote… and in time for the public to weigh in.
The $3 billion Save Our Streets bond is on the horizon. Don’t count on Mitchell Englander and Joe Buscaino to be straightforward with the numbers used to justify it or who will cover the debt service.
The people deserve independent, unadulterated analysis; not the work of spreadsheet jockeys doing the bidding of political hacks.
Let the people’s elected watchdog review the assumptions and alert the public to the bad math too often used to justify deals.
(Paul Hatfield is a CPA and serves as Treasurer for the Neighborhood Council Valley Village. He blogs at Village to Village, contributes to CityWatch and can be reached at: [email protected]) –cw
CityWatch
Vol 11 Issue 75
Pub: Sept 17, 2013