LA WATCHDOG--Our City’s budget and finances are a mess.  But City Hall is less than transparent, treating us like mushrooms, keeping us in the dark and dumping tons of ripe manure on our heads. 

But on Saturday, you will have the opportunity to learn more about the City’s budget and finances by attending one of the six Regional Budget Day meetings throughout the City that are being hosted by the Neighborhood Council Budget Advocates.  These meetings begin at 9:30 in the morning and will last for about two to three hours.  Refreshments will be served.  See below for the location nearest you or click here. 

Importantly, the Neighborhood Council Budget Advocates are interested in your ideas about how to make the City more efficient and transparent and to increase revenues. 

While the Advocates have produced many recommendations over the years that have saved the City considerable sums and increased revenues, City Hall has been resistant to implement common sense suggestions that would make the City’s finances and operations more transparent and curb its out of control spending. 

On October 4, 2106, the Neighborhood Council Budget Advocates urged the City Council and Mayor Eric Garcetti to implement the following four excellent budget related recommendations of the LA 2020 Commission.  

  • Create an independent “Office of Transparency and Accountability” to analyze and report on the City’s budget, evaluate new legislation, examine existing issues and service standards, and increase accountability. 
  • Adopt a “Truth in Budgeting” ordinance that requires the City develop a three-year budget and a three-year baseline budget with the goal to understand the longer-term consequences of its policies and legislation. (Council File 14-1184-S2)  
  • Be honest about the cost of future promises by adopting a discount rate and pension earnings assumptions similar to those used by Warren Buffett.   
  • Establish a “Commission for Retirement Security” to review the City's retirement obligations in order to promote an accurate understanding of the facts. 

For more information on this recommendation, see the October 6, 2016 CityWatch article, NC Budget Advocates Argue for Transparency Office and Truth in Budgeting Law. 

But the City Council and the Mayor have done nothing to implement these recommendations despite the fact that they were enthusiastically endorsed by City Council President Herb Wesson at a press conference on April 9, 2014.  Interestingly, Wesson was also the moving force behind the formation of the blue ribbon LA 2020 Commission headed by former Secretary of Commerce Mickey Kantor and Austin Beutner.  

The City’s budget is out of control. 

In January, the City Administrative Officer said that the City is looking at a potential budget deficit of $245 million this year (it was “balanced” on July 1, 2016) and that the Reserve Fund is in danger of dipping below mandated levels. As a result, the City’s credit rating is in jeopardy.  

The City is projecting a river of red ink over the next four years despite revenues being up $1 billion over the last four years and another $600 million over the next four years.  Our lunar cratered streets have continued to worsen, so much so that our gridlock is the worst in the developed world according to The New York Times. And our unfunded pension liability of more than $20 billion (according to Moody’s Investor Services) is a weapon of mass financial destruction aimed at the heart of all Angelenos.  

In March, the Neighborhood Council Budget Advocates will issue its annual “White Paper” that will propose a “Back to Basics” Plan.  This will include a call for long range planning, a policy of not entering into budget busting labor contracts, a plan to repair and maintain our streets and the rest of our infrastructure, and the development of a business friendly environment which encourages employers to remain and invest in our City. 

The Neighborhood Council Budget Advocates look forward to your input.  After all, it is our City.  

See you on Saturday morning at 9:30 at the one of the following locations where coffee will be on the house.  

  • ACTION INFO 

Regional Budget Day Locations 

Marvin Braude Center

6262 Van Nuys Boulevard

Van Nuys 91401

 

Los Angeles Zoo and Botanical Gardens

Griffith Park Drive

Los Angeles 90027

 

Glassell Park Community Center

3650 Verdugo Road

Glassell Park 90065

 

Ridley Thomas Constituent Center

8475 S. Vermont Avenue

Los Angeles

 

West LA Municipal Building

1645 Corinth Avenue

Los Angeles 90049

 

Croatian Cultural Center

510 W. 7th Street

San Pedro 90731

 

More info here.

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--The County Board of Supervisors has placed Measure H on the March 7 ballot, which, if approved by the two-thirds of the voters, will increase our sales tax by a quarter of a cent to 9 ½%.  This ten year tax increase will generate $350 million a year which will be earmarked to finance services for the homeless.  

Measure H is expected to be approved by County voters based on the results of the November election.   

Measure HHH was approved by 77% of the voters.  This measure authorizes the City to issue $1.2 billion in general obligation bonds to fund permanent supportive housing for the homeless.  The County will be responsible for providing the necessary services as outlined in the ballot measure. 

Measure M, approved by 71% of the County’s voters, authorizes a permanent half cent increase in our sales tax to finance Metro’s ambitious capital expenditure program and its money losing operations. 

And 75% of the County’s voters approved Measure A, a $100 million tax to fund its Department of Parks and Recreation. 

The proponents of Measure H have also raised over $1.5 million from the usual suspects, including our old friend, Frank McCourt of Dodger infamy, and other real estate developers as well as many other City and County ring kissers looking for future paybacks.   

However, voter turnout in March is expected to be considerably lower than in November.  While 3.4 million votes were cast in the County for the Presidential candidates, turnout in March is expected to be in the range of 1 million voters (30%), representing a very different voter profile.  

In addition, County voters outside of the City have tended to be more fiscally prudent than City voters.  And they outnumber City voters by 50%. 

Voters in March may also be in a foul mood as a result of being hit with so many new taxes in 2016 and the prospect of even more taxes over the next two years.  

In 2016, Angelenos were hit with a $150 million tax increase in connection with the massive DWP rate increase of over $1 billion. 

Measure HHH, the $1.2 billion homeless bond, will cost City property owners an average of $65 million a year over the next 30 years. 

The Los Angeles Community College District’s issuance of $3.2 billion in bonds will cost an average of around $200 million a year for the next 30 years. 

County property owners will be tagged for another $100 million to fund its parks. 

The Metro half cent sales tax increase will cost County residents an additional $750 million a year. 

And this does not include state taxes associated with the new $2 a pack cigarette tax, the $9 billion K-12 school construction bond, or the Soak the Rich income tax surcharge. 

There are more taxes that are in the pipeline. 

The County Board of Supervisors is actively considering a Stormwater Tax that will raise between $300 and $500 million a year from property owners. 

The City is still considering a multibillion Street Repair Bond that will tag taxpayers for $100 to $200 million a year.  

The South Coast Air Quality Management District is contemplating raising $300 million through a new Vehicle Licensing Fee. 

And the State is considering a $3 billion increase in our gas tax, a $10 billion expansion of the current sales tax (thank you, Bob Hertzberg), a multibillion bond to repair its neglected parks, and a $2 billion bond to finance University of California facilities.  

There is also the issue of trust. 

During the last election, the County Supervisors, Mayor Garcetti, and the management of Metro withheld information about significant cost overruns on the widening of the Sepulveda Pass and Downton Regional Connection until after the election. 

And then you have the City’s budget and the tsunami of red ink, the County’s massively underfunded retirement plans, our failing infrastructure, the unwillingness of our elected officials to say no to unaffordable union demands, and the corrupt pay-to-play culture that permeates City Hall and the County Hall of Administration.  

The Supervisors, Mayor Garcetti, and the City Council have told us that homelessness is their number one priority.  If so, then the Supervisors need to find $350 million in the County’s $30 billion budget rather than hitting us up with yet another increase in our regressive sales tax. 

By voting NO on H, we can send a message to Eric, the City Council, and the Board of Supervisors that they need to use our tax dollars more efficiently and that we are not their ATM.   

+++++++++

 

Measure H: Los Angeles County Plan to Prevent and Combat Homelessness. 

To fund mental health, substance abuse treatment, health care, education, job training, rental subsidies, emergency and affordable housing, transportation, outreach, prevention, and supportive services for homeless children, families, foster youth, veterans, battered women, seniors, disabled individuals, and other homeless adults; shall voters authorize Ordinance No. 2017-0001 to levy a ¼ cent sales tax for ten years, with independent annual audits and citizens’ oversight?

 

+++++++++

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--Mayor Eric Garcetti and the Herb Wesson led City Council are opposed to Measure S, the Neighborhood Integrity Initiative, that is on the March 7 ballot.  Instead, they support the status quo where real estate developers make billions, the politicians receive millions, and we get the shaft. 

In a slick mailer paid for by real estate developers and the County Federation of Labor, Garcetti said, “Measure S will cause major job losses, will cost taxpayers millions, and will make our housing and homelessness even worse.” 

But the “facts” (see below) supporting Garcetti’s comments are based on the flawed Economic Policy Analysis by Beacon Economics, a local consulting firm that has close financial ties to opponents of Measure S, the Los Angeles Chamber of Commerce and Los Angeles City Hall.  

This not so independent analysis has not been peer reviewed.  Nor has it been the subject of an open and transparent discussion by the City Council, the City Administrative Officer, or the Chief Legislative Analyst as the business-as-usual Council Members are not willing to subject this report to rigorous scrutiny.  

The fatal flaw in this analysis is that it compares the impact of Measure S with the market prior to the approval by the voters on November 7 of Initiative Ordinance JJJ, the Affordable Housing and Labor Standards Related to City Planning Initiative.    

This overly complex ordinance that is over 10,000 words of confusing legal mumbo jumbo is a real deal and job killer.  

According to a previous Beacon analysis prepared to support the Los Angeles Chamber of Commerce’s opposition to JJJ, this measure’s “potential to drastically reduce residential construction would further accelerate increases in home prices and rents in Los Angeles.” 

[Note: The Los Angeles Times also opposed JJJ as it “could make LA’s housing crisis even worse.”] 

JJJ would require a developer of a residential project of 10 or more units who seeks a zoning change to essentially enter into a “project labor agreement” that requires construction workers be paid the “prevailing wage,” a rate that is significantly higher than market rates.  This will drive up project costs by 46% according to Beacon. 

At the same time, developers will have to set aside up to 25% of a project’s units for low and moderate income tenants, thereby lowering the projected rental income. 

The combination of Higher costs and lower rents is good reason not to build in LA, a reality that must be considered when analyzing the relative impact of Measure S. 

Garcetti is also claiming that Measure S will stymie the development of affordable housing and permanent supportive housing.  But this claim does not take into consideration that developers can build “as of right” without having to get zoning changes from City Hall.  And with 785,000 parcels of property in the City, there are ample opportunities for the development of market rate, affordable, and permanent supportive housing under the Measure S 24-month moratorium.  

Garcetti and the City Council claim they are beginning to reform the planning process.  They are developing ordinances to update the city’s General Plan and its 35 Community Plans and to have the City (not the real estate developers) oversee the Environmental Impact Statements and Traffic Studies.  They have introduced motions to limit campaign contributions from real estate developers. 

But if the voters reject Measure S, will we ever get an objective analysis of the impact of JJJ, the union inspired initiative that will make the building of multifamily buildings uneconomic?  Will the City continue to update on an accelerated basis the City’s General Plan and its 35 Community Plans in an open and transparent manner as required by Measure S?  Will the City provide the Planning Department with the necessary resources, especially after July 1, 2018 when the new labor contracts kick in and result in a tsunami of red ink?  Will the Garcetti and the City Council cut off the hand that feeds them and limit campaign contributions from real estate developers?  

The answer is obviously NO since we cannot trust Garcetti and the Council Members when it comes to their ultimate aphrodisiac, campaign cash. 

Vote Yes on S and end the status quo of a corrupt pay-to-play culture where real estate developers make billions, politicians receive millions, and we get the shaft.  

+++++++

Fake Facts 

  • Costs taxpayers over $70 million each year.
  • Destroys 12,000 jobs each year.
  • Cost $640 million in lost wages each year.
  • Results in losses of $1.9 billion to our City every year it is in effect
  • What is the impact of JJJ and how does that compare to Measure S?  

+++++++

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--Section 245 (see below) of the Los Angeles City Charter allows the City Council to assert jurisdiction over any action by the Board of Commissioners of a City Commission by a two-thirds vote of the Council.  There are certain exceptions for the Ethics Commission, pension plans, and personnel matters.  

While the City Council has the ability to veto the action by a two-thirds vote, it does not have the ability to “amend, or take any action with respect to the Board’s action.”   

However, there is an exception for City Planning that allows the City Council to amend the action of the City Planning Commission or the local Area Planning Commissions.  

And my oh my, have the members of the City Council taken advantage of this loophole.   They have extracted millions in campaign contributions and other favors from real estate speculators and developers, regardless of the impact on our neighborhoods and the increase in traffic.  

The Los Angeles Times had a well-researched, front-page expose of the $600,000 in pay to play campaign contributions involving the approval of the $72 million Sea Breeze residential development in the Harbor area of the City.   In this case, the City Council reversed the decision of the Area Planning Commission and the City Planning Commission, both of which had turned down the developer’s request for a zoning change for this industrial zoned property.  

This City Council granted variance resulted in an increase in the value of the land of $25 million according to a CityWatch article by Austin Beutner.  Of course, the beneficiaries of these laundered campaign contributions (Council members Joe Buscaino, Jose Huizar, Mitch Englander, and Nury Martinez as well as Supervisor Janice Hahn and Mayor Eric Garcetti) claim with a straight face and a touch of indignation that these overly generous cash contributions from people they had never met before did not influence their decision to grant the developer’s request. 

There is also the recent action of the City Council that permitted a Beverly Hills developer to erect a 27 story residential skyscraper in a low-rise neighborhood in Koreatown.  In this case, $1.25 million in contributions to two slush funds bought the cooperation of Mayor Eric Garcetti and City Council President Herb Wesson.   

The list of developments where money talks goes on and on, including, but certainly not limited to, the Palladium in Hollywood, the Reef in South LA, the Cumulus at Jefferson and Rodeo, as well as many other mega-developments throughout the City that will cause increased congestion and stress on our already overtaxed infrastructure. 

The net is that real estate speculators and developers make billions, our local politicians collect millions, and we and our neighborhoods get the shaft.  

One of the major benefits of Measure S is that it will put the brakes on the corrupt pay to play culture at City Hall as “up zoned” developments will be prohibited under the two year moratorium.  This will protect our neighborhoods and our quality of life while the City engages in real planning in an open and transparent manner. 

So NO to pay-to-play corruption.  Say YES to real planning.  And Vote YES on Measure S. 

+++++++++ 

Sec. 245.  City Council Veto of Board Actions. 

Actions of boards of commissioners shall become final at the expiration of the next five meeting days of the Council during which the Council has convened in regular session, unless the Council acts within that time by two-thirds vote to bring the action before it or to waive review of the action, except that as to any action of the Board of Police Commissioners regarding the removal of the Chief of Police, the time period within which the Council may act before the action of the Board shall become final shall be ten meeting days during which the Council has convened in regular session. 

   (a)   Action by Council.  If the Council timely asserts jurisdiction over the action, the Council may, by two-thirds vote, veto the action of the board within 21 calendar days of voting to bring the matter before it, or the action of the board shall become final. Except as provided in subsection (e), the Council may not amend, or take any other action with respect to the board’s action. 

   (b)   Waiver.  The Council may, by ordinance, waive review of classes or categories of actions, or, by resolution, waive review of an individual anticipated action of a board.  The Council may also, by resolution, waive review of a board action after the board has acted.  Actions for which review has been waived are final upon the waiver, or action of the board, as applicable. 

   (c)   Effect of Veto.  An action vetoed by the Council shall be remanded to the originating board, which board shall have the authority it originally held to take action on the matter. 

   (d)   Exempt Actions.  The following actions are exempt from Council review under this section: 

   (1)   actions of the Ethics Commission; 

   (2)   actions of the Board of Fire and Police Pension Commissioners; 

   (3)   actions of the Board of Administration for Los Angeles City Employees Retirement System; 

   (4)   actions of the Board of Administration of Water and Power Employees Retirement Plan; 

   (5)   quasi-judicial personnel decisions of the Board of Civil Service Commissioners; 

   (6)   actions of a board organized under authority of the Meyers-Milias Brown Act for administration of employer-employee relations; 

   (7)   individual personnel decisions of boards of commissioners other than the Board of Police Commissioners; and 

   (8)   actions which are subject to appeal or review by the Council pursuant to other provisions of the Charter, ordinance or other applicable law. 

   (e)   Exceptions for Actions of City Planning Commission and Area Planning Commissions.  The Council shall not be limited to veto of actions of the City Planning Commission or Area Planning Commissions, but, subject to the time limits and other limitations of this section, after voting to bring the matter before it, shall have the same authority to act on a matter as that originally held by the City Planning Commission or Area Planning Commission.

+++++++++

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG-The La Kretz Innovation Campus is a welcome addition to the City’s economic development infrastructure.  Located on 3.2 acres in the Arts District, this one story, renovated warehouse consists of 60,000 square feet of “modern, creative office and laboratory spaces” that will serve as an “incubator of startups and early stage businesses focused on the commercialization of clean technologies.”   

Importantly, this tasteful, LEED certified development respects the character of the neighborhood, a rare feat in modern day Los Angeles. 

There is also an attractive 25,000 square foot neighborhood park that will be leased to and operated by the Department of Recreation and Parks. 

This $43 million development was named after Morton La Kretz, a philanthropist and real estate speculator who made a tax deductible contribution of $3 million in return for the naming rights to the Campus.   

He is also one of the forces behind the controversial 1.4 million square foot, Crossroads of the World development that is located near Sunset and Highland, right in the middle of already traffic congested Hollywood. This massive mixed use development does not respect the character of this low rise neighborhood as it will have buildings that are 400 feet tall, will house 1,250 residential and hotel units, and will have 280,000 square feet of office, retail, and commercial space.      

Needless to say, this massive project will require the approval of local Council Member Mitch O’Farrell, the Planning and Land Use Management Committee chaired by Jose Huizar, the Herb Wesson led City Council, and Mayor Eric Garcetti who represented this part of Hollywood when he was a member of the City Council.  

In September, Jose Huizar made a motion (Council File 16-1109) calling for the Chief Legislative Analyst and the Economic and Workforce Development Department to report on the progress of the Campus, including incubating early stage green businesses and supporting energy and water conservation through research and education.  

But no report would be complete unless it analyzed the adequacy of the economic returns to our Department of Water and Power which was forced to “invest” $20 million in this pet project of Eric Garcetti and Jose Huizar and to absorb the operating costs of $895,000 a year.  The report should also include an analysis of whether the bargain rents from “green” tenants are consistent with the market and the high cost of the Campus. 

This report should also address La Kretz’s use of philanthropy for his own personal gain.  This would include not only the Crossroads of the World development in Hollywood, but his two controversial projects on the Los Angeles River, one in Atwater Village and the other across the river in Elysian Village.  

La Kretz should be complimented for his generosity in helping to fund the Campus.  And while he has not taken the well-travelled road of contributing to the campaign coffers of the Mayor and the members of the City Council, he has achieved a level of influence through his charitable gifts that may result in the approval of this massive, out of character development in Hollywood.  More than likely, this will result in estimated profits in excess of $100 million. 

Not a bad return on a tax deductible $3 million investment. 

The pay to play culture surrounding the Crossroads of the World development is just another example of why we should VOTE YES ON MEASURE S on March 7 so we can help stem the corruption that has infected City Hall to the detriment of our neighborhoods. 

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--You can’t make this stuff up. 

Council District Nine Incumbent Curren Price’s campaign slogan, The Price is Right for the Ninth, is spot on given the pay to play culture permeating the cesspool of corruption known as City Hall. 

This begs the question to Price, “What is the price that the deep pocketed real estate developers paid you to support the out of context, $1.2 billion high rise development of The Reef in South Central that has the very real potential to displace tens of thousands local residents?” 

But Price is not alone.  

We should demand that Mayor Garcetti and all of the members of the Herb Wesson led City Council come clean about all their shady dealings with real estate developers, starting with Garcetti, Buscaino, Englander, Huizar, and Martinez and their involvement with the $600,000 of laundered campaign contributions involving the $72 million Sea Breeze development that was disclosed in a well-researched front page story of the Los Angeles Times.  

And the list of neighborhood destroying developments are too many to enumerate, but involves billions of congestion causing, “up zoned” developments approved by the Mayor Garcetti, the Herb Wesson City Council, and the Jose Huizar led Planning and Land Use Management committee.      

As of December 31, the Mayor and the seven City Council incumbents have been showered with over $5 million in campaign contributions with millions more expected prior to the March 7 election.  And this does not include millions in self-serving contributions to “independent” expenditure committees to support individual candidates and politically favored ballot measures.  

While the price of admission to the cesspool of corruption known as City Hall is chump change relative to the value of favors granted to City Hall’s generous real estate development cronies, what is the price that we Angelenos will have to pay?  

Trust me, it ain’t chump change.  

Vote Yes on S, the Neighborhood Integrity Initiative.

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--As a result of Angelenos' accurate perception that our corrupt City Council and Mayor are unduly influenced by the campaign contributions of real estate developers, the leaders of the City’s public sector unions, and other special interests, Councilmember Mike Bonin introduced his “Clean Money Elections for Los Angeles” motion on January 17.  

Under his proposal that “gets money out of politics,” the City would establish a system of publically financed municipal elections where candidates would “agree to forgo corporate donations, special interest money, further donations from individuals, or significant self-financing” in return for “a statutorily established amount of money sufficient to run an aggressive and well-financed campaign.”   

This voluntary program would be fully funded by a dedicated revenue stream.  According to Bonin’s motion, specific sources of financing would include fees on development and a severance tax for all oil and gas produced within the City of Los Angeles. 

But rather than levying new taxes on the business community which will be passed onto all Angelenos, the City Council should investigate the use of their less than transparent discretionary slush funds that are reputed to haul in $20 to $25 million a year.  

Sources of cash for these slush funds include the Street Furniture Fund (advertising revenues from bus shelters), Oil Pipeline Franchise Fees, the Real Property Trust Fund (50% of the proceeds of the sale of surplus property), and AB 1290 Funds (tax increment funds from the dissolution of the corrupt Community Redevelopment Agency).  

There are also lucrative fees from the Lopez Canyon Landfill, the Sunshine Canyon Landfill, and the Central LA Recycling and Transfer Station that never see the light of day.  

Unfortunately, these slush funds are shrouded in mystery as the City Council refuses to allow a detailed audit that is available to the public.  Rather, our Elected Elite’s idea of transparency is a data dump of more than 100 pages of computer printouts which require an experienced forensic accountant to decipher.  

And when asked by Mayor Villaraigosa in 2010 to “lend” $40 million to shore up the City’s Reserve Fund in the face of a projected $485 million deficit, the answer was a self-serving and resounding NO.  

Despite this lack of transparency, each Councilmember has detailed information on their own discretionary slush fund.  

Another source of cash would be to tap the combined $100 million annual budgets of the Mayor and City Council.  But like the slush funds, this might be hitting too close to home and limit the ability of our Elected Elite to finance their pet projects and reward their friends, cronies, family, and contributors to their election campaigns.  

Bonin requested that the Chief Legislative Analyst and the City Administrative Officer develop cost estimates and revenue sources for the Clean Money Public Campaign Financing System.  He also moved that the Ethics Department to prepare a ballot measure for our rejection or acceptance in 2018. 

Any reform will also need to address Independent Expenditure committees that are funded by real estate developers, the leaders of the City’s public unions, and other special interests.  These committees are designed to support individual candidates, ballot measures, or tax increases where the Mayor and other elected officials put the arm on well healed donors who are looking for special treatment at City Hall.  

Of course, any reform will require the cooperation of our 18 elected officials and any candidate for office.  And this will be near impossible as campaign cash is the ultimate aphrodisiac for the money grubbing occupiers of City Hall and their cronies.  

+++++++ 

Note: The recent flurry of Council motions endorsing campaign reform, including a Ban on Developer Campaign Contributions, are an effort to blunt wide spread voter support of Measure S, the Neighborhood Integrity Initiative, and to offset voter outrage over the pay to play corruption involving real estate developers.  

Recent articles and editorials in the Los Angeles Times and CityWatch have detailed the corruption involving the Sea Breeze development where $600,000 in suspicious money laundering campaign contributions to Supervisor Janice Hahn, Mayor Garcetti, and Councilmembers Buscaino, Jose Huizar, Mitch Englander, and Nury Martinez resulted in the approval of a $72 million development that was rejected by both the Area and City Planning Commissions.

The Los Angeles Times, CityWatch, and other LA area publications have also had a field day commenting on the pay to play corruption at the over height development of billionaire Rick Caruso near the already congested Beverly Center, the oversized Cumulus development at Jefferson and La Cienega, the out of character Reef in South Central, and the 27 story development at Catalina and Eighth in Koreatown where Garcetti and Wesson extorted $1.25 million from the Beverly Hills developer in return for a variance valued at an estimated $20 million.

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--In August of 2015, the City of Los Angeles announced what turned out to be a budget busting contract with the Coalition of City Unions that represents the City’s 20,000 civilian workers.  According to Mayor Eric Garcetti, this agreement “prioritizes service delivery and strengthens our long term fiscal health.” 

To the contrary, this back room deal contributed to the City’s never ending Structural Deficit (where personnel costs increase faster than revenues) and blew a gaping hole in the 2020 budget, turning a projected surplus of $68 million into $101 million deficit. 

But that’s not all, folks. 

The City also committed to a “goal” of hiring 5,000 civilian employees by June 30, 2018.  But in a December report prepared by the City’s Personnel Department that outlined the Targeted Local Hire Program, not one mention was made about the cost of this program or the impact on the City’s budget. Yet the City is looking at an $85 million deficit next year, but that was before the City Administrative Officer informed us on January 6 that this year’s breakeven budget is a pipedream as the shortfall may be as high as $245 million thanks to lower revenues and higher than budgeted litigation costs. 

While some of the new employees will replace higher cost retiring workers, the hit to the City’s budget has been rumored to be in the range of $250 million when considering the fully loaded costs of salaries, Cadillac healthcare plans, and very generous pensions. 

The Targeted Local Hire Program appears to be more of a social welfare program as it is focused on hiring and retaining of local Angelenos from underserved communities.  Under the proposed system, over 80% of the positions would be allocated to the applicants from the designated underserved communities.    

But what about all the other Angelenos who have stayed out of trouble and done what was expected of them.  Don’t they deserve a fair shot at these high paying, guaranteed for life City jobs that have very generous benefits that far exceed those in the private sector?  And don’t the odds favor them doing a better job? 

This is not the time to be expanding the City’s workforce.  The City is looking at a river of red ink of almost $300 million over the next four years, and that was before the realization that this year’s unexpected deficit may be as high as $245 million.  The depleted Reserve Fund is under severe pressure to fund this shortfall.  And more than likely, the economy is going to be hitting some headwinds that will put additional pressure on the budget.  And as we know, it will be hard to lay off employees that are represented by the campaign funding leaders of the City’s self-serving public unions who consider us their ATM.  

Rather than hiring and training 5,000 new workers and adding to the City’s permanent overhead, why not hire independent third parties to complete specific tasks such as repairing our streets and sidewalks, trimming our trees, and maintaining our parks?  

Before proceeding with the Targeted Local Hire Program, Councilmember Paul Koretz, the Chair of the Personnel Committee and one of the main promoters of this less than transparent program, should conduct public hearings and outreach so that we have a better understanding of this very expensive initiative and its impact on the City’s already precarious finances. 

At the same time, Koretz, City Council President Herb Wesson, and Mayor Eric Garcetti would be wise to follow the advice of the Los Angeles Times to “commission and independent analysis of the impacts” of the program and “allow plenty of time for the public [and the Neighborhood Councils] to ask questions.” 

A year ago, Koretz wrote, “The City of Los Angeles has a mission to provide the highest quality public service to the residents of the City in the most efficient and cost effective manner.” 

Koretz must honor this pledge.  

  • Read More 

Strategic Workforce Development Taskforce / Personnel Department / Letter of Agreement / Hiring Civilian Employees Council File 16-0109

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--Despite General Fund revenues being up by over $1 billion since Eric Garcetti became our Mayor, the City Administrative Officer indicated in a January 6 memo that the “combined potential deficit [for the fiscal year ending June 30, 2017] currently stands at $245 million.” 

You have to be kidding.  A billion bucks and these jokers cannot balance the budget. 

The budget is being hammered by higher than anticipated expenditures and lower than expected revenues.  But there are not many real operational solutions since the Mayor, the Personnel Committee headed by Paul Koretz, and the City Council are not even willing to considering laying off or furloughing unionized employees who represent the bulk of City budget expenditures.   

Spending is anticipated to be $70 to $80 million over amounts approved by the City Council and Mayor Garcetti in June.  The primary culprit is legal settlements and verdicts against the City that are more than double the budgeted $67 million. But this budgeted amount was significantly less than the amount recommended by the City Administrative Officer (rumored to be $120 million) last April when Garcetti presented his budget to the City Council. 

The revenue shortfall (including those at risk) is projected to be $165 million, consisting of lower than expected reimbursements from the proprietary and special departments, lower taxes on DWP Ratepayers as Power System revenues are below projections, and lower collection of property and sales taxes. 

The CAO has proposed a number of nickel and dime solutions which, when taken as a whole, may help eliminate some of the budget deficit.  These include curtailing any new expenditures, limiting hiring, increasing revenues by collecting the hotel tax from short-term rental sites in addition to AirBnb, investigating the revenue potential of billboards on City property (subject to the approval of the City Council), and being reimbursed for services by major event venues. 

As expected, the CAO has proposed that the City proceed with a ten year Judgment Obligation Bond of up to $70 million. The proceeds from this offering would be used to replenish the Reserve Fund so that it would have the capacity to help close the budget deficit. 

But this financial strategy of using long term debt to finance operating losses highlights the financial follies that have been dumped on us by Garcetti, the Paul Krekorian Budget and Committee, the Personnel Committee chaired by Paul Koretz, and the Herb Wesson led City Council.  They have steadfastly refused to follow the many common sense recommendations of Miguel Santana, the City Administrative Officer who, unfortunately, is leaving to become the Chief Executive Officer of the troubled Los Angeles County Fair Association.    

The City will muddle through this financial mess by issuing Judgment Obligation Bonds, developing new sources of revenues, selected budget cuts, fewer hires, and/or raiding the Reserve Fund and maybe even the previous sacrosanct Budget Stabilization Fund.  But it will not be pretty, especially when we have to listen to all the excuses of the City Council and the Mayor.  

This financial fiasco demonstrates why the City Council and Garcetti need to place on the ballot a LIVE WTHIN ITS MEANS* charter amendment so that voters have the opportunity to either accept or reject budget reform. 

Finally, Garcetti and Personnel Chair Paul Koretz do not deserve to be re-elected in March because they have failed the citizens of Los Angeles by refusing to adopt realistic budget and personnel policies that will allow the City to balance its budget and provide basic services to all Angelenos. 

Time for a change.  Throw the bums out.  

*The “Live Within Its Means” charter amendment will require the City to develop and adhere to a Seven Year Financial Plan; to pass three year balanced budgets based on Generally Accepted Accounting Principles; to prohibit any labor contracts that result in future budget deficits; to benchmark the efficiency of its operations; to fully fund its pension plans within twenty years; to implement a twenty year plan to repair and maintain our streets, sidewalks, and the rest of our infrastructure; and to establish a fully funded independent Office of Transparency and Accountability to oversee the City’s finances and operations.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--In 2013, Mayor Eric Garcetti told us that the revitalization of the 11 mile stretch of the Los Angeles River from Griffith Park to the Arts District was projected to cost $1.1 billion, of which the City’s share was $432 million.  

In 2015, the cost increased to $1.4 billion, but our share for the 11 mile revitalization ballooned to $1.2 billion as federal regulations limited the Army Corps of Engineers contribution to $200-$300 million.  While the City had no clue how it was going to come up with its share, the City Council authorized the City Administrative Officer to issue a letter to Army Corps of Engineers stating the City will have the financial capability to meet its cost sharing obligations.   

In late 2016, the revitalization plan was expanded to include the first 32 miles of the 51 mile long Los Angeles River that flow through the City, beginning in Canoga Park and ending at the Vernon line.  But once again, the cost ballooned, this time to an estimated $7 billion. The cost per mile also increased to $219 million, up 72% from the $127 million per mile for the 11 mile revitalization plan. 

Importantly, EIFDs are not permitted to fund operating expenses such as ongoing maintenance and repairs, adding another level of expense to the river revitalization plan that has not been considered.   

Consistent with past practice, Garcetti has not developed a plan to finance this aspirational, multi-decade project.  However, one alternative that is being considered by the City Council and the Economic and Workforce Development Department (“EWDD”) is Enhanced Infrastructure Financing Districts (“EIFD”), a new financing vehicle authorized by the State in 2015 that allows local governments to fund capital projects by diverting “incremental” property tax revenues from the City to an EIFD to finance the payment of interest and principal on long term bonds. 

In many ways, EIFDs are intended to replace the controversial and often corrupt Community Redevelopment Agencies by limiting their taxing authority to ‘consenting” entities (in this case the City and County, but not LAUSD) and requiring a 55% vote of the EIFD voters to approve the issuance of bonds. 

The recent report prepared at the request of EWDD recommends establishing nine EIFDs along the 32 miles of the river that would be entitled to collect 75% of the incremental property taxes from properties within one mile of the River due to the City and County (52% of the total as any incremental tax revenues due LAUSD would not be included) that exceed the existing assessed value.   This amount would then be reduced by interest payments, interest reserves, and delinquency reserves.  And then another 20% would be set aside for affordable housing. 

Over the next 30 years, the report indicated (but only after massaging the massive amounts of data) that over $7.6 million in incremental tax revenues would be available to the nine river EIFDs.  But after financing costs (interest, interest coverage, and reserves) and the affordable housing set aside, only $1.5 billion (20%) is available for investment in river related projects.  This is an unacceptable proposition that is dependent on issuing massive amounts of debt.  

The report also indicates that the EIFDs will not increase taxes of the properties in the district. While true, it will divert the incremental property tax revenue from the City’s General Fund, resulting in less money for services for those who live in the remaining 88% of the City based on the assessed value of all City property. Again, this is not an acceptable proposition since the City’s voters do not have a say in the matter. 

There are also issues of transparency and accountability that need to be addressed as the EFIDs may have a life span of up to 45 years and may have the ability to increase fees and assessments without the approval of the voters in the districts or the City. 

What is not to like about a revitalized Los Angeles River?  But does the river revitalization plan take priority over repairing our lunar cratered streets, our parks, and our urban forest; public safety (LAPD and LAFD); affordable housing and the homeless; and the restoration of City services.  And should the City develop a pay as you go revitalization plan instead of issuing billions in new debt?   

Before proceeding with the $7 billion river revitalization plan and the establishment of EIFDs, the City needs to reach out to the entire City and its Neighborhood Councils to determine the City’s priorities and educate the public on the revitalization plan and the intricacies of the Enhanced Infrastructure Financing Districts.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--At its December 6 meeting, the politically appointed Board of Commissioners of our Department of Water and Power approved the transfer of $264 million of Ratepayer money from DWP’s Power System to the City coffers without any discussion, once again demonstrating their disregard for the Ratepayers and our hard earned cash.  But this is standard operating procedure as witnessed by the Board’s recent blessing of the above market $41 million lease for the City owned Figueroa Plaza and the uneconomic $12 million Rooftop Solar Program. 

The Commissioners also knew that the $264 million 8% Transfer Fee is the subject of a class action lawsuit that alleges that this fee is really a tax as it exceeds the cost of providing electrical service to the Ratepayers.  This violates the California constitution because the tax has not been approved by the City’s voters. 

But the Board does not bear the sole responsibility for its failure to stand up for the best interests of the Ratepayers.  Behind the scenes is Mayor Eric Garcetti, calling the shots, pulling the strings, and directing the Commissioners to approve actions that help satisfy City Hall’s addiction to our cash. 

But this $264 million transfer tax is $27 million less than budgeted $291 million, which, when combined with the projected budget deficit of $82 million for this year, will result in red ink of $110 million. And this does not include the projected $35 million shortfall in property tax revenues. 

To fund this deficit, the City is considering issuing a $70 million Judgment Obligation Bond and/or levying a special assessment on the Department of Water and Power.  

The City is desperate to settle the class action lawsuit in a way that will preserve all or most of the Transfer Tax without giving us the opportunity to vote on this tax.  Rumors from well-placed sources indicate that the City is close to settling the class action litigation where the City will cap the transfer at $250 million a year without giving the voters the opportunity to approve or reject this tax. 

This, however, will not be without a fight as taxpayers will protest any settlement that does not require a vote. 

The purpose of this pushback is not to break the City, but to reform the City’s budget process.  

As an incentive for voters to support the $250 million Transfer Tax (the equivalent of a half cent increase in our sales tax or a 5% bump in our property taxes), the City should also place a LIVE WITHIN ITS MEANS* charter amendment on the ballot.  Each measure would require voter approval of the other ballot measure. 

While we would all like to “save” $250 million a year, this is a fair price to pay for real budget reform, especially given that our fiscally irresponsible Mayor has been unwilling to confront the City’s Structural Deficit that continues to produce rivers of red ink, lunar cratered streets, and massive unfunded pension liabilities that will eventually overwhelm the City’s budget.  

Here’s to Real Reform and a Happy, Healthy, and Wet 2017.    

 

+++++++

 

*The “Live Within Its Means” charter amendment will require the City to develop and adhere to a Seven Year Financial Plan; to pass three year balanced budgets based on Generally Accepted Accounting Principles; to prohibit any labor contracts that result in future budget deficits; to benchmark the efficiency of its operations; to fully fund its pension plans within 20 years; to implement a 20 year plan to repair and maintain our streets, sidewalks, and the rest of our infrastructure; and to establish a fully funded independent Office of Transparency and Accountability to oversee the City’s finances and operations.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--The City is looking at an $82 million year end deficit according the Second Financial Status Report prepared by the City Administrative Officer.  This gap does not include the possibility of lower revenues from the utility users’ tax, the sales tax, parking fines, and the 8% Transfer Tax from our Department of Water and Power.  

One of the major reasons for this shortfall is that payouts from the Liability Claims Account are expected to be “at least” $135.5 million, $67 million over $68.5 million in the City’s Adopted Budget that was blessed by the City Council in May. 

Included in these payouts is a jury verdict for an eye popping $23 million in a wrongful death suit against the deep pocketed City for its failure to repair a dangerous intersection in San Pedro. The City intends to finance this cash payout by raiding its Reserve Fund that can ill afford this hit. 

And on Tuesday, the City Council approved the payment of $8 million to settle lawsuits involving three men who were shot and killed by LAPD officers.  And once again, the Reserve Fund will end up footing the bill. 

According to City Hall sources, there are a number of other lawsuits involving the Police Department that could cost the City big bucks.  But rather than take the risk of being slammed by huge verdicts from runaway juries, the City, viewed as a deep pocket by the plaintiff ‘s bar, will elect to settle many of these cases for what appears to be outrageous amounts, but tiny compared to the potential exposure. 

The City is considering financing the $67 million of excess settlements by issuing up to $70 million of Judgment Obligation Bonds.  These bonds, which must be approved by the State and are payable over a maximum of ten years, would shore up the Reserve Fund’s liquidity, an important component in protecting the City’s high quality bond ratings. 

At the same time, the bonds are paying for what is realistically considered an operating expense, allowing the City to continue to “kick the can down the road,” dumping yesterday’s obligation on tomorrow’s taxpayers. 

A classic example is the $16 million judgment for the 2007 May Day demonstrations that was financed with a 2010 Judgment Obligation Bond that will not be paid off until 2020, 13 years after this incident involving the LAPD and 295 demonstrators in and around MacArthur Park. 

Unfortunately, this low ball budgeting scam is not an isolated event.  Last year, the City budgeted $54 million for Liability Claims, but ended up forking over $110 million in settlements.  

In the future, the City needs to develop a realistic budget for it Liability Claims Account instead of relying on the Reserve Fund and Judgment Obligation Bonds.  

At the same time, the City should make the Police Department and every other City department “own” its liabilities rather than relying on the General Fund and the Reserve Fund.  This would force the Police Chief, the Fire Chief, and all department heads to focus on preventing potential liabilities.  

Finally, the City should use its political clout in Sacramento to implement tort reform as California is considered one of the country’s top “Judicial Hellholes.”  

But maybe we asking too much of Mayor Eric Garcetti and the Herb Wesson led City Council.  After all, they have our wallets to raid.  And they would not want to alienate the campaign funding lawyers who make an excellent living by suing our cash strapped City. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--The Department of Water and Power’s pension plan and its plan to cover Other Post-Employment Benefits (“OPEB”) have unfunded liabilities of almost $4.8 billion, an obligation that the Ratepayers will be required to fund.  

The Department of Water and Power pension plan is only 84% funded as assets of $10.3 billion are about $2 billion short of its future obligations of $12.3 billion. 

At the same time, the OPEB obligations are only 75% funded as assets of $1.75 billion are about $600 million less that its future obligations of $2.3 billion. 

Combined, DWP retirement obligations are only 83% funded, representing an unfunded liability of $2.5 billion. 

That’s the good news. 

When DWP finishes cooking the books and marks the assets to their true market value and assumes a more realistic investment rate assumption of 6.25%, the unfunded liability soars to $4.8 billion, representing an unhealthy funded ratio of 71%. 

DWP’s retirement plans are also very expensive to maintain. This year, the Department is expected to contribute $550 million to the two plans, an amount equal to over 12.5% of Department revenues and equal to almost 60% of its payroll.  The City, on the other hand, contributes less than 30% of civilian workers’ salaries to the Los Angeles City Employees’ Retirement System. 

During the last year, the unfunded liability increased by 50% ($1.6 billion) to $4.8 billion, in large part because the return on invested assets was less than 1% (0.82%), a considerable shortfall from the overly optimistic investment rate assumption of 7.5%.  At the same time, the annual contribution will increase to 60% of projected payroll, up from less than 50% the previous year. 

DWP, to its credit, has been making some progress. 

Several years ago, the Department contributed $600 million to fund a portion of its OPEB obligations, unlike the County and the State who have failed to fund any of this ever increasing liability.  As an aside, the City has been funding a portion of this obligation for almost 20 years.  

In the past year, it lowered its investment rate assumption to 7.25% even though it resulted in a higher unfunded liability and increased contributions. 

The Department and IBEW 18 also agreed to establish a new pension tier with lower benefits for employees who were hired after January 1, 2014.  This resulted in lower annual contributions as a percentage of the payroll. 

But even with these changes, DWP’s retirement plans are not sustainable as the investment returns on the stock and bond portfolios are expected to be in the range of 6% to 6.5%, lower than the targeted rate of return of 7.25%.  Furthermore, the investment rate assumption does not provide for the funding of the $4.8 billion unfunded liability which will continue to compound.  At the same time, annual benefits of this mature pension plan will exceed contributions by the Department and its employees. 

This shortfall will eventually be funded by the hard pressed Ratepayers who are already being smacked with a five year, $1 billion rate increase.  

Rather than speculate about the status of DWP’s retirement plans, the Board of Commissioners should require the Department, with the assistance of the Ratepayers Advocate and the Neighborhood Councils, to follow the recommendation of the LA 2020 Commission to establish an independent and transparent Commission on Retirement Security to review the DWP’s retirement obligations in order to promote am accurate understanding of the facts, to report on employment costs in various categories, and to develop concrete recommendations on how to achieve equilibrium on retirement costs by 2020. 

Is this too much to ask of the Garcetti appointed Commissioners?

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--At the November 15 meeting of Board of Water and Power Commissioners, President Mel Levine, Vice President Bill Funderburk, and Jill Banks Barad voted to approve the $13 million Solar Rooftop Program despite the lack of any financial analysis.  But the absence of any definitive information is why Christina Noonan and Michael Fleming stood their ground and opposed this feel good, politically motivated project because there were too many unanswered questions and that it was obvious that this deal was a real stinker and was and is not in the best interest of the Ratepayers. 

Under this pilot program, our Department of Water and Power will finance, install, and maintain 1 megawatt (1,000 kilowatts) of new photovoltaic solar power on the rooftops of 400 single story, owner occupied homes in low income and underserved areas of the City.  In return, the homeowner will receive $30 a month ($360 a year) for the next 20 years pursuant to a one sided contract with the Department. 

Importantly, all the electricity produced by these rooftop solar systems will not be used by the homeowners, but will be pumped into the DWP grid and will help the Department met its renewable energy mandates of 33% by 2020 and 50% by 2030. 

But the economics of this deal stink. 

Over the next 20 years, DWP is expected to spend almost $13 million on this pilot project.  This includes $4 million for IBEW labor crews to install the photovoltaic systems over the next four years, $6 million for ongoing IBEW labor, and almost $3 million for customer lease payments.  Including the cost of borrowed money, the cost per kilowatt hour is almost 50 cents, 5 times more expensive than DWP’s purchased wholesale solar alternatives and over 3 times more expensive than the retail price of 16 cents we are charged on our ever increasing bimonthly bills. 

But it gets worse if you assume modest levels of overhead and insurance to repair damaged rooftops.  Then the price per kilowatt hour increases to 75 cents. 

But that’s not all folks!  If there are cost overruns, a common occurrence for DWP / IBEW built solar projects, the price soars to a mindboggling $1.00 per kilowatt hour.  This is more than 10 times the wholesale rate for solar power and more than 6 times the retail rate.  

And this does not include the illegal 8% Transfer Fee! 

The Board tried to justify this wildly uneconomic deal by relying on the new Equity Metrics Date Initiative claiming that the program was addressing the “solar access disparity” in the City.  But the supporting data that was prepared by the Los Angeles Alliance for a New Economy, a labor dominated organization, is unavailable and does not appear to take into consideration the sizeable investment that environmentally conscious homeowners in higher end neighborhoods have made in rooftop solar systems that have a very low return on investment.  

The Solar Rooftop Program is also a pet project of IBEW Union Bo$$ d’Arcy as 60% to 70% of the cost will be for IBEW labor.  And if for some strange reason this program manages to survive, the anticipated 40 megawatt project will cost Ratepayers over $700 million and be a cash cow for the IBEW.  

Mayor Eric Garcetti was also complicit in this Solar Rooftop Program as he approved this boondoggle pursuant to his Executive Directive No. 4 that was issued on June 24, 2014.  

With friends like Eric Garcetti and his three politically appointed Commissioners, Mel Levine, Bill Funderburk, and Jill Barad Banks, picking our pockets, who needs enemies? 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--Earlier this week, Miguel Santana, our highly regarded City Administrative Officer, shocked the City when he announced that he will become the next Chief Executive Officer of the Los Angeles County Fair Association, the controversial nonprofit organization that runs the Fairplex on County owned land in Pomona. 

But in July of 2009, everybody thought Miguel had lost his marbles when he agreed to be the City Administrative Officer for the City of Los Angeles. After all, the City was projecting a $2 billion river of red ink over the next two years. 

Why would he want to work for the City and report to the 15 bickering nincompoops on the City Council and fiscally irresponsible Mayor Antonio Villaraigosa, who, along with City Council President Eric Garcetti, approved an overly generous, unsustainable five year, 25% raise for the City’s civilian workers just as the economy was tanking in 2007.  

And then Santana, the new kid on the block, picked a fight with the campaign funding leadership of the City’s powerful civilian unions by questioning the economics of the Early Retirement Incentive Program that would have cost the civilian pension plan (and therefore the City and its taxpayers) $600 million over the next 15 years.  

But this was just the opportunity that Santana envisioned after he received a Master in Public Administration from Harvard’s Kennedy School of Government in 2005.   

Over the next several years, it was rough sledding as the City was unable to eliminate its Structural Deficit, where personnel expenditures grew faster than revenues. But there was meaningful progress, year after year, despite the constant interference by our Elected Elite. 

The civilian unions and the City split the cost on the Early Retirement Incentive Program. 

The City was able to spread out the five year, 25% wage increase over seven years, although there was considerable squawking from the unions about all their “sacrifices.”  

There was modest pension reform that slowed the rate of growth in the unfunded pension liability.  

There were tough decisions as the City was forced to cut projected expenditures year after year to balance the budget.  There was even some cooking of the books to balance the budget when the City “banked” police overtime and deferred the maintenance of our streets.  

The Structural Deficit became more manageable as the annual anticipated budget gap dropped year after year, from over $300 million in 2011-12 to under $100 million for the upcoming fiscal year beginning July 1, 2017.  

Santana helped kill some boneheaded plans, including Villaraigosa’s scheme to sell the City’s parking garages to pay for every day operating expenditures. 

Santana, the City’s equivalent of a Chief Financial Officer, also earned the trust of the investment community (who purchased the City’s bonds) and the credit rating agencies by being open and transparent about the City’s finances and its challenges and building a respectable Reserve Fund for emergencies and contingencies.  

There were also situations where he put the City interests before those of the citizens.  For example, he negotiated the settlement of the $1 billion class action lawsuit involving the Telephone Users’ Tax for a nickel on the dollar.  But in his defense, we would have paid the bill, one way or the other.  But it represented an opportunity to require the City to place on the ballot a “Live Within Its Means” charter amendment to entice us to approve a new tax to cover this shortfall. 

He is also negotiating the settlement of class action litigation involving the illegal 8% Transfer Fee from DWP’s Power System to the City’s General Fund, capping the annual transfer at less than $250 million and waiving past liabilities that are north of $1.5 billion.  But the question remains whether the proposed transfer needs to be approved by the voters pursuant to Proposition 26.  

Miguel also earns kudos as a manager of his department.  He has developed a team of highly qualified, trust worthy individuals who have served as a significant resource for the City Council, the Mayor, and the managers of the City’s departments.  

The City still faces significant financial hurdles: a Structural Deficit of close to $100 million next year; an unfunded pension liability of $15 billion that has the possibility of doubling over the next ten years; deferred maintenance north of $10 billion to repair our streets, sidewalks, parks, and the rest of our deteriorating infrastructure; aggressive unions seeking raises exceeding the rate of inflation; and spending pressures from the Mayor and City Council who are unwilling to reform the City’s broken finances. 

Of all the people at City Hall, there was nobody who I trusted more than Miguel.  I will miss him, his intellect, his rigorous analysis, his directness, his openness, his hard work, his modesty, and his integrity.  If not for Miguel, I hate to think of the mess we would be facing.  

Thank you, Miguel. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--Our Enlightened Elite who occupy Los Angeles City Hall tell us that pension reform is not necessary.  After all, the recent actuarial report for the Fire and Police Pension Plan indicated that its $19 billion retirement plan was 94% funded as of June 30, 2016.  

But as we all know, figures never lie, but liars figure, especially when it involves the finances of the City of Los Angeles. 

The City will say that a pension plan that has assets equal to 80% of its future pension obligations is in good shape.  Baloney!  Pension plans should aim to be 100% funded, especially in down markets.  And in today’s bull market, where the Dow Jones Industrial Average is hitting record highs, the pension plan should be 120% funded so that it can withstand another bear market. 

Even at the 94% funded ratio, the unfunded pension liability for the retirement plan is pushing $1.2 billion, not exactly chump change when compared to the projected payroll of $1.4 billion for the 12,800 active cops and firefighters. 

But there is more bad news that is buried in the opaque actuarial reports that, when pieced together and analyzed, reveals that the overall Fire and Police Pension Plan is over $6 billion in the red and that only 75% of its future obligations are funded.  

The Fire and Police Pension Plans are also responsible for Other Postemployment Benefits (“OPEB”) which covers medical benefits for retirees.  But the $3 billion of OPEB obligations are less than 50% funded, resulting in an additional $1.6 billion in unfunded liabilities. 

The City is also cooking the books by “smoothing” the actual gains and losses in its investment portfolio over a seven year period.  This little trick is covering up a $600 million hit to its investment portfolio. 

Finally, if the newly calculated liability (that includes adjustments for OPEB and smoothing) of $3.4 billion (85% funded) is adjusted to reflect the more realistic investment rate assumption of 6.5% (as recommended by Warren Buffett), the unfunded pension liability soars to $6.25 billion and the funded ratio plummets to 75%.  

When combined with the $9 billion liability of the Los Angeles Employees’ Retirement System, the City’s total unfunded pension liability exceeds $15 billion.  And this liability is expected to double over the next ten years based on realistic rates of return that are in the range of 6% to 6.5%.  

But what are Mayor Eric Garcetti, City Council President Herb Wesson, Budget and Finance Chair Paul Krekorian, and Personnel Chair Paul Koretz doing to address the single most important financial issue facing the City? 

Nothing! Absolutely nothing other than put their heads in a potato sack and hope that a robust stock market will make the $15 billion problem go away.  

They have ignored the recommendations of the LA 2020 Commission to form a Committee on Retirement Security to review and analyze the City’s two pension plans and develop proposals to “achieve equilibrium on retirement costs by 2020.” 

Krekorian and Koretz made the bone headed suggestion to raise the investment rate assumption to 8% so that the City would be able to lower its annual required pension contributions to the underfunded pension plans, allowing more money for union raises.  

Wesson has not even created a Council File for the pension and budget recommendations of the LA 2020 Commission. 

But the real culprit is Garcetti who has refused to address the pension mess that will eventually become a crisis.  He has not asked his political appointees on the two pension boards to initiate a study of the pension plans and the City’s ever increasing contributions that now devour 20% of the City’s General Fund budget.  He has refused to contest the State’s Supreme Court “California Rule” which does not allow the City to reform the pension plans by lowering future, yet to be earned benefits.  

Rather than look out for the best interests of the City and all Angelenos, he continues to kiss the rings of the campaign funding union leaders who are vital to his political ambitions. 

The City’s lack of openness and transparency and its unwillingness to address its ever growing, unsustainable $15 billion pension liability can only be categorized as a major league cover up that should be front and center in the upcoming March election.  

Where’s Eric?

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

-cw

LA WATCHDOG--The County of Los Angeles has prided itself on being better managed than the City of Los Angeles.   

In 2007, Mayor Antonio Villaraigosa and the Eric Garcetti led City Council approved a five year labor contract that granted the City’s civilian employees a 25% raise.  While this contract was based on wishful thinking from the beginning, it turned into an unmitigated mess when the recession smacked the City’s unrealistic revenue projections, resulting in huge budget deficits.  To balance its budget, the City reduced services, furloughed workers, dumped over 1,600 employees (and their unfunded pension liabilities) on our Department of Water and Power, laid off almost 500 employees, and implemented the $600 million Early Retirement Incentive Program for 2,400 senior employees. 

The County, on the other hand, did not grant any meaningful raises during this period, and, as a result, did not have to cut services or furlough or layoff its employees in order to balance its budget. 

The Supervisors also believe that the County’s pension plan, the Los Angeles County Employees Retirement Association, is in better shape than the City’s two pension plans, the Los Angeles City Employees Retirement System and the Los Angeles Fire and Police Pension Plans.

On the surface, this appears to be the case.  

As of June 30, 2016, preliminary estimates (using the overly optimistic investment rate assumption of 7.5%) indicate that the County’s $58 billion plan is 83% funded with a shortfall of $10 billion.  On the other hand, the City’s $43 billion of future obligations are only 77% funded, resulting in an unfunded liability of $10 billion.  

At the same time, the County pension plan has 94,000 active members, 2½ times the 37,000 active members under the City’s much more generous plans.  

However, when the County’s $31 billion of unfunded liability for Other Post-Employment Benefits (primarily retiree medical benefits) (“OPEB”) are considered, the County’s unfunded liability soars to over $40 billion, resulting in a funded ratio of a very unhealthy 55%.  This is significantly lower than the City’s 77% funded ratio which includes its OPEB obligations. 

Over the years, the County has failed to set aside any real money to fund its OPEB obligations, resulting in a funded ratio of less than 2%.  On the other hand, the City, to its credit, has been making its annual required contributions since the late 1980’s, resulting in unfunded OPEB liability of “only” $2.1 billion and a funded ratio north of 60%. 

[Note: Few governments have funded any of their Other Post-Employment Benefits, including the State of California which has an unfunded OPEB liability of a whopping $71 billion.] 

If the Supervisors were to properly fund its Other Post-Employment Benefits, the annual required contribution will be in excess of $2.1 billion.  But by ignoring this very real, snowballing obligation, the Supervisors are using these false “savings” to fund the County’s bloated bureaucracy, increases in salaries and employee benefits, additional social services, and to meet the demands of the campaign funding leaders of the County’s public unions. 

When the unfunded pension liability is adjusted to reflect a more realistic investment rate assumption, the County has a $50 billion liability that has the potential to crowd out essential services. 

But will the Supervisors address this $50 billion mess where the facts, issues, and recommendations for financial sustainability are discussed in an open and transparent manner?  Or will they follow the example of Mayor Eric Garcetti and the Herb Wesson led City Council who have ignored the excellent recommendations of the LA 2020 Commission and who continue to kick the $16 billion can down our lunar cratered streets? 

[Note: For each of the 4 million Angelenos, the total pension liability is $9,000, $5,000 for the County and $4,000 for the City. This does not include LAUSD or the State.]

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

-cw

LA WATCHDOG--According to the opaque actuarial report for the Los Angeles City Employees’ Retirement System (“LACERS”), 2016 was a good year.  The return on its investment portfolio was 7%, the unfunded pension liability of $5.5 billion was $200 million lower than the previous year, the funded ratio “improved” to 72.6% from 70.7%, and the City’s 2017-18 Annual Required Contribution (“ARC”) to LACERS may be lower than this year’s payment.  

But a more realistic analysis reveals that the City is “cooking the books,” relying on a set of false assumptions and policies that cover up the severity of the pension crisis.  

In the real world, the return on investment was breakeven, the unfunded pension liability increased to almost $9 billion, the funded ratio decreased to a unhealthy 61%, and the ARC is understated by at least $300 million. 

There are two policies adopted by the City that allows it to pull the wool over our eyes: “smoothing” where gains and losses compared to the targeted rate of return of 7.5% are amortized over a seven year period and two, the reliance on an overly optimistic investment rate assumption of 7.5%. 

Smoothing was designed to even out the City’s pension contributions so they would not bounce around in an unpredictable manner based on the ups and downs of the stock market.  But this has resulted in an understatement of the unfunded pension liability of $750 million as the cooked up actuarial value of its assets exceeds their market value by the same $750 million. 

Smoothing also resulted in LACERS showing a 7% return on its investments.  But in the real world, the ROI was breakeven (+0.05%) for the year, which, when compared to the targeted rate of return of 7.5%, resulted in an increase in the unfunded liability of almost $800 million, not a $200 million decrease as advertised by the actuaries. 

The major culprit is the reliance on an overly optimistic investment rate assumption of 7.5%.  Professional investors such as Warren Buffett of Berkshire Hathaway state that 6.5% is a more realistic rate of return, and even that rate may be optimistic. 

If the investment rate assumption of 6.5% is used, LACERS’ unfunded liability based on market values will soar to almost $9 billion and the funding ratio will plummet to 61%.  This is a far cry from the advertised $5.5 billion shortfall and a funded ratio of 72.6%. 

The use of the more realistic investment rate assumption of 6.5% will also cause the Annual Required Contribution to increase by over $300 million, putting an even bigger dent in the City’s budget. 

And this does not include the higher Annual Required Contribution for the Los Angeles Fire and Police Pension Plans that cover 26,000 active and retired firefighters and cops. 

Together, the combined unfunded pension liability will soar to over $15 billion.   

Despite this looming crisis, Mayor Eric Garcetti is unwilling to address real pension reform for fear of antagonizing the campaign financing leadership of the City’s public unions.  Rather, he continues to support this shell game, this Ponzi scheme, burying his head in the sand, pretending there is no crisis, hoping beyond hope that the stock market will bail the City out, even though it will dump tens of billions of unfunded pension liabilities on the next two generations of Angelenos.  

Rather than continuing down this path that will result in massive increases in our taxes, Mayor Garcetti needs to stop “waffling.”  He should implement the recommendations of the LA 2020 Commission and the Neighborhood Council Budget Advocates to establish a “Commission for Retirement Security” to review the City's retirement obligations in order to promote an accurate understanding of the facts (transparency) and to develop concrete recommendations on how to achieve an equilibrium by 2020. 

Without real pension reform, the next two generations of Angelenos will be short changed as escalating pension contributions will crowd out basic services while, at the same time, they will be paying more taxes to fund the past financial follies of the overly ambitious Eric Garcetti. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

-cw

 

LA WATCHDOG--Pay-to-play is alive and well in Los Angeles as our Elected Elite continue to sell us out for cash campaign contributions, the ultimate aphrodisiac for Mayor Eric Garcetti and the members of the City Council. 

In an excellent piece of investigative reporting, David Zahniser and Emily Alpert Reyes detailed how a sleazy real estate speculator / developer illegally funneled more than $600,000 through a network of questionable donors to selected members of the City Council and Mayor Garcetti.  These contributions were part of a full court press to override the findings and recommendations of the City Planning Department and the City Planning Commission in the spring of 2014 that denied zoning changes and variances for Sea Breeze, a $72 million development of a 352 unit apartment building on land intended for industrial use in the Harbor Gateway area of the City. 

[See A $72-million apartment project. Top politicians. Unlikely donors.  Who wrote the checks to elected officials weighing approval? ] 

But the $600,000 in campaign contributions was an excellent investment as the Planning and Land Use Management Committee of the City Council (“PLUM”), the City Council, and Mayor Garcetti approved the controversial zoning changes in early 2015, resulting in an estimated windfall profit well in excess of $10 million for the ethically challenged speculator. 

Assisting with these zoning changes and variances benefited former Council Member Janice Hahn to the tune of $203,500 in campaign contributions.  After she departed for Congress in late 2011, Joe Buscaino, the new Council Member for Harbor Gateway, “earned” $94,700 by ushering the developer’s appeal through the Planning and Land Use Management Committee.  And as we all know, professional courtesy dictates that the local Council Member rules supreme in his district, no matter how bad the rotten Harbor fish stink. 

The developer was not taking any chances as he also greased the palms of Jose Huizar, the Chair of PLUM, and the two other committee members, Mitch Englander and Gil Cedillo, with over $100,000 in contributions from a number of suspicious donors. 

And that was topped off by multiple contributions totaling $60,000 to an independent campaign committee that supported Garcetti. 

But this is well documented deal is not an isolated event as the pay-to-play game is taking place all over the City.  

There is the NoHo West development in North Hollywood; the development  the Martin Cadillac site on the congested Westside; the 27 story residential skyscraper in low rise Koreatown; the Cumulus monstrosity at the F rated intersection at La Cienega and Jefferson in South LA, the 1.6 million square foot Reef development in South Central, just south of DTLA; the Rocketdyne development in Warner Center section of Woodland Hills; and the Caruso luxury high rise apartment building near the already clogged intersections surrounding the Beverly Center. 

And no doubt, other congestion causing monstrosities will be sprouting up all around town, especially in those parts of our City that are undergoing rapid gentrification like Boyle Heights, Echo Park, and Highland Park.  

The corruption associated with the Sea Breeze development must be investigated by the City’s deliberately underfunded Ethics Department and Jackie Lacey, the County’s District Attorney, focusing not only on the sleazy developer and his partners in crime, but on all the beneficiaries of these illegal contributions. 

At the same time, the City Council needs to adopt a rule that requires the real time disclosure of all campaign contributions (and behests) by any party affiliated with a council related action, including lobbyists and lawyers.  This policy would also require our elected officials to sign off on these disclosures, with the requirement that they “know” their donors.  This new rule has been labeled the “Political Donation Impact Review” by a neighbor to a mega-project that will cause ungodly amounts of congestion on surface streets and the adjoining freeway.  

We also have the Neighborhood Integrity Initiative that has qualified for the March ballot.  This reform measure calls for the City to plan for the City’s future, a task that has been neglected because it interferes with the fund raising activities of the City Council.  The Initiative will require the City to update its General Plan and its 37 Community Plans.  It will eliminate “spot zoning” where the City Council, under the leadership of the local Councilmember, will be able to create massive value for the developer by “up zoning” a specific property.  It will also require the City to control the Environmental Impact Reviews, taking that responsibility away from the self-serving developers.  

As an enforcement mechanism, the Initiative places a 24 month moratorium on “up zoned” projects.  But contrary to the propaganda put out by its developer funded opponents, the Initiative does not place any restrictions on projects that are consistent with existing zoning regulations. 

Reform of the City’s planning process has been made more complicated by the approval by the voters of JJJ, the Affordable Housing and Labor Standards Act, that requires inclusionary zoning and the equivalent of a project labor agreement on residential projects seeking zoning changes for projects of more than 10 units.  However, with all the financial constraints imposed by JJJ and its numerous loopholes, the new law will lead to even greater corruption as it gives the City Council more power over residential developments. 

In the next four months prior to the March election, we will have a raucous debate involving  City Planning, the General Plan, the Community Plans, congestion, increased density, the allocation of the necessary resources to the Planning Department, and the absolute requirement for greater transparency into the impact of development on our local communities.  

This process will also provide us with insight to the rigged system where real estate developers and the City Council are in cahoots with each other in ways that work against our best interests and those of our residential communities. 

Sea Breeze is not an isolated deal.  It is just the tip of the iceberg. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

-cw

LA WATCHDOG--We have 24 ballot measures to contend with on Tuesday, four of which involve the City; one each for Metro, the County, and the Los Angeles Community College District; and 17 for the State of California. 

When deciding how to vote on the following seven local ballot measures and six state measures that involve our wallets, we need to consider whether we trust our politicians with our hard earned money and whether our Elected Elite are working in our best interests or those of their campaign funding cronies, real estate developers, and union leaders.   

The City of Los Angeles is corrupt enterprise where pay-to-play is standard operating procedure.  On Sunday, the Los Angeles Times ran a front page expose detailing how $600,000 in illegal campaign contributions paved the way for the City Council and Mayor Garcetti to approve the $72 million Sea Breeze development in Harbor City despite being rejected by the City Planning Commission and the local Neighborhood Council. 

The City is fiscally irresponsible.  Over the last four years, revenues have increased by $1 billion and yet the City is projecting a budget deficit next year of $100 million.     

Despite rivers of red ink and $15 billion of unfunded pension liabilities, Garcetti and the Herb Wesson led City Council have refused to consider the excellent budget recommendations of the LA 2020 Commission. 

The City continues to use our Department of Water and Power as an ATM.  In October, the politically appointed Board of Commissioners (with one dissenting vote) approved an incestuous $41 million, 10 year lease for 4 floors of Figueroa Plaza, a poorly maintained, out of the way complex owned by the City.  Ratepayers are being taken for over $20 million.  

Taxpayers are under attack.  If all the State and local ballot measures are approved, Angelenos proportionate share is $1.6 billion.  This equates to $400 a person or $1,600 for a family of four.  $1.6 billion will increase our sales tax to 11.7% or require a 32% bump in our property taxes.  There is another $2 billion in the pipeline.  And this does not include funding for the hundreds of billions of unfunded pension liabilities.     

Ask yourself, do you trust Mayor Garcetti, the Herb Wesson led City Council, or the reconstituted Board of Supervisors to act in the best interests of its hard working residents?   

City Ballot Measures 

Measure HHH – NO - $1.2 Billion Homeless Bond 

This is a reward for bad behavior.  Mayor Garcetti and the City Council tell us that homelessness is a priority, but it is not a budget priority despite a $1 billion increase in General Fund revenues over the last four years.  Revenues are projected to increase another $600 million over the next four years.  The alternative to this measure is a general obligation bond paid for by the General Fund, not through an increase in our property taxes.     

Measure JJJ – HELL NO / Affordable Housing and Labor Standards 

This ballot measure was cooked up by the County Federation of Labor.  It calls for inclusionary housing, prevailing wages (a 100% premium to market wages), and the equivalent of a project labor agreement.  But the numbers do not work.  Affordable housing becomes more unaffordable as money is diverted to well-paid construction workers and their unions. 

RRR – YES – DWP Reform 

This is a step in the right direction.  Additional ordinances will be needed for DWP to establish its own Human Resources Department, free from the City’s Personnel Department and its overly restrictive work rules.  Management and the Board will have more flexibility provided they abide by the newly mandated strategic plan.  The only power grab is by the City’s civilian unions.   

SSS – NO – Airport Police Eligible for Fire and Police Pension Plans 

We need to have increased transparency and pension reform before there are any changes to the existing pension plans. This proposal is more expensive than the existing arrangement with LACERS (Los Angeles City Employees Retirement System).   

Metropolitan Transportation Authority 

Measure M – NO - Metro / Los Angeles County Traffic Improvement Plan 

A 9½% sales tax is regressive.  It is one of the highest rates in the country. The Metropolitan Transportation Authority has a record of cost overruns (billions) and multiyear delays. The inefficient MTA is unable to manage its current infusion of $2.6 billion in taxpayer money.  It does not deserve a 33% raise to $3.4 billion or another $75 billion over the next 40 years.  It is a “forever” tax with no independent oversight.  A $10 million campaign war chest supporting this new tax is being funded by crony capitalists looking to feast on our tax dollars.  Do you trust the 13 politicians on the MTA Board?  

County of Los Angeles 

Measure A – NO – Parks Parcel Tax 

This is another “forever” tax where the money is directed to pet projects.  There is no plan to address deferred maintenance of $21 billion.  Oversight by political appointees is inadequate: reactive as opposed to proactive. Come back with a 25 year, well thought out plan that includes deferred maintenance and real independent oversight.   

Los Angeles Community College District 

Measure CC – NO - $3.3 Billion Facilities Bond 

CC was placed on the ballot without limited community input.  This poorly run district is overreaching.  $3.3 billion is too damn much for this enterprise with a record of squandering billions from previous bonds.  Cut the amount in half, develop controls to manage the District, create an independent oversight body with real power, conduct community outreach, and then place a measure on the ballot.  

State of California 

Proposition 51 – NO - $9 Billion School Facilities Bond 

An initiative cooked up by home builders, construction companies, realtors, unions, and their cronies.  Keep Sacramento out of the local school systems.  Governor Jerry Brown opposes Prop 51.  

Proposition 53 – YES – No Blank Checks 

No Blank Checks requires voter approval of State revenue bonds of more than $2 billion. It increases transparency and accountability. It may impact Jerry Brown’s two pet projects, the not so High Speed Railroad ($68 billion) and the controversial Twin Tunnels ($15 billion).  A no brainer.  

Proposition 54 – YES – Voters First, Not Special Interests 

The State Legislature cannot pass any bill unless it has been in print and published on the internet for at least 72 hours before the vote.  Prop 54 is a no brainer unless you are a backroom politician.  

Proposition 55 – NO – Soak the Rich Income Tax Surcharge 

Prop 55 extends the temporary income tax surcharge on higher incomes for another 12 years.  Yet State revenues are up $50 billion (over 40%) since the surcharge was approved by the voters in 2012.  The surcharge increases the reliance on the volatile stock market and the income tax, increasing the prospect of huge budget deficits when the market tanks.  This is compounded by Sacramento’s spending spree.  There are unintended consequences of having the highest income tax rate in the country.  The unions and other special interests funding this initiative to the tune of $57 million have produced many misleading, scare tactic ads.   

Proposition 56 – YES - Cigarette Tax 

An additional $2 a pack tax will deter smoking, save lives, and lower healthcare costs. The tobacco industry has spent over $70 million opposing this proposition.   

Proposition 61 – YES – Prescription Drug Pricing 

This proposition is the result of the Legislature’s failure to address the escalating cost of prescription drugs.  Big Pharma is spending over $100 million to defeat this measure. 

Conclusion 

Ballot measures HHH (the $1.2 billion homeless bond), Measure M (the Metropolitan Transportation Authority’s “forever” permanent half cent increase in our already regressive sales tax), and Measure A (the County’s “forever” parcel tax for parks) were placed on the ballot by our elected politicians.  

By voting NO on these three measures, we can send a message to Mayor Garcetti, the Herb Wesson-led City Council, and the reconstituted County Board of Supervisors that we demand increased transparency and accountability, long range planning and multiyear budgeting, pension transparency and reform, and that the City, as well as the County, “Live Within Its Means.”  

And most importantly, they need to understand that we are not their ATM.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

-cw

LA WATCHDOG--Crony capitalism and pay to play are alive and well in Los Angeles.   

In a well-researched front page story, Los Angeles Times reporters David Zahniser and Emily Alpert Reyes detailed how a sleazy real estate developer illegally funneled more than $600,000 to City politicians. As a result of this play to pay scheme, Mayor Eric Garcetti and the City Council “up zoned” Sea Breeze, his $72 million residential apartment building on industrially zoned land in the Harbor Gateway neighborhood that had been turned down by the Garcetti appointed City Planning Commission and the local neighborhood council. 

Of course, the offending politicians (including Janice Hahn, a candidate for County Supervisor, who received over $200,000) are quick to deny that their favorable vote was influenced by campaign contributions. But we all know that our smooth talking Elected Elite never met a campaign contribution they did not like, the same as it is with tax increases, DWP rate hikes, and budget busting labor contracts. 

But this is chump change compared to the $10 million campaign led by Mayor Garcetti to brow beat us into approving Measure M, a permanent half cent increase in our sales tax to a staggering 9½%, one of the highest rates in the country.  This tax is designed to raise an additional $850 million a year for the Metropolitan Transportation Authority, increasing its annual haul from the County’s taxpayers by 33% to an astronomical $3.4 billion. 

But who is financing this $10 million campaign that is equivalent on a per capita basis to the tobacco industry’s efforts to defeat Proposition 56, the state ballot measure to increase the tax on cigarettes by $2.00 a pack.  And more importantly, what do they want in return? 

The underwriters of Yes on Measure M Committee (a Coalition of Mayor Eric Garcetti, concerned citizens, labor organizations, businesses, and non-profits) include a large cast of cronies who want to feast at our expense on MTA contracts. 

These vampires include unions (the Operating Engineers, the ILWU, IBEW Local 11, and the Carpenters & Joiners) who want high wages and numerous jobs; construction and engineering firms (Skanska, AECOM, and Parsons) who want big fat contracts; real estate developers (Westfield) and corporations (Fox, Disney, and NBCUniversal) who want special treatment from Garcetti, the City Council, and the County Board of Supervisors; and concerned citizens (Eli Broad, Jerry Perenchio, and Haim Saban) who have their own special agendas.  

We are going to be pounded with slick ads promoting Measure M, the Los Angeles County Traffic Improvement Plan, promising improved mobility, less time in traffic, great middle class jobs, and the repair of our local streets.  But outlandish campaign promises are a dime a dozen, especially when it comes to politicians eyeing our hard earned cash. 

The MTA does not deserve a 33% increase in funding from the taxpayers.  It is an inefficient organization whose projects are billions over budget and years behind schedule.  Its operations are experiencing lower ridership.  And it does not have the management, the engineering staff, the project managers, or the systems to be able handle its existing funding ($2.6 billion) and projects, to say nothing of the pipedreams envisioned by Mayor Garcetti.    

The MTA is also a rogue organization that lacks adequate oversight as it Board of Directors consists of 13 politicians, including nine from the City and County, who have no clue how to manage or oversee a sprawling enterprise with 9,000 employees and an operating loss of $1 billion a year.  

The City also does not deserve an increase in Local Return funds that would accompany this new tax.  It already receives $200 million a year in Local Return funds from the three previously approved sales tax levies, but has failed to develop a plan to repair our streets, some of the worst in the nation.  Which leads to the question: where the hell has all this Local Return money gone?   

Our City has also failed to reform its finances, refusing to even consider the excellent budget recommendations of the LA 2020 Commission.  As a result, the fiscally irresponsible Garcetti now faces a $100 million deficit next year despite an increase in revenues of $1 billion over the last four years.   

Finally, if all of the tax increases on the November ballot were approved by the voters, Angelenos proportionate share will be $1.6 billion, or $400 for every resident.  Lumped together into a single tax, this increase will increase our sales tax to 11.7% or require a 30% bump in our property taxes.  

We cannot afford an increase in our sales tax to a breathtaking 9½% to say nothing about the other ballot measures for the City, County, Community College, and State.   

Measure M is just another example of Crony Capitalism, but this time on steroids as we are being asked to approve a forever tax that will raise $75 billion over the next 40 years.  It is time to tell Eric Garcetti and his cronies that we are not their ATM. 

Vote NO on Measure M. After all, it is your money. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)-cw 

 

LA WATCHDOG--The Dodgers had a very good year, especially when you consider that they set a record for placing players on the disabled list, including a number of highly paid starting pitchers.  The Bums won the National League West with 91 wins, eliminated the Washington Nationals in a nail biting five game series, and gave the Cubs a run for their money in the National League playoff.  

And once again, we led Major League Baseball in attendance.  

Now that the official season is over, the hard work begins on constructing next year’s roster so that the Dodgers have a shot of winning the World Series.  At the same time, the team needs to guard its future by protecting promising prospects and by not entering into unsustainable long term contracts.  

The first order of business is to sign Justin Turner, 31, and Hanley Jansen, 29, to reasonable contracts.  This will involve handsome raises over their existing salaries of $2.5 million and $7.4 million, respectively. 

The Dodgers will also have to trade for or enter into the free agent market to find two healthy starting pitchers and to add more punch to its lineup.  This will require the Dodgers, who already have the largest payroll in baseball, to once again open up the check book. 

The Dodgers are an attractive destination for a free agent: a winning team with a shot at a World Series ring, the second largest media market in the country, the glamor and hype of Hollywood, fantastic weather, and enthusiastic fans looking for a repeat of 1988. 

But the Dodgers are starting out with two strikes because California has the highest marginal income tax rate in the country, topping out at 13.3% for all income north of $1,000,000.  But a million bucks, while a lot of money to the ordinary fan, does not get us a starting player. 

Rather, a quality starting pitcher or a productive hitter will command a multiyear contract with an annual salary at least $20 million.  At that level, the tax bill from the State of California will be $2.6 million (12.6%), not exactly chump change. 

If the Dodgers were to make the player whole for the extra tax, it would cost the Dodgers an extra $4 million when MLB’s luxury tax is taken into consideration.

On the other hand, if Proposition 55, the union sponsored ballot measure that extends the “temporary” Soak the Rich income tax for an additional 12 years, is rejected by the voters, the player will only have to pay 9.8% of his income, or about $2 million. But this is still a hefty amount when compared to other states (Texas, Florida, and Washington) that have no income tax.

But this incremental savings may make a difference to a player or players who may have the potential to help us win a World Series and end our 28 year drought.  

While the self-serving proponents tell us that there are no adverse consequences if we stick it to the State’s highest earners, we all know that there is no such thing as a free lunch.

One very real consequence of our hostile tax environment is that many prosperous businesses and their high paying jobs will depart for locations with a more favorable tax and regulatory environment.  Or how many large multinational companies will move large manufacturing operations out of Southern California to a more business friendly climate.  Or how many people and companies will decide to pass on investing in California, especially since the State is sending the signal that it cannot be trusted when it comes to “temporary” taxes and that tax increases are a way of life. 

Prop 55 will also increase our dependence on the income tax which, when the economy and stock market tanks, will result in massive deficits, especially since Sacramento is embarking on a spending spree given the economy’s recovery.  

The Los Angeles Times, a supporter of Proposition 30 in 2012 that authorized the “temporary” income tax increase, is urging us to vote NO on Prop 55 because the Legislature has refused to reform our State’s tax structure that is “fiscally, politically, and socially unsound.”

While Prop 55 may not cost us the World Series, it is an example of the unintended consequences of this self-serving ballot measure cooked up by our public sector unions. 

Vote NO on Proposition 55.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

-cw

LA WATCHDOG--Last week, the Times Editorial Board rightfully criticized Mayor Eric Garcetti for not taking a position on Build Better LA (Measure JJJ, the Affordable Housing and Labor Standards Relating to City Planning), saying we “need straight talk from [our] City leaders” and “now’s the time for them to come out of hiding on Measure JJJ.” 

The measure’s sponsor and major proponent, the politically powerful Los Angeles County Federation of Labor, claims that Build Better LA will create more affordable housing and more well-paying construction jobs.  

The truth is that if JJJ is approved by the voters, it will stymie the development of multifamily residential housing, create fewer jobs, make affordable and market rate housing more expensive, and deprive the City of much needed revenues. 

And given the loopholes in Build Better LA that allow the City Council to amend this initiative and the massive amounts of cash involved, there is the potential for mischief and corruption. 

If passed, developers who want a zoning, height, or density change will be required to have up to 25% of the project’s units be affordable for low and moderate income tenants.  But inclusionary housing, especially at the levels dictated by JJJ, is not a free lunch because it will have a significant downward impact on rents and the developer’s return on investment. 

Developers will also have to meet stringent hiring requirements.  These will require that construction workers be paid the “prevailing wage,” a rate that is significantly higher than market wages.  Developers would also have to meet local hiring requirements and comply with onerous reporting requirements.  Overall, these “project labor agreement” mandates will increase costs by more than 40% according LA based Beacon Economics, a well-regarded research and consulting firm that has been retained by the City on numerous occasions.  

Between the lower per square foot rents resulting from the addition of affordable apartments and the significantly higher costs per unit caused by the prevailing wage and other hiring and union mandates, the developers’ return on investment tanks, the risks increase, the banks refuse to make construction loans, investors bail, and developers abandon projects that would have been viable if not for JJJ, Build BAD LA. 

As a result, fewer apartments will be built, there will be fewer construction jobs, and rents will increase because of the scarcity factor.  The City’s revenues will also be impacted by fewer construction and development related fees that are required from real estate developers. 

And the City’s economy will be adversely impacted by the downturn in construction.  

JJJ allows the City Council to adjust the affordable housing percentages if the developer is able to show that such adjustments are necessary to ensure the developer a “reasonable return on investment.”  Of course, given the amount of money involved, a few targeted campaign contributions will help ensure that the affordable set-asides guidelines are relaxed.  

The developers may also pay an “in-lieu fee” into the City’s Affordable Housing Trust Fund if they do not want to include affordable units in a project.  This will allow the developers to maintain luxury buildings where the high end tenants do not have to mix with the hoi polloi.  

But once this cash is in the Affordable Housing Trust Fund, the Mayor and creative geniuses on the City Council will no doubt figure out a way to direct these funds to their pet projects without these deals seeing the light of day. 

We are being sold a bill of goods by the Los Angeles County Federation of Labor, which, along with IBEW Local 11, have invested over $1 million in this ballot initiative.  

But where is Mayor Eric Garcetti?  Why isn’t he shedding light on this scam that is being perpetuated by the same wise guys that tried (but failed) to pull a fast one by exempting companies whose workers were represented by unions from the recently enacted minimum wage requirements?  

Or is our upwardly mobile Mayor, the wannabe Governor, Senator, or Cabinet Secretary, willing to sell us out for fear of alienating the campaign funding unions that are feasting at our expense?  

The Los Angeles Times urges a NO vote as JJJ because it will make LA’s housing crisis even worse by making affordable housing more unaffordable.  

Vote NO on JJJ.  It is BAD for LA. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

– cw

LA WATCHDOG--Since California is not a battleground state, we have been spared from many of the inane ads for Hillary and The Donald.  But that is not to say we are off the hook as an estimated $400 to $500 million will be spent on the State’s 17 ballot measures by powerful special interests trying to convince us to reject or approve selected ballot measures. 

Of the 17 November ballot measures, three ballot measures are attracting a substantial portion of cash: Proposition 56 (Cigarette Tax), Proposition 61 (Prescription Drug Pricing), and Proposition 55 (the extension of the “temporary” Soak the Rich Income Tax Surcharge). 

Rather than succumb to barrage of ads, we should tell the big money special interests to take a hike, to buzz off, sending a loud and clear message that we are not for sale to the highest bidder, especially when they bombard us with many misleading advertisements. 

As such, both Proposition 56 (Cigarette Tax) and Proposition 61 (Prescription Dug Pricing) deserve a YES vote as Big Tobacco and Big Pharma have spent over $150 million into ads opposing these two ballot measures.  

On the other hand, Proposition 55 (Soak the Rich Income Tax Surcharge) deserves a NO vote as the California Teachers Association and the California Association of Hospitals have sunk over $55 million into this ballot measure that is betrayal of our trust and not in the best interest of the State and its economy. 

YES on 56, the Cigarette Tax 

If voters approve this initiative sponsored by the American Cancer Society, taxes on cigarettes will increase by $2.00 a pack.  This economic signal to the market will discourage people from either continuing or taking up this nasty habit that costs us billions in healthcare costs. 

The expected haul of $1.4 billion in the first year (which will decline over time as fewer butts are consumed) from this new tax will be allocated primarily to funding health care for low-income Californians. 

But Big Tobacco (primarily Philip Morris and RJ Reynolds) has “invested” over $66 million to defeat this measure, making numerous misleading claims that this tax will benefit special interests (the medical industry) and deprive schools of much needed money.  But these claims have been debunked by numerous credible sources, including our Los Angeles Times which endorses this proposition.

While many people oppose ballot box legislation, this initiative was the result of the failure of the Legislature to pass tax increases because our elected officials were bought off by generous campaign contributions (or threats) from the tobacco industry and their lobbyists.  

YES on Proposition 61, Prescription Drug Pricing 

Once again, our cowardly legislators have failed to represent their constituents as they have placed the profits of the pharmaceutical industry and their political careers and campaign war chests above our best interests.  

In this case, the Legislature’s failure to pass laws that would increase transparency into the rapidly increasing prices of prescription drugs has prompted an initiative led by the Aids Healthcare Foundation (“AHF”) that will prohibit the State of California from buying any prescription drug at a price greater than the lowest price paid by the Department of Veteran Affairs. 

While AHF has spent about $15 million placing this initiative on the ballot and purchasing airtime, this amount is dwarfed by the $87 million spent to date by pharmaceutical companies.  And the industry is expected to dump considerably more cash into its efforts to defeat this measure, with some expecting expenditures of at least $100 million. The Los Angeles Times, which opposes this measure, raised a number of valid points as to why we should vote NO.  But its solution to “fast rising drug prices” is a comprehensive, national solution that addresses competition, the speedy approval of new drugs, the role of federally funded research, and the development of new insurance models is not going to happen without prodding from the likes of AHF and the voters. 

By voting YES on 61, we will send a message to Sacramento and the international drug companies that they need to get their asses in gear and develop a comprehensive policy that is acceptable to the voters of California. Otherwise, nothing will change and we (and our wallets) will continue to be sitting ducks for Big Pharma.  

NO on Proposition 55, the Soak the Rich Income Tax Surcharge 

In 2012, 55% of California’s voters approved Proposition 30.  This measure authorized a “temporary” surcharge on higher income Californians to help plug the State’s budget deficit.  And now that the State’s revenues have increased by almost $50 billion to almost $170 billion, there is no need to extend the Soak the Rich Income Tax Surcharge beyond its 2018 expiration date.  

However, the California Teachers Association and the California Association of Hospitals and Health Systems are leading a $56 million campaign to extend this surcharge for another 12 years. They are also supported by a slew of elected officials, organizations that rely on the State’s cash, and public sector unions that are addicted to our cash and who have no problem betraying the promises that were made in 2012. 

While this surcharge will produce an estimated $7 billion a year, it also increases the State’s dependence on the income tax derived from wealthy Californians.  But this places the State’s finances in a very precarious position, especially when the stock market tanks, capital gains disappear, and incomes shrivel, resulting in significantly lower tax revenues and massive budget deficits like the State experienced during the Great Recession. 

This is why the Los Angeles Times opposes Proposition 55, calling for the Legislature to produce a more comprehensive overhaul of the State’s budget process. 

Conclusion

Rather than being bamboozled by Big Tobacco, Big Pharma, and the State’s public unions, we have the opportunity to see through their misleading ads and vote for what is in our best interests and not follow the lead of our Elected Elite who have their own personal agendas. 

Vote YES on 56, Vote YES on 61, and Vote Hell NO on 55. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

– cw

LA WATCHDOG--Of the 24 ballot measures on the November ballot, only four are specific to the City of Los Angeles. And of these four, only one deserves a YES vote (RRR - DWP Reform), two deserve a NO vote (HHH - the $1.2 billion homeless bond and SSS – Fire and Police Pension Plans), and one deserves a HELL NO vote (JJJ - Build Better LA). (See Ballot Summaries below.) 

When determining how to vote, the first and most important question is whether you trust the proponents of the ballot measure.  And in the case of the City of Los Angeles, Mayor Eric Garcetti and the City Council have not earned our trust and confidence as they have not embraced the reform of our City’s finances.  They have ignored the excellent budget recommendations of the LA 2020 Commission, have refused to address the Structural Deficit where the increase in personnel expenditures (salaries, pensions, and medical benefits) exceed the growth in tax revenues, have passed on reforming the City’s two pension plans which are $15 billion in the hole, have failed to develop a plan to repair our streets and the rest of our failing infrastructure, and continue to bow to the wishes of real estate developers and billboard operators. 

NO on Proposition HHH, the $1.2 Billion Homeless Bond 

While our Enlightened Elite who occupy City Hall have told us that addressing homelessness is a priority, they have failed to make the average payment of $65 million a year a budget priority despite a $1 billion increase in City revenues over the last four years and another $600 million over the next four years.  Rather than continue with this $2 billion revenue grab over the next 30 years (including interest payments) through an increase in our property taxes, the City has the capacity to pay for the homeless bonds by eliminating their discretionary slush funds, reduce their bloated staffs, and discontinue the hundreds of millions in “giveaways” to international hotel operators and mall operators such as Westfield.  

The City has not developed a credible financial plan to fund the $2.8 billion gap between the $4 billion cost of 10,000 units of permanent supportive housing and the $1.2 billion in bond proceeds.  Nor has it addressed the over the top cost of $400,000 a unit.  Nor has it entered into a definitive agreement with the County which is considering a quarter cent increase in our sales tax ($350 million) to fund its service to the homeless. 

The concept of throwing cash at the homeless problem without a financial and operational plan does not pass muster, especially given the lack of meaningful oversight.  

For more information, see the CityWatch article, Los Angeles Must Resolve Its Homeless Crisis … This $1.2 Billion Taxpayer Ripoff is Not the Way to Do It.  

NO on Charter Amendment SSS, the Los Angeles Fire and Police Pension Plans 

If approved by a majority of the voters, Airport Police officers will be eligible to participate in the Los Angeles Fire and Police Pension Plans (“LAFPP”) instead of the less generous Los Angeles City Employees Retirement System (“LACERS”) plan.  But without real pension reform that addresses the billions of unfunded liabilities of both LACERS and LAFPP, this ballot measure does not deserve our support.   This scheme will also result in significantly higher pension contributions by the Airport and eventually its airline tenants.  

The Los Angeles Times urges a NO vote. Police Pension Measure SSS Raises Too Much Doubt to Support. 

HELL NO on Initiative Ordinance JJJ / Build Better LA Initiative 

The Build Better LA Initiative is a crude attempt by the Los Angeles County Federation of Labor to take advantage of the affordable housing shortage in the City of Los Angeles.  It would require real estate developers who request a zoning change or variance to include units of affordable housing in the development and to agree to the equivalent of a Project Labor Agreement.  While there has not been any detailed analysis of the financial impact of this measure on housing costs, preliminary estimates indicate that it would drive up costs by 30% to 40%.  This added expense will result in a transfer of money intended for affordable housing into the pockets of construction workers and their unions. 

This misleading, self-serving ballot measure will make affordable housing more unaffordable.  

The Los Angeles Times urges a NO vote.  Measure JJJ Could Make LA’s Housing Crisis Even Worse.   

For additional information, see the CityWatch article, Build Better LA Initiative: Affordable Housing Made More Unaffordable  

YES on Charter Amendment RRR, DWP Reform 

The major problem with our Department of Water and Power is City Hall.  Unfortunately, this charter amendment does not address the issue of Ratepayers being used as an ATM by Mayor Garcetti and the City Council.  Nor are there any major changes in the governance of the Department.  But it does allow for more efficient procurement and contracting, increased oversight by the Ratepayers Advocate and a newly created Water & Power Analyst that reports directly to the Board of Commissioner, and a more transparent process of appointing a new General Manager. It also requires the Department and the Board of Commissioners to prepare a Four Year Strategic Plan beginning in 2020 for consideration by the City Council and the Mayor. 

The major source of controversy is that this charter amendment begins the process that may lead to the Department establishing its own Human Resources Department for its 9,000 employees that is separate and distinct from the City’s Personnel Department and remove the Department from the City’s cumbersome civil service rules and regulations.  The City’s civilian unions are labeling this as a “power grab” because it would lessen their influence over the affairs of the Department and limit the transfer of City employees to better paying jobs at DWP.  But any major changes would require Council approval which would “undoubtedly prompt an epic political battle.” 

While this ballot measure is not the answer to our prayers, it is a step in the right direction. 

As a side note, City Council President deserves a pat on the back for ushering this ballot measure through the City Council.  And with his leadership, hopefully other meaningful changes will be implemented by the City Council. 

The Los Angeles Times in a very good editorial urges a YES vote.  

 

++++++++++++ 

 

Ballot Summary / Question 

HHH - HOMELESSNESS REDUCTION AND PREVENTION, HOUSING, AND FACILITIES BOND. PROPOSITION HHH. 

To provide safe, clean affordable housing for the homeless and for those in danger of becoming homeless, such as battered women and their children, veterans, seniors, foster youth, and the disabled; and provide facilities to increase access to mental health care, drug and alcohol treatment, and other services; shall the City of Los Angeles issue $1,200,000,000 in general obligation bonds, with citizen oversight and annual financial audits? 

SSS – CITY OF LOS ANGELES FIRE AND POLICE PENSIONS; AIRPORT PEACE OFFICERS. CHARTER AMENDMENT SSS. 

Shall the Charter be amended to: (1) enroll new Airport peace officers into Tier 6 of the Fire and Police Pensions System; (2) allow current Airport peace officers to transfer into Tier 6 from the City Employees’ Retirement System (LACERS) at their own expense; and (3) permit new Airport Police Chiefs to enroll in LACERS? 

JJJ – AFFORDABLE HOUSING AND LABOR STANDARDS RELATED TO CITY PLANNING. INITIATIVE ORDINANCE JJJ. 

Shall an ordinance: 1) requiring that certain residential development projects provide for affordable housing and comply with prevailing wage, local hiring and other labor standards; 2) requiring the City to assess the impacts of community plan changes on affordable housing and local jobs; 3) creating an affordable housing incentive program for developments near major transit stops; and 4) making other changes; be adopted? 

RRR – CITY OF LOS ANGELES DEPARTMENT OF WATER AND POWER (DWP). CHARTER AMENDMENT RRR. 

Shall the Charter be amended to: (1) add qualification requirements, stipends and removal protections for DWP Board; (2) expand Board to seven members; (3) require DWP prepare four-year Strategic Plans for Council and Mayoral approval; (4) modify DWP’s contracting, rate-setting and other authority; (5) permit future alternatives to existing civil service standards for DWP employees through collective bargaining; and (6) require monthly billing?

 

+++++++++++++++++

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.)

– cw

LA WATCHDOG--On September 28, Mayor Eric Garcetti issued his Fiscal Year 2017-18 Budget Policy and Goals to all of the General Managers of All City Departments. The goals include closing a projected $85 million deficit for the fiscal year beginning July 1, 2017, identifying over $40 million in new general funds to maintain the City’s current commitment to the homeless, and hiring 5,000 new employees by June 30, 2018 to restore services and replace retiring workers.   

This missive is focused on next year’s budget and does not address the long term reforms that are desperately needed to tackle the City’s Structural Deficit (where the growth in personnel costs exceeds the increase in revenues), the massive unfunded liabilities of its two unsustainable pension plans (estimated to be in the range of $15 billion based on a more realistic investment rate assumption), and the deferred maintenance on its infrastructure (estimated to be north of $10 billion). 

On October 4, the Neighborhood Council Budget Advocates (“NCBAs”)* delivered the following recommendation to Mayor Garcetti and the City Council.

+++

Early White Paper Recommendation

The Neighborhood Council Budget Advocates (the “NCBAs”) urge the City Council and Mayor Eric Garcetti to implement the following recommendations of the LA 2020 Commission as part of its budget for the 2017-18 fiscal year: 

  • Create an independent “Office of Transparency and Accountability” to analyze and report on the City’s budget, evaluate new legislation, examine existing issues and service standards, and increase accountability. 
  • Adopt a “Truth in Budgeting” ordinance that requires the City to develop a three year budget and a three year baseline budget with the goal to understand the longer-term consequences of its policies and legislation. (Council File 14-1184-S2)  
  • Be honest about the cost of future promises by adopting a discount rate and pension earnings assumptions similar to those used by Warren Buffett.   
  • Establish a “Commission for Retirement Security” to review the City's retirement obligations in order to promote an accurate understanding of the facts. 

We request that the Budget and Finance Committee assign a Council File for each of the recommendations and agendize each of these items for its next meeting on October 17, 2016.  

The implementation of these recommendations will be the first step in addressing the City’s Structural Deficit, the massive unfunded liabilities of its two unsustainable pension plans, and the deferred maintenance on its infrastructure.  

The adoption of the recommendations of the LA 2020 Commission will result in increased transparency into the City’s complex operations and finances and begin the process of restoring Angelenos’ trust and confidence in City Hall and its elected officials.  

The NCBAs are making these recommendations prior to the 2017 Neighborhood Council Budget Advocates White Paper so that they will be an integral part of the upcoming fiscal year’s budget process.  

The NCBAs look forward to a timely response.

+++

 

Stay tuned to see if Mayor Garcetti and the City Council are willing to implement meaningful reform or will it be business as usual, kicking the can down the road and dumping tens of billions in unfunded obligations on the next generation of Angelenos. 

 

+++

NEED TO KNOW 

*The Neighborhood Council Budget Advocates are the elected to represent the charter authorized Neighborhood Councils.  Their role is to explore, research, study, seek input, prepare and present the concerns and interests of the communities of the City of Los Angeles ("City") about the use of City funds, City revenue collection, City budget and budget allocations, efficiency of City government, City finances, City financial obligations and other such concerns and related to financial matters of the City to the Mayor and City Council.  

Join the discussion: 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  lajack@gmail.com.) – cw

 

LA WATCHDOG--On Tuesday, the Board of Water and Power Commissioners voted 4 to 1 to approve an above market, 10 year, $41 million lease of four vacant floors of subpar office space at Figueroa Plaza, a 615,000 square foot, City owned office complex located north of the downtown Central Business District.  

LA WATCHDOG--Mayor Eric Garcetti and his budget team are putting a full court press on the Board of Water and Power Commissioners to approve an above market, 10 year, $41 million lease for four vacant floors of office space at Figueroa Plaza, a two tower, 615,000 square foot City owned complex located north of the Central Business District in DTLA.  (Photo above: Sculpture by Terry Allen. The bronze statue is located in Downtown L.A. at 7+FIG Plaza, on the corner of 7th and Figueroa Street, outside the corporate offices of Ernst Young) 

But this deal, like the previous 10 year, $63 million lease for six vacant floors that was proposed in June, does not pass the smell test because this above market lease is not in the best interests of the Department of Water and Power or its Ratepayers. 

Which leads us to the question of whether the five Commissioners, led by President Mel Levine and Vice President Bill Funderburk, will stand up for the interests of the Department and the Ratepayers or will they bow to the pressure from Mayor Garcetti and his budget team who are looking to balance the City’s budget on the backs of the Ratepayers? 

Figueroa Plaza is not considered a desirable location for law firms, investment banks, commercial banks, consulting firms, or other professional organizations that occupy Class A space because of its poor location north of the Central Business District.  In addition to being out of the way, this older building has a poor reputation for maintenance, services, and amenities.  This is not helped by rent roll dominated by government employees.  

Yet the City wants our Department of Water and Power to pay Central Business District Class A rents for this subprime space.  At the same time, the City wants DWP to pony up $9 million for tenant improvements, an expense that is usually born by the landlord, in this case, the City of Los Angeles.  

From the Mayor’s perspective, in the first year of the lease, the City will receive $3 million in rent and “save” $9 million in tenant improvements.  This $12 million swing will help the City close its projected $85 million budget deficit for the upcoming fiscal year.  

The Department maintains that it needs this additional space to accommodate 700 new employees.  But without a well thought out Space Utilization Plan for its 9,576 employees, an 8 to 10 year lease is inappropriate, especially given its above market cost.  

Any space plan would need to address the updating of DWP’s 50 year old historic headquarters building located across from the Music Center in downtown Los Angeles.  But this is problematic as IBEW Local 18, DWP’s domineering union, will assert jurisdiction over all the work at overtime rates, doubling the cost and the time to completion.  This will cost Ratepayers an additional $150 to $200 million.  

The question has also been raised whether the IBEW and Union Bo$$ d’Arcy would claim jurisdiction over the work at Figueroa Plaza.  

At its meeting on September 20, the Board of Commissioners discussed the proposed $41 million lease in closed session.  When the $63 million lease was on the agenda in June, the Board deferred the matter until a later time.  As a result, there has not been a public discussion or any outreach involving this controversial lease whose main beneficiary appears to be the City, not DWP or the Ratepayers. 

The Department has prepared a 229 page memo outlining this transaction. This includes a 161 page report that justifies the lease. But several experts, including potential tenants and their representatives, have discounted this report stating it was “made as indicated” and does not reflect the real rental market. 

Will the Commissioners conduct an open hearing on this above market lease?  Will the Commissioners demand that DWP prepare a Space Utilization Plan before entering into this above market lease?  Will this study include many different alternatives, including selling the DWP headquarters and moving to an area that would benefit from the economic development?  Will the Commissioners demand that the Department update its Personnel Plan to reflect the addition of 700 new employees?  

In other words, will the Commissioners act in the best interests of the Department and the Ratepayers and tell the Mayor and his budget team to buzz off?

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)-cw

  • See also:

DWP Deserves ‘Free’ Rent at Fig Plaza

The Fig Plaza Stick Up: Ripping Off DWP Ratepayers for $40 Million

--Exposed! City Overcharging DWP Millions on Downtown Fig Plaza Rent

 

 

LA WATCHDOG--Mayor Eric Garcetti and the Herb Wesson led City Council are using the homeless issue to pick our pockets for almost $2 billion over the next 30 years in an effort to cover up their abject failure to make this unfortunate situation a priority in the City’s budget over the last four years. 

If Proposition HHH (Homeless Reduction and Prevention, Housing, and Facilities Bond) is approved by two-thirds of the voters, the City will issue $1.2 billion of bonds over the next ten years.  These funds, along with billions from politically wired real estate developers and other governmental entities, will finance the construction of 10,000 units of permanent supportive housing for LA’s homeless population at a cost as high as $4 billion.  

LA WATCHDOG--Many believe that California would be better off if we sent Attorney General Kamala Harris to Washington to succeed Barbara Boxer, the 75 year old “junior” senator from California.  But then again, is it fair to the rest of the country to stick the nation with the highly partisan Kamala Harris when Loretta Sanchez is the more qualified candidate? 

Kamala Harris’ fatal flaw is that she is a staunch opponent of pension reform.  

During the last two years, she has authored unfavorable and biased summaries for two bipartisan ballot measures that would have reformed California’s unsustainable pension plans.  Pension reform is the most important financial issue facing all levels of government as ever increasing pension contributions are required to cover the estimated unfunded liability of up to $500 billion. But these growing contributions are crowding out basic services such as public safety and the repair of our infrastructure as well as progressive initiatives involving education, affordable housing, and services to the homeless. 

This has resulted in numerous ballot measures for new taxes which, despite their stated use, are really going to fund the upside down pension plans.  

But rather than endorsing pension reform, Harris sold out to the campaign funding leadership of the public unions who are vehemently opposed to any reform of the very generous pension plans.  As a result, Harris has benefitted from significant cash contributions to her campaign war chest.   

Obviously, Harris did not get the memo from Rhode Island Governor Gina Raimondo that “you can’t be a progressive and be opposed to pension reform.” 

Ever since Harris was elected Attorney General in 2010, she has used her office as a stepping stone for higher office.  Over the years, she has been gallivanting around the country, spending hundreds of thousands of dollars on first class travel, five star hotels, and limousines and hitting up the usual out of state suspects for campaign donations. 

She has also used her office to reward her campaign contributors.   In 2015, Harris placed so many conditions on Prime Healthcare’s acquisition of the money losing hospitals owned by the Daughters of Charity that the buyer walked away from the transaction.  According to subsequent litigation, it was alleged that Harris was doing the bidding of the SEIU which was in a labor dispute with Prime Healthcare.  

No wonder the SEIU has been so generous to Harris’ campaign war chest.  

Harris has been so busy running around the country raising money and planning her next campaign that her office has suffered from the lack of organization and leadership and high turnover.  Her office has failed to implement or follow through on numerous initiatives such as gun control and criminal justice. But that has not stopped her from claiming credit for the work of others as was the case with the national mortgage settlement that was spearheaded by the Attorney Generals in New York and Delaware.  

Sanchez, on the other hand, has developed a reputation over her twenty years in House of Representatives as a legislator who can work in a bipartisan manner, much like Senator Diane Feinstein who has been an effective proponent for California. She has the endorsement of 17 of the State’s Democratic Congressional representatives, almost double the number that are supporting Harris.  

Sanchez also has a strong working knowledge of immigration, a very important issue to Californians, as she is the co-chair of the Immigration Task Force, a member of the Hispanic Caucus, and the daughter of hard working immigrants who achieved the American Dream. 

She has an excellent understanding of the water issues facing the State, having worked on matters involving conservation, groundwater, the Salton Sea, and other complex problems facing Orange County and Southern California. 

She is a ranking member of the House Armed Services Committee, but voted against the Iraq War, and the House Homeland Security Committee.  

Without doubt, Sanchez, an MBA and a financial analyst in the private sector before she upset B1 Bob Dornan in the 1996 election, is familiar with the federal budget, a complex issue that impacts all Californians. 

While Sanchez and Harris are both Democrats, we have the choice between Harris, a San Francisco ideologue who has derailed pension reform in return for union campaign cash, or Sanchez, a Southern Californian and a seasoned legislator with private sector experience who has demonstrated that she can work in a bipartisan manner to get things done. 

While Harris is leading in the polls, Sanchez has the unique opportunity to upset Harris by putting together a coalition of Hispanics, moderate Democrats, independents, and Republicans. 

Viva Sanchez.  

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw

LA WATCHDOG--In June, the Board of Commissioners of our Department of Water and Power postponed its consideration of a 10 year, $63 million lease of six floors of office space at Figueroa Plaza, a City owned office complex, because it did not pass the smell test.* 

Now, the Department is considering another ten year lease, but only for four floors at a cost of $41 million.  But once again, this deal is not ready for prime time as it is not in the best interests of the Department and the Ratepayers. 

The Department’s management makes the valid argument that its needs this additional space to house 700 employees who are needed to oversee the repair and maintenance of its water and power infrastructure, to modernize its IT and financial management systems, and to facilitate succession planning and the transfer of institutional knowledge as a third of its work force is eligible to retire over the next five years. 

But a ten year, $41 million lease is out of the question since DWP has not developed a long term plan to determine its real estate needs.  This space plan would include the reconfiguration of the John Ferraro Building, DWP’s 50 year old, 1.6 million square foot headquarters that is located across from the Music Center in DTLA. Interestingly, this idea was nixed during the City’s budget crisis by Mayor Villaraigosa and the Eric Garcetti led City Council.  

The “restacking” of JFB is estimated to be an expensive two or three year project if it were properly planned and managed by an experienced, independent contractor who would develop a floor by floor plan that would limit the disruption to the Department’s operations.  

There is also the concept of locating some of the Department’s noncore functions in less expensive real estate in parts of our City that would benefit from economic development. 

A well thought out and properly executed space plan would indicate that the Figueroa Plaza lease not exceed four or five years and that Department would need only three floors of “creative” office space.  This would imply that a five year lease (including parking) would be in the range of $12 million, not including tenant improvements of around $9 million that the City wants DWP to pay.  The total lease would be approximately $21 million, a significant discount to the new $41 million proposal. 

However, the City should consider cutting DWP and its Ratepayers a break given that we are forking over $291 million to fund the illegal 8% Transfer Tax on Power System revenues.  We are also being slammed with a five year $1 billion rate increase.  As such, the City should consider waiving the annual rent of about $2 million a year, leaving DWP to pay for the tenant improvements and parking.  DWP would be responsible for the $9 million tenant improvements that would stay with the building after the lease is over.  

The City will argue that it cannot afford the loss of revenue.  But given the vacancy factor of this out of the way location, its lack of amenities, its government dominated rent roll, the lack of interest by private sector renters, and the complex’s deferred maintenance, the likelihood of attracting tenants for these three floors is questionable. 

And maybe it is time for the City to give a little something back to the Ratepayers. 

 

●●

 

  • Previous CityWatch articles on the DWP lease of Figueroa Plaza 

--The Fig Plaza Stick Up: Ripping Off DWP Ratepayers for $40 Million

June 27, 2016 

--Exposed! City Overcharging DWP Millions on Downtown Fig Plaza Rent

June 20, 2016

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw

 

LA WATCHDOG--We need to send a loud and clear message to Mayor Eric Garcetti, the Herb Wesson led City Council, the County Board of Supervisors, the Los Angeles Community College District, the Los Angeles Unified School District, Governor Jerry Brown, and our representatives in Sacramento that we are not their ATM. 

LA WATCHDOG--In the 2013 Mayoral race, Candidate Eric Garcetti opposed Proposition A, the permanent half cent increase in our sales tax that would have raised our already regressive sales tax to a staggering 9½%, one of the highest rates in the country. 

LA WATCHDOG--In her ten years on the Los Angeles City Council (2001-2011), Janice Hahn never met a wage increase, rate increase, or tax increase she did not like.  She was also opposed to increased transparency into the operations, finances, and management of the Los Angeles Department of Water and Power. 

In 2007, Hahn was a major supporter of the 5 year, 25% wage increase for the City’s civilian workers.  While the economics of this deal were questionable even under favorable economic conditions, it turned out to be a disaster when the economy tanked and the City’s finances were turned upside down.  

Even with this river of red ink, Hahn was unwilling to support the hard decisions to balance the budget because she did not want to antagonize the leaders of the City’s unions who had snookered Mayor Antonio Villaraigosa and Council President Eric Garcetti with promises to bargain in good faith if the City’s financial condition changed.  

The City eventually balanced the budget, but only after it dumped 1,600 employees onto the DWP payroll (along with $175 million in unfunded pension liabilities) and enticed 2,400 senior employees to retire through the Early Retirement Incentive Program that stuck the City’s underfunded civilian employee pension plan with an additional $600 million liability. 

In 2008, Hahn was a sponsor of the Proposition A (the City of Los Angeles Special Gang and Youth Violence Prevention, After-School and Job Training Programs Tax), a $36 parcel tax designed to raise about $30 million a year.  But this ballot measure failed to receive the necessary two thirds vote, in large part because the ballot measure did not win the endorsement of the Los Angeles Times.  

In 2008 and 2010, Hahn supported two hefty rate increases in our water and power rates while, at the same time, putting on a show where she pretended to sympathize with the downtrodden Ratepayers.  After all, she wanted the continued support of DWP’s domineering union, IBEW Local 18, and Union Bo$$ d’Arcy, its politically powerful business manager.  

In 2010, she and her partner in crime Richard Alarcon sided with Mayor Villaraigosa in his scheme to have DWP withhold $73.5 million from the City’s General Fund unless the City Council agreed to an even higher rate increase. But this effort failed when the 13 other members of the City Council refused to go along with hare brained stunt that was not in the best interests of the City and the DWP Ratepayers.  

In late 2010, Hahn was also one of the opponents of the placing on the ballot the charter amendment to create the Ratepayers Advocate to oversee the operations, finances, and management of the Department.  And even after 78% of the voters approved this ballot measure in March of 2011, Hahn continued her efforts to water down the powers of the Ratepayers Advocate because Union Bo$$ d’Arcy’s concern about increased transparency and accountability into the operations and finances of our Department of Water and Power. 

While Hahn was on the City Council, Hahn gave lip service to pension reform.  But when push came to shove, Hahn was MIA because once again she was unwilling to alienate the leaders of the City’s civilian unions who refused to negotiate in good faith to reform our seriously underfunded pension plans.  

The County Board of Supervisors has undergone a significant change as the fiscally responsible Zev Yaroslavsky and Gloria Molina have been replaced by Sheila Kuehl and Hilda Solis, both of whom are not known for their budget balancing prowess.  Adding the fiscally irresponsible and inexperienced Janice Hahn to the Board of Supervisors that has a budget of $28 billion and pension liabilities exceeding $50 billion is only asking for trouble, especially if the economy experiences a downturn. 

A vote for Janice Hahn will be a vote for budget shenanigans, a vote against pension reform, a vote against transparency, a vote for the self-serving leaders of the County’s public unions, and a vote for increased taxes on the hard working citizens of Los Angeles County. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw

LA WATCHDOG--The Build Better LA Initiative is the Los Angeles County Federation of Labor’s attempt to increase affordable housing in the City of Los Angeles by requiring real estate developers who want a zoning change or General Plan amendment to include low income housing in their developments.  It also provides for increased density in Transit Oriented Communities in return for affordable units. 

But this November ballot initiative (officially the Affordable Housing and Labor Standards Related to City Planning Initiative Ordinance JJJ) is over 10,000 words and very difficult for planning gurus to understand to say nothing of us mere mortals.  But maybe this obfuscation is part of County Fed’s strategy.  

The proponents of the initiative are playing up the lack of affordable housing in the City.  But County Fed’s underlying goal is to establish the equivalent of “project labor agreements” on all developments of ten or more units that are granted General Plan amendments that allow for increased residential space, density, or height.  

Notably lacking is any discussion about the economics associated with this ballot measure.  But according to several sources, this initiative will increase construction costs by about 30% to 40%, in large part because of the onerous hiring requirements (see below) contained in the initiative. 

There has not been any discussion or analysis of the impact this initiative would have on our streets, especially in areas such as Hollywood and DTLA where congestion is already a major league problem. More than likely, these supersized skyscrapers will require many more luxury apartments to pay for the affordable units, resulting in massive increases in traffic as the upper income tenants will not rely on the bus or subway, but will tool to work in their gas guzzling BMWs. 

There are also no specific provisions that require the City to update its General Plan or its 37 Community Plans.  Rather, it appears that “up zoning” and “spot zoning” will continue to be business as usual, only this time on steroids, all to the detriment of our family oriented neighborhoods and streets.  

This initiative also gives extraordinary power to the City Council as it will have the ability to adjust the affordable housing requirements of a particular project “upon a showing of substantial evidence that such adjustments are necessary to maximize affordable housing while ensuring a reasonable return on investment for Developers.” 

Talk about an invitation for corruption! 

Union sponsored Initiative JJJ is not ready for prime time.  It adds significantly to the cost of construction.  There is no planning.  It is overdevelopment of steroids.  It does not respect our neighborhoods.  It grants the City Council too much power.  And it is an invitation for corruption. 

Vote NO on JJJ.  There are better ways to build LA.

 

●●

 

Ballot Language 

AFFORDABLE HOUSING AND LABOR STANDARDS RELATED TO CITY PLANNING. INITIATIVE ORDINANCE RRR 

Shall an ordinance: 1) requiring that certain residential development projects provide for affordable housing and comply with prevailing wage, local hiring and other labor standards; 2) requiring the City to assess the impacts of community plan changes on affordable housing and local jobs; 3) creating an affordable housing incentive program for developments near major transit stops; and 4) making other changes; be adopted? 

Hiring Requirements 

All building and construction work on the project will be performed at all tiers by contractors which

(a) are licensed by the State of California and the City of Los Angeles;

(b) shall make a good-faith effort to ensure that at least 30% of all their respective workforces’ construction workers’ hours of Project Work shall be performed by permanent residents of the City of Los Angeles of which at least 10% of all their respective workforces’ construction workers’ hours of Project Work shall be performed by Transitional Workers whose primary place of residence is within a 5-mile radius of the covered project;

(c) employ only construction workers which possess all licenses and certifications required by the State of California and the City of Los Angeles;

(d) pay their construction workers performing project work the wages prevailing in the project area determined pursuant to California Labor Code § 1770; and

(e) have at least 60% of their respective construction workforces on the project from: (1) workers who have graduated from a Joint Labor Management apprenticeship training program approved by the State of California, or have at least as many hours of on-the-job experience in the applicable craft which would be required to graduate from such a state-approved apprenticeship training program, and (2) registered apprentices in an apprenticeship training program approved by the State of California or an out-of-state, federally-approved apprenticeship program.

●●

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw 

LA WATCHDOG--In November, we will be asked to reject or approve “The California Children’s Education and Health Care Protection Act of 2016.” If approved by a majority of the voters, this ballot measure, Proposition 55, will extend to December 31, 2030 the “temporary” income tax surcharges on upper income Californians that were authorized in November of 2012 when 55% of the voters approved Proposition 30. 

Prop 30 was designed to prevent “devastating” cuts to the State’s educational budget by establishing a seven year “soak the rich” income tax surcharge (2012 to 2018) and a four year quarter of a cent increase in our sales tax (2013 to 2016).  

According to Legislative Analyst, this 12 year extension of the ‘temporary” income surcharges will increase state revenues by $4 billion to $9 billion a year from 2019 through 2030, depending on the economy and, importantly, the stock market.  This year’s budget assumed $7 billion from these income tax surcharges. 

But this is not the only “revenue enhancement” scheme that is being cooked up by our friends in Sacramento and the campaign funding leadership of the public sector unions. 

State Senator Bob Hertzberg (D-Van Nuys) is pushing to extend the sales tax to include services.  This so called “reform” would generate “roughly $10 billion in its first year and increasing amounts thereafter.”  According to a chart prepared by the California Board of Equalization, the State has identified 15 industries and 487,000 firms that have the potential to generate $111 billion in sales tax revenue.  This includes lawyers, accountants, and other value added service providers. 

According to a report by State Controller Betty Yee and her Council of Economic Advisors on Tax Reform, another revenue enhancement is the “split roll” where commercial and industrial properties would be assessed at their fair market value.  At a 1% property tax rate, annual “revenue gains would likely surpass $5 billion and may add up to more than $10.2 billion.”  However, the split roll will require the approval of the voters since it involves amending Proposition 13, the third rail of California politics. 

The folks in Sacramento and their cronies in the transportation lobby are also beating the drums for an increase our gas tax, already the highest in the nation when you factor in the impact of the “cap & trade” fees.  This proposed increase is estimated to be in the range of $2 billion to $4 billion a year.  This money would help fund efforts of the California Department of Transportation to repair the State’s highways, roads, bridges, and other related infrastructure.  

At the same time, the State is swiping $1 billion a year from CalTrans, a bloated agency where 3,500 surplus employees are costing the State, its taxpayers, and our roads over $500 million a year. 

Our good friend Hertzberg is also pushing a bill (SB 1298) that would allow stormwater / urban runoff to be considered as wastewater, thereby allowing the County of Los Angeles to levy $20 billion in fees without the approval of the voters.  This would result in an increase in our real estate taxes of 8%.  

Proposition 30 has done an admirable job of making up revenue shortfall over the last five years.  Since 2012, the State’s General Fund revenues have increased by almost $34 billion (39%) while overall revenues, including special funds, has increased to almost $171 billion, a bump of more than 40%. 

Now that income and sales tax revenues have rebounded to record levels, Proposition 55 and the 12 year extension of the “temporary” income tax surcharges represents just another revenue grab by the State, the California Teachers Association, the hospital lobby, and the SEIU (Service International Employees Union) that deserves to be rejected by the voters in November. 

And while a “soak the rich” tax has a certain appeal, we need to be careful not to kill the golden goose.  If only a small percentage of the upper income taxpayers and their profitable corporations and the small businesses they control decide to relocate or not invest in our economy, many of our fellow citizens will be without good manufacturing or value added service oriented jobs.  

We need to send a message to the fiscally irresponsible scoundrels in Sacramento, their cronies, and the campaign funding leaders of the public sector unions that we are not their ATM.  After all, we are doing more than our fair share as we have the highest income tax rate, the highest sales tax, and the highest gas prices in the country.  

Vote NO on Proposition 55.

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw

 

LA WATCHDOG--David Wright (photo above on left front with Mayor Garcetti) is an excellent choice to be the permanent General Manager of our Department of Water and Power. But you have to wonder why we would endorse Wright as he has to have a screw or two loose if he is willing to take a position that is the toughest job in the City.  

He will be caught in a crossfire between skeptical Ratepayers who are concerned about ever increasing rates, the environmental lobby where money is no object, a domineering union and its rich contract and overly restrictive work rules, the media who loves to put DWP on the front page, the public’s demand for increased transparency, the Mayor and the City Council who view the Department as an ATM, and the credit rating agencies.  

At the same time, he and his management team are responsible for leading a complex enterprise with 9,000 employees, $5 billion in annual revenues, and a five year capital budget of over $13 billion that is designed to finance numerous unfunded mandates and regulations and update the Department’s water and power infrastructure. 

He has to be crazy. 

Nevertheless, Tony Wilkinson (Chair of the Neighborhood Council DWP Memorandum of Understanding Oversight Committee and an active participant in developing the November ballot measure to reform certain aspects of Department) and I sent the following letter to City Council President Herb Wesson endorsing Wright as our next General Manager.  

●● 

City Council President Herb Wesson

Los Angeles City Hall 

Appointment of David Wright as LADWP General Manager  

Dear Herb, 

This is a critical time for the Department of Water and Power which is why we support naming David Wright as its permanent General Manager.  

The City has placed on the November ballot a measure to reform the Department of Water and Power.  This reform will also require additional legislation by the City Council.  However, it appears that the City’s unions and other organizations are preparing to oppose this reform as they are putting their own interests ahead of those of the Ratepayers and the City.  

The Department is also in the midst of a major capital expenditure program to update its infrastructure, to repower its generating capacity so that 33% of our energy will be from renewable resources by 2020, and to meet numerous clean water requirements. 

The Department is also engaged in many internal reforms, including the establishment of the Administrative System Services unit to replace the “Joint Services” operation.  This new division will focus on improving customer service and the billing systems, establishing a more efficient personnel department, modernizing information technology and computer systems, enhancing physical and cyber security, and creating a more efficient procurement and contracting operation. 

Over the last five years, under the management of knowledgeable industry executives, the Department has made considerable progress in meeting its goals.  As such, it makes sense to continue with our existing management team and avoid the risk of bringing in an outside General Manager who does not have a working knowledge of the Department, its people, its goals, its Ratepayers, the City Council, and the Mayor.  

We are fortunate to have David Wright, the Interim General Manager who has been the Department’s Chief Operating Officer for the past year. He has a strong industry background and is knowledgeable about the Department and its operations.  He also has had considerable experience with other organizations, which will allow him to introduce new ideas to the Department. 

Importantly, Marcie Edwards has endorsed David, in large part because of the excellent job he has done in addressing the billing fiasco caused by a flawed Customer Information System.  He has made considerable progress in reorganizing and rationalizing Joint Services, a thankless but important job that nobody was willing or able to tackle.  

As Ratepayers, we were impressed with Wright’s August 6 presentation to the Neighborhood Council DWP MOU Oversight Committee where he emphasized the need for excellent customer service which in turn will improve the Department’s reputation.     

We strongly believe that selection of a new General Manager cannot wait until a year from now, when an entirely new and lengthy selection process may be in place. DWP needs a firm hand today. It needs a General Manager who is not handicapped by the term Interim in his title. 

We urge you to make this process easy, put this task behind you, and name David Wright as the permanent General Manager of the Department of Water and Power.  

Tony Wilkinson

NC DWP MOU Oversight Committee 

Jack Humphreville

DWP (Advocacy) Committee 

PS: We also recommend that the Department, the Board of Commissioners, the City Council, and the Mayor retain the services of Marcie Edwards for the next six months to facilitate an orderly transition, to assist the Department in analyzing pending legislation and regulations, and to protect DWP’s assets from regionalization. 

●●

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw 

LA WATCHDOG--The Wall Street Journal is reporting that Gannett, the nation’s largest publisher of newspapers, has sweetened its offer to purchase Tribune Publishing* (“Tribune” or the “Company”), the owner of the Los Angeles Times, The San Diego Union-Tribune, the Chicago Tribune, and six other daily newspapers around the country. (Note: Tribune Publishing changed its name to “tronc,” which was derived from TRibune ONline Content.) 

While the terms of this overture were not disclosed, it is most likely north of the all cash $15 a share offer that was rejected out of hand by Tribune’s Board of Directors in late May.  But this unilateral action of the Board was not appreciated by many of the other shareholders who believed that this offer, double the price of the stock when Gannett made it first offer in April, represented an excellent price for Tribune. 

The back story of this rejection of Gannett’s very generous offer started in February with the private sale of 15% of Tribune’s stock at a below market price to Michael Ferro, a Chicago based internet entrepreneur, in a back room deal most likely orchestrated by Eddy Hartenstein, the then Chairman of the Board and the former publisher of the Los Angeles Times.  Hartenstein, not to his credit, was an associate of Sam Zell, the controversial Chicago based financial wizard who was responsible for the 2008 bankruptcy of the Tribune Company, the former parent of the Company, that was saddled with $13 billion of leveraged buyout debt. 

Within two months, Ferro had fired the Chief Executive Officer, replaced him with one of his long time henchman, and reconstituted the Board of Directors, leaving him with absolute control of Tribune. Today, Hartenstein is one of the two remaining directors. 

In May, subsequent to Gannett’s offer of $15 a share, Ferro engineered the private sale of 5 million shares at $15 a share (a total of $75 million) to Patrick Soon-Shiong, a Westside medical entrepreneur who is reputedly the wealthiest person in Los Angeles.  (He also owns a minority interest in the Los Angeles Lakers which he purchased from Magic Johnson.) Combined, Ferro and Soon-Shiong, now the Vice Chairman of Tribune, own 28% of the stock and control the Board of Directors.   

But the other 72% of the shareholders, many of which are sophisticated institutional investors and hedge funds, will not be happy campers if Tribune rejects another very generous offer from Gannett.  And this time, it will result in litigation. 

On June 13, Oaktree Capital Management, a well-respected Los Angeles based investment firm and the owner of 13% of Tribune stock (18% prior to the diluting sales to Ferro and Song-Shiong), sent a five page letter to Tribune asserting its right under Delaware Law to inspect the books and records of the Company.  Of particular interest are the shenanigans associated with the February below market sale of over 5 million shares to Ferro and the subsequent actions that allowed Ferro to seize control of the Company without paying a premium price.    

Other institutional investors have also indicated their displeasure at the cavalier rejection of Gannett’s offer, calling for the Board to retain an independent financial advisor to determine the fairness of the Gannett offer and to enter into negotiations with Gannett.  

According to The Wall Street Journal, Tribune is expected to respond to the new offer by the end of the week.  At that time, we will know if the Company has entered into a $1 billion deal with Gannett (this includes almost $400 million in debt).  Tribune’s Board may also decide to enter into negotiations with Gannett with the desire to increase the offer or to entertain offers from other potential purchasers, including News Corporation, a company controlled by Rupert Murdoch. 

If the Board of Directors rejects Gannett’s generous offer, the outside shareholders will no doubt haul the Company and its directors into court in an attempt to force the Tribune to sell the Company.   

Alternatively, Gannett may bide its time and launch, with the support of the outside investors, a proxy contest to oust the current directors at next year’s annual meeting.   

In any case, stay tuned. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw 

LA WATCHDOG--Of the 24 ballot measures* on our November ballot, the least controversial is Proposition 54, the California Transparency Act, unless, of course, you are a Sacramento insider who likes the cover of the dead of night.  

This initiated Constitutional amendment will prohibit the State Legislature from “passing any bill unless it has been in print and published on the internet for at least 72 hours before the vote, except in the case of public emergency.” 

This straight forward, easy to understand provision would eliminate the “gut and amend” maneuver where “legislative leaders hollow out innocuous bills and insert new language on unrelated but often controversial issues, then ram the bills through in the final hours of a legislative session.” 

If approved by a majority of the voters, we will have a more transparent legislature as the media and the voters will have the opportunity to review, analyze, and comment on any last minute changes made by the politicians and their cronies.  This contrasts with the past practice where numerous state budgets and spending bills were ram rodded through the Legislature at the last minute, benefitting special interests and often times much to our detriment. 

Proposition 54 also requires the Legislature to make audiovisual recordings of its public meetings in their entirety and post them on the internet within 24 hours. These recordings must be available to the public through the internet for at least 20 years.  

We will also have the right to record by audio or video any public meeting which recordings may be posted on the internet and used for any “legitimate” purpose without having to pay any fees.  

Wouldn’t it be fun to catch a legislator catching a few zzzz’s or playing internet games while the Assembly or Senate was in session! 

The opponents have claimed that this Constitutional amendment will result in “unnecessary and costly delays” that will cost “millions of dollars – funds that could be used to improve education, lower tuition costs, or help create jobs.”  But the Legislative Analyst and Director of Finance estimate the initial cost to be $2 million and the annual cost to be about $1 million, not even budget dust compared to the State’s annual budget that is rapidly approaching $200 billion. 

The opponents of the California Legislature Transparency Act will also take shots at its backer, Charles T. Munger, Jr., claiming that this son of a philanthropic billionaire has his own political agenda.  To the contrary, Munger’s stated goal is “to take power from narrow factions and return it to ordinary Californians.”  

This initiative has broad bipartisan support which is already having an impact as the Legislature is on good behavior knowing that any last minute “gut and amend” shenanigans will be used to promote Proposition 54. 

Whether you are a Democrat or a Republican, or a Libertarian or a Green, this common sense initiative is a no brainer. 

Vote YES on Proposition 54, the California Legislature Transparency Act.  

●●

NEED TO KNOW

 

The following is the ballot language:  

Prohibits Legislature from passing any bill unless it has been in print and published on the Internet for at least 72 hours before the vote, except in cases of public emergency. Requires the Legislature to make audiovisual recordings of all its proceedings, except closed session proceedings, and post them on the Internet. Authorizes any person to record legislative proceedings by audio or video means, except closed session proceedings. Allows recordings of legislative proceedings to be used for any legitimate purpose, without payment of any fee to the State. 

 

*There are 24 ballot measures: 17 State measures, 2 County measures, 4 City measures, and a last minute $3.3 billion bond measure sponsored by the Los Angeles Community College District. 

Websites: 

Yes on Prop 54: Voters First, Not Special Interests: www.YesProp54.org 

Vote No on Prop 54, Stop the Special Interest Power Grab: www.NoOnProposition54.com 

●●

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw 

LA WATCHDOG--Saturday’s scoop by David Zahniser of the Los Angeles Times that Marcie Edwards (photo above), the respected General Manager of our Department of Water and Power, has been in discussions with Mayor Eric Garcetti’s office about retiring, but only after an orderly transition.  But what was not disclosed is that these discussions have been going on for several months and that Mayor and his office were unable to make a timely decision on how to transition from Edwards to a new General Manager. 

As a result of Zahniser’s article, Mayor Garcetti reacted by announcing on Monday afternoon that Edwards will retire on August 16 and that David Wright, the Department’s Chief Operating Officer and Edwards’ choice as her successor, will be appointed as DWP’s Interim General Manager. (See the press release below.) 

Edwards, who was appointed General Manager in February of 2014, has done a very credible job.  Most importantly, she developed a strong management team that allowed the Department to address a number of politically sensitive controversies.  These include the brouhaha over the Joint Training and Safety Institutes and the questionable use of $40 million of Ratepayer money and the flawed Customer Information System that resulted in a large number of highly publicized billing mistakes. 

She also built on the legacy of Ron Nichols, the previous General Manger (January 2011 to January 2014), by establishing credible relationships with the Ratepayers, the environmental community, and the City Council. These relationships, coupled with numerous meetings throughout the City, allowed the Department to implement a five year, $1 billion rate increase without the usual controversy.  

David Wright (left), the Interim General Manager, is a relatively new addition to the Department’s management ranks, but has had considerable utility experience, including as General Manager of Riverside Public Utilities.  As the Chief Operating Officer, he also has an understanding of DWP, its management, its strengths and weaknesses, and its highly politicized environment. 

He also has a strong working knowledge of the proposed charter amendment involving the partial reform of DWP’s governance and contracting and procurement policies as well as the follow up ordinances that have been considered by the City Council Rules Committee. 

Over the next three months, Garcetti will need to focus on who will be the next General Manager of our Department of Water and Power.  The new full time General Manager, which may well be Wright, must have considerable management experience in the utility industry and be able to develop a strong and deep management team and to establish strong relationships with the members of the City Council, Ratepayers, and other outside constituencies. 

However, if the DWP Charter amendments are approved by the voters in November, the process for selecting the General Manager will be changed to follow the more elaborate process used in selecting the Police Chief. 

In any case, the appointment of the General Manager is the most important decision that the Mayor makes involving our Department of Water and Power and that is why the Ratepayers need to be an integral part of the decision making process. 

●●

 

The following is Garcetti’s press release.

 

MAYOR ERIC GARCETTI

CITY OF LOS ANGELES

 

FOR IMMEDIATE RELEASE

August 1, 2016

 

MAYOR GARCETTI ANNOUNCES RETIREMENT OF LADWP GENERAL MANAGER MARCIE EDWARDS, NAMES DAVID WRIGHT AS UTILITY’S INTERIM LEADER 

LOS ANGELES—Los Angeles Department of Water and Power (LADWP) General Manager Marcie Edwards will step down after more than two decades of service to the utility, Mayor Eric Garcetti announced today. She retires as the first woman ever to lead LADWP in its 114-year history. 

Concurrently, Mayor Garcetti named the Department’s current Chief Operating Officer, David Wright, a 27-year public utility veteran with a strong background in reliability, infrastructure development and customer service, to serve as Interim General Manager. 

During Edwards’ more than two years of service as LADWP’s General Manager, she guided and stabilized the utility through a critical moment in its history. As punishing drought conditions strained local water supplies, she led the push to cut LA water use by 20 percent in just one year. 

At the same time, she effectively navigated LADWP through significant unforeseen issues with its billing system, and built widespread consensus for a sensible rate increase plan to enable critical future investments in sustainable water and power infrastructure, maintaining LADWP’s exemplary reliability track record and completely getting off coal.  

“When I took office, LADWP was facing difficult challenges -- we needed a visionary leader to put our utility back on track, and that’s exactly what Marcie Edwards has done,” said Mayor Garcetti. “She has left an indelible mark on our city, and I am deeply grateful for her service.” 

Wright has been at DWP since early 2015 focusing on fixing the billing system and improving customer service after spending nearly a decade as General Manager of Riverside Public Utilities, earning consistent praise for his success in improving service to his customers. He has also served as Chief Financial Officer for the Las Vegas Valley Water District, the Southern Nevada Water Authority and the Silver State Energy Association, overseeing a nearly $1 billion budget for the three water and electric organizations. 

At Riverside Public Utilities, Wright led a complete overhaul of the customer service system, an upgrade that provided customer satisfaction levels that were at the top of the industry.  The effort was so successful the City of Riverside later adopted the platform to handle all of its constituent services through their 311 call center. As one of his first tasks, Mayor Garcetti has asked Wright to develop and implement a “customer bill of rights” to provide specific service level guarantees for the utility’s ratepayers. 

“LADWP exists to serve the people of Los Angeles -- its leader should be someone who has a proven customer service track record,” said Mayor Garcetti. “David Wright has spent his career making public utilities work better for the people they serve, and I’m proud to appoint him as LADWP’s next Interim General Manager.” 

Edwards will step down as General Manager on August 16, 2016.  She will assist with an orderly transition and serve as special advisor to the Mayor, LADWP Board and Mr. Wright, the interim General Manager, through Dec. 31.  

“It’s been a privilege to lead LADWP through both difficult challenges and transformative efforts to build a sustainable future for Los Angeles,” Edwards said. “I am grateful to Mayor Garcetti for the opportunity to serve my city.” 

“I am deeply honored that Mayor Garcetti has chosen me to lead LADWP during such an important period for the utility,” Wright said. “I will do everything I can to make LADWP a utility that not only focuses on infrastructure, reliability and sustainability, but that strongly focuses on improving service levels to our customers to significantly higher levels.  It’s important that LADWP makes it easy to do business with us by working better and more efficiently for our customers than ever before.”

 

●●

 

 

 

 

LA WATCHDOG--How does Metro expect us to understand its 27 page, 12,000 word ballot measure that would increase our sales tax by half a cent to a whopping 9½%, one of the highest rates in the county? 

Or should we just trust Metro’s Board of Directors led by Mayor Eric Garcetti, his three appointees, and the four County Supervisors who voted to place this ill-conceived measure on the November ballot? 

But there is much more than a plain old multibillion dollar tax increase buried in these 27 pages of mumbo jumbo that will make the Los Angeles County Metropolitan Transportation Authority and its Board of Directors less accountable to the voters. 

If the proposed half a cent increase in our sales tax is approved by two-thirds of the voters, Metro will collect an additional $860 million in the first year, bringing the total haul from the four voter approved sales taxes to $3.5 billion in 2018. 

However, unlike the 2008 voter approved Measure R half cent increase that was to expire in 30 years (2039), this tax does not have a sunset provision unlike the March version of this ballot measure.  Furthermore, this measure proposes to make the Measure R half cent tax permanent. 

As a result, Metro will be able to incur substantially higher levels of debt that will burden the next generation of Angelenos who will not have the opportunity to say “No More Debt” at the polls.  

There are also serious questions about Metro’s management and organization and whether it has the ability to manage its daily operations, increase ridership and fares, properly maintain its aging infrastructure, and execute its ambitious expansion plans on time and on budget, especially given recent problems with the widening of 405 through the Sepulveda Pass and the Regional Connector. 

Metro claims that there will be enhanced level of accountability for expenditures.  But how is it possible for seven politically appointed members of the Independent Oversight Committee to oversee a sprawling enterprise with over 9,000 employees, $2 billion in annual expenditures, a $750 million operating loss, $15 billion in assets, and a multibillion capital expenditure program? 

There are also a number of pet projects in the measure’s Expenditure Plan, including $1.1 billion for the bike path along the LA River, the “LA Street Enhancement & Great Streets Program,” and Jose Huizar’s Historic Downtown Street Car.  And needless to say, there are other stinkers buried in the $120 billion Expenditure Plan. 

Metro has been actively promoting the Los Angeles County Transportation Improvement Plan, assisted by Garcetti, the Board of Supervisors, and all the special interests who will benefit from the increased revenue and the proceeds the billions in new debt.  But this measure is going to be a tough sell. 

In 2014, Measure J, the thirty year extension of the Measure R half cent tax, received only 66% of the vote, just short of the two thirds needed for approval.  But this ballot measure is more complicated as Metro is asking us to pony up an additional $860 million a year and $120 billion over the next 40 years. 

The voters of the City of Los Angeles are also frustrated with City Hall.  For example, our City does not have a plan to repair our lunar cratered streets despite the fact that the City is entitled to more than 8% of the sales tax revenue generated from the four voter approved sales taxes.  As of now, the City is expected to receive over $18 billion from this Local Return program over the next 40 years. 

Furthermore, Garcetti and the Herb Wesson led City Council have refused to reform its finances, refusing to Live Within Its Means and ignoring the common sense, easy to implement recommendations of the LA 2020 Commission.  These include multiyear budgeting, the establishment of an Office of the Transparency and Accountability to oversee the City’s fragile finances, and the creation a Commission on Retirement Security to review the City’s unsustainable pension plans. 

And finally, we, the voters, are being overwhelmed by numerous ballot measures (see the note below) that will funnel billions of our hard earned money to our inefficient, bloated State, County, and City governments which are controlled by self-serving politicians and their cronies.  

Metro does not deserve a $120 billion blank check.  

●● 

The ballot measure shall read as follows: 

Los Angeles County Traffic Improvement Plan.  To improve freeway traffic flow/safety; repair potholes/sidewalks; repave local streets; earthquake retrofit bridges; synchronize signals; keep senior/disabled/student fares affordable; expand rail/subway/bus systems; improve job/school/airport connections; and create jobs; shall voters authorize a Los Angeles County Traffic Improvement Plan through a ½ cent sales tax and continue the existing ½ cent traffic relief tax until voters decide to end it, with independent audits/oversight and funds controlled locally? 

●● 

Note: In addition to Metro’s permanent $850 million increase in the county’s sales tax, voters are being bombarded by the City’s $1.2 billion bond measure to fund supportive housing for the homeless and the County’s evergreen $95 million parcel tax for its parks.  The Los Angeles Community College District announced a $3.3 billion bond measure.  And the state ballot has a $1 billion cigarette tax, a 12 year extension of the $10 billion of “temporary” soak-the-rich income tax, and a measure authorizing $9 billion in school construction bonds, 

Other taxes that are waiting in the wings are a $4.5 billion bond measure to repair the City’s streets and sidewalks, a homeless tax to fund the County’s homeless initiatives, a tax to fund the City and County’s $20 billion stormwater / urban runoff program, and an increase in the State’s gas tax.  There is also the issue of how to fund the unfunded pension liabilities of the City and County that exceed $65 billion (about $10,000 for each of the City’s 4 million residents). 

Earlier this year, we were also hit with an additional tax of $150 million associated with DWP’s $1 billion rate increase. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw 

LA WATCHDOG--On June 23, the politicians on the Board of Directors of the Los Angeles County Metropolitan Transportation Board voted to place on the November ballot the “Los Angeles County Traffic Improvement Plan” which, if approved by two-thirds of the voters, will increase our sales tax by a half cent to 9½%, one of the highest rates in the country.  

The Supervisors also decided to make this a permanent increase, eliminating the 40 year time horizon that was an integral part of the previous proposal in March.  

This ballot measure will also make permanent the Measure R half cent tax increase that County voters approved in 2008, eliminating the 2039 sunset provision.  Interestingly, in 2012, the County’s voters did not approve extending this tax for another 30 years until 2069. 

If this measure is approved, it will increase Metro’s tax revenue over the next 40 years by $120 billion to an estimated $300 billion.  These funds will be used to subsidize Metro’s money losing operations, fund its pensions, and finance its very ambitious, debt fueled capital expenditure program that will burden future generations of Angelenos.    

But this appears to be just the beginning of our Enlighten Elite’s efforts to raise our taxes to astronomical levels. 

In all likelihood, once Janice Hahn (who never met a tax or rate increase she did not like) is elected to the Board, the Supervisors will approve placing on the ballot a quarter of cent increase in the sales tax to fund the County’s homeless initiatives.  

Of course, our Elected Elite will tell us that this new homeless tax will be offset by the expiration on December 31, 2016 of the quarter of a cent sales tax under the terms of Proposition 30 that was approved by 55% of California voters in November 2012. 

Our City is also on the sales tax bandwagon. 

In 2013, the Herb Wesson led City Council placed on the ballot Proposition A, a permanent half cent increase in our sales tax to finance City services.  Despite City Hall’s well-financed campaign and threats by Mayor Villaraigosa and Police Chief Charlie Beck to lay off cops, 55% of the voters rejected this tax increase.  

Interestingly, mayoral candidate Eric Garcetti opposed Proposition A because he said that Angelenos were already paying their fair share and could not afford another hit to their wallets.  Yet now, as Mayor and a member of the Metro Board, Eric is an enthusiastic backer of this new tax that will cost County taxpayers an estimated $850 million next year.    

In 2014, the City considered placing on the November ballot another half cent bump in the sales tax to finance the $4.5 billion plan to repair and maintain our lunar cratered streets.  But the Save Our Streets – LA proposal never made it to the ballot because City Hall realized that skeptical voters would have trashed this measure, especially after they were made privy to Controller Ron Galperin’s critical audit of the Department of Street Services. 

Garcetti and the Herb Wesson led City Council are cooking up numerous schemes to raise taxes so they can throw money at problems rather than figuring out how they can make the City operations more efficient.  

We are hearing chatter about the City’s infrastructure needs, ranging from streets and sidewalks to stormwater and urban runoff.    There are discussions about budget busting increases in the size of the City’s work force by hiring 5,000 new civilian employees.  And the City and the County need to address their unsustainable pension plans that have a combined unfunded pension liability of at least $70 billion (almost $10,000 for every Angeleno).   

With all of these “needs,” a 10% sales tax might be considered a bargain by our elected officials.   

Before we consider approving the Metro’s half cent increase in our sales tax, the City $1.2 billion bond issue for the homeless, and the County $100 million parcel tax for its parks, we must demand that the City and the County develop a long range operational and financial plan that outlines the total burden they want us to bear.  The City should also implement the recommendations of the LA 2020 Commission to implement multiyear budgeting, to establish an Office of Transparency and Accountability to oversee the City’s fragile finances, and to form a Commission on Retirement Security to develop information and solutions to our unsustainable pensions.  

Until then, these ballot measures deserve a NO vote. 

And this Note: These City and County tax proposals are in addition to the State ballot measures involving the issuance of $9 billion in school construction bonds, an additional $1 billion tax on cigarettes, and the 12 year extension of Proposition 30’s “temporary” multibillion dollar “soak the rich” income tax.  

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw 

LA WATCHDOG--Why haven’t Mayor Eric Garcetti and City Council President Herb Wesson followed up on the recommendation by the LA 2020 Commission to “establish a Commission on Retirement Security to review the City’s retirement obligations in order to promote an accurate understanding of the facts” and make “concrete recommendations on how to achieve equilibrium on retirement costs by 2020?”  

Why?  Because these two ambitious politicians fear alienating the campaign funding leaders of the City’s unions who do not want a public discussion of the facts surrounding the City’s ever increasing annual contributions to the City’s two massively underfunded pension plans that are forcing the City to scale back on basic services. 

Over the last ten years, the City’s contribution to its two pension plans (Los Angeles City Employees Retirement System and the Los Angeles Fire and Police Pension System) has tripled to $1.1 billion, up from $350 million in 2005.  As a result, pension contributions now chew up 20% of the City’s $5.6 billion budget, up from less than 10% in 2005. 

This $750 million increase in pension contributions has forced the City to cut back on basic services such as public safety and the repair and maintenance of our streets, sidewalks, and parks.  The City has even resorted to placing an ill-conceived $1.2 billion bond measure on the November ballot to fund supportive housing for the homeless. 

Unfortunately, it is only going to get worse as the City, its pension plans, and their fiscally irresponsible, Garcetti appointed Commissioners are banking on an overly optimistic rate of return of 7½% on the combined investment portfolio of $33 billion.   

But the stock and bond markets are not cooperating as demonstrated by this year’s less than 1% return on CalPERS (California Public Employees’ Retirement System) $300 billion investment portfolio.   

If the City’s pension funds earned this meager 1% as compared to the targeted 7½%, it would result in an investment shortfall of an estimated $2.7 billion, an amount equal to about half of the City’s annual budget.  This “loss” will increase the unfunded pension liability as of June 30, 2016 to almost $11 billion, representing a funded ratio of an unhealthy 74%.  

However, if the investment rate assumption was a more reasonable 6½% as recommended by knowledgeable investors such as Berkshire Hathaway’s Warren Buffett, the unfunded pension liability would jump to over $16 billion, representing a dangerously low funded ratio of 66% and almost three times the City’s annual budget. 

Over the next five years, the City’s two pension plans will rack up an additional shortfall of over $5 billion if the rate of return on their investment portfolios is 6½%, a much more likely outcome than the targeted return of 7½%. 

But rather than recognizing this combined shortfall of $7.9 billion over the next five years, the City has cooked up a scheme to amortize these losses over a 20 year period, reducing the hit to the City’s budget.  

Even with this scheme, the City’s pension contribution is expected to increase by more than 50% over the next five years to $1.7 billion, representing 27% of the City’s projected General Fund budget. 

Garcetti and Wesson, along with Budget Committee Chair Paul Krekorian and Personnel Chair Paul Koretz, will tell us they made significant reforms to LAFPP in 2011 and LACERS in 2013 and 2015.  But these cosmetic amendments are nickels and dimes and did not address the overly optimistic investment rate assumption of 7½% and the unsustainable post-retirement medical benefits. 

This pension time bomb is a weapon of mass financial destruction where we will burden the next generation of Angelenos with tens of billions of unsustainable debt. This will destroy their standard of living and their environment.  

It is time for Garcetti, Wesson, and the members of the City Council to get off their fat asses, put on their big boy pants, and begin to address this problem by establishing an independent, well-funded Committee for Retirement Security. 

Only then will we be able to begin the hard task of developing a solution where the City and its future will not be devoured by the pension monster. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw 

LA WATCHDOG--On Tuesday, July 5, the County Board of Supervisors voted to place on the November ballot a $95 million parcel tax to benefit the County’s parks.  

Unlike a traditional parcel tax of $40 on each of the County’s 2.4 million parcels, this new parcel tax will be based on the square footage of improved property in the county (6.4 billion square feet) times 1.5 cents per square foot, an amount that may be adjusted upward based on the Western Urban Consumer Price Index.  Over the next 35 years, this tax will raise almost $6 billion based on reasonable assumptions for inflation and growth as compared to $4 billion under the traditional parcel tax. 

This new levy will replace two parcel taxes totaling $81 million that were approved by the voters in 1992 and 1996, one of which expired in 2015 ($52 million) while the second parcel tax ($29 million) will expire in 2019. 

In drafting the final, 8,700 word ballot measure, the Supervisors listened to the public (and their polls) and lowered the proposed tax to $95 million from the $200 to $300 million level that was discussed in its May 3 meeting.  

While this proposed increase (including the cost of living adjustment) is reasonable, especially given inflation since 1992, getting the approval of two-thirds of the voters will be a tough sell. 

The Supervisors may snatched defeat from the jaws of victory by approving Sheila Kuehl’s motion to make this parcel tax a permanent tax, eliminating the 35 year sunset provision.  

In 2013, 55% of voters in the City of Los Angeles rejected Proposition A, in part because many Angelenos were turned off by the permanent nature of the half cent increase in our sales tax to a whopping 9 ½ %.  This may also apply to the permanent half cent increase in our sales tax that is being proposed by the Metropolitan Transportation Authority (“Metro”) for the November ballot. 

Another contentious issue is the allocation of the tax revenues.  The Valley and the other parts of the County believe that they are not getting their fair share as the Supervisors are favoring the districts represented by Hilda Solis and Mark Ridley-Thomas based on the Needs Assessment Report that called for revenues to be spent disproportionately in underparked areas of the County. 

There are other issues that are of concern, including the lack of independent oversight, the lack of a maintenance plan for the County’s existing parks, shifting the burden to the owners of commercial real estate, and the potential for the new Board of Supervisors to burden the next generation with mountains of debt secured by this new parcel tax.  

But the real kiss of death may be “voter fatigue” where the overwhelmed and mad as hell voters reject all of ballot measures trying to pick our pockets.   

At the State level, we are being asked to approve $9 billion in general obligation bonds to finance K-12 and Community College facilities (Proposition 51), a $1 billion cigarette tax (Proposition 56), and the 12 year extension of the Governor Brown’s “temporary” income tax surcharge that is expected to yield $5 to $11 billion a year (Proposition 55, also known as the Pension Tax as these revenues will eventually fund the massive pension liabilities of CalPERS and CalSTRS).  

The County is also proposing a $130 million marijuana tax to finance its homeless efforts. 

Metro is proposing to nick us for an additional $850 million a year by permanently increasing our sales tax by a half cent, resulting in a sales tax of mind boggling 9 ½ %.  This, along with the other related taxes, will result in tax revenue of $3.5 billion a year for Metro.  

Finally, our City has placed on the ballot a measure to allow the City to issue up to $1.2 billion in bonds to fund, along with private real estate developers and other government entities, an estimated $3 to $4 billion of supportive housing. 

And this assault on our wallets does not include the $150 million tax increase associated with the recent $1 billion increase in our DWP water and power rates, a street tax that was pushed by the Los Angeles City Council in 2014, or any taxes to fund the County’s $20 billion stormwater plan.   

Maybe it is time for us to send our Elected Elites (and their cronies) in Sacramento, the County, and the City a loud and clear message that we are sick and tired of being their ATM by voting NO on all of these ballot measures.

●●

Ballot language

 

Safe, Clean Neighborhood Parks, Open Space, Beaches, Rivers Protection, and Water Conservation Measure           

To replace expiring local funding for safe, clean neighborhood/ city/ county parks; increase safe playgrounds, reduce gang activity; keep neighborhood recreation/ senior centers, drinking water safe; protect beaches, rivers, water resources, remaining natural areas/ open space; shall 1.5 cents be levied annually per square foot of improved property in Los Angeles County, with bond authority, requiring citizen oversight, independent audits, and funds used locally? 

●●

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw 

LA WATCHDOG--“Need now means wanting someone else's money.  Greed means wanting to keep your own.  Compassion is when a politician arranges the transfer.”  

Once again it is silly season in Los Angeles as our Enlightened Elite will be blowing smoke in our face, urging us to approve the proposed offering of up to $1.2 billion bonds over the next ten years.  These funds, along with billions from real estate developers and other governmental entities, will finance the construction of an estimated 10,000 units of supportive housing for LA’s homeless population. 

But this well intentioned measure that will be on the November ballot does not deserve our support. 

For openers, the City does not have the necessary management expertise, organizational capabilities, or experienced personnel to manage such a complex program.  This is because social services are the responsibility of the County which has dropped the ball in caring for the homeless population that numbers around 45,000 persons (less than 0.5% of the County’s population). 

Furthermore, the City does not have a well thought out plan to implement this ambitious multi-billion dollar endeavor.  How does the City propose to work with real estate developers and other government entities to raise billions needed to complete the build out of 10,000 housing units?  How does the City intend to work with County and the State, each of whom have their own ideas about how to address the homeless issue?  How does the City propose to pay for the necessary services that the homeless require since the City is prohibited by law from financing these day to day expenses with bond money? And how will the City develop a team of qualified individuals to implement this program in an efficient manner? 

There is also inadequate oversight of this multi-billion dollar build out that involves numerous real estate developers, many of whom already have close relationships with our elected officials.  The City is proposing to establish by ordinance a Citizens Oversight Committee where its seven members will be appointed by the Mayor and City Council.  But will this Committee be independent of the Mayor and the City Council?  And will it have the necessary expertise, resources, and authority to monitor and control the effectiveness of this program? 

In developing this $1.2 billion bond measure, the City Council failed to solicit input from the Neighborhood Councils and the public, unlike the process involving the reform of Department of Water and Power that will be on the November ballot and DWP’s $1 billion rate increase.  Rather, it is a top down process, where the all-knowing City Hall apparatchiks dictate policy to the City’s proletariats. 

The City proposes to service the $1.2 billion of bonds by imposing a new tax on our property.  But this tax, which starts off at $6 million a year and peaks at $100 million in 2028, is not necessary because the debt service (principal and interest) may be financed by a small percentage of the projected increase in the City’s General Fund revenues.  

Over the next 30 years, the average annual debt service is $60 million and equals 3.5% of the increase in the City’s tax revenues.  

This leads to the question that if the Mayor and City Council believe that the homeless issue is so important, why not make it a budget priority?  This contrasts with the City authorizing a $200 million giveaway for the Grand Avenue Hotel or approving a $125 million a year wage and benefit increase for the City’s civilian unions. 

The City has also refused to address its Structural Deficit, its annual budget, and its finances.  The Mayor and City Council have ignored the recommendations of the LA 2020 Commission to establish an Office of Transparency and Accountability to oversee the City’s finances, to develop a multiyear budget, and to form a Commission on Retirement Security to review the City’s seriously underfunded pension plans.  It has also not developed a plan to repair and maintain our lunar cratered streets or to benchmark the efficiency of the City’s operations. 

Simply stated, Mayor Garcetti and the Herb Wesson led City Council do not want our City to Live Within Its Means.  

The proposed $1.2 billion bond proposal is just another attempt by our Elected Elite to throw money at a problem based on the premise that we, the voters, should trust them to spend our hard earned dough efficiently. 

But with no organization and management, no plan, no oversight, no outreach, no respect for our wallets, and no budget reform, the measure to authorize $1.2 billion in bonds to fund the City’s homeless initiative deserves a NO vote in November. 

●●

The following is the proposed ballot language. 

HOMELESSNESS REDUCTION AND PREVENTION, HOUSING, AND FACILITIES BOND. 

To provide safe, clean affordable housing for the homeless and for those in danger of becoming homeless, such as battered women and their children, veterans, seniors, foster youth, and the disabled; and provide facilities to increase access to mental health care, drug and alcohol treatment, and other services; shall the City of Los Angeles issue $1,200,000,000 in general obligation bonds, with citizen oversight and annual financial audits?

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw

LA WATCHDOG--At its meeting last Tuesday, the politically appointed Board of Commissioners of our Department of Water and Power postponed its consideration of DWP’s proposed ten year, $63 million lease of 124,350 square feet of office space in Figueroa Plaza, a City owned office complex, because a CityWatch article suggested that the Department may be overpaying by $20 million. 

This overpayment is part of the City’s scheme to stick the Department and its Ratepayers with almost $15 million of tenant improvements, an expense normally the responsibility of the landlord, in this case the City of Los Angeles. 

The City is also attempting to extract an additional $5 million through higher than market rents.  

However, it appears that DWP is being slammed for an additional $20 million as market professionals and several DWP employees have indicated that the Department needs only half the contracted space to house the 550 employees who are scheduled to occupy Figueroa Plaza.  This would require DWP to adopt space planning techniques similar to those used in the private sector. 

Of course, if DWP had adopted proper space planning techniques for its 1.6 million square foot headquarters building, then this ten year, $63 million lease would not be necessary.  But past attempts by DWP to modernize its historic 50 year old headquarters building were shot down by the previous mayor and the Garcetti led City Council.    

By the way, the concept of proper space planning also applies to the City and its more than 32,000 employees. And just imagine how the tens of millions in annual savings could be used to repair and maintain our lunar cratered streets or house the homeless, alleviating the need for an increase in our taxes.  

This ten year, $63 million lease for 124,250 square feet of City owned office space was the creation of the Municipal Facilities Committee and its members, the City Administrative Officer, the Chief Legislative Analyst, and Mayor Eric Garcetti, as it was looking to off load the expense of this office space that was vacated by the Lewis Brisbois law firm as a result of the DaVinci Fire on December 8, 2014.   

In November of 2015, the City was prepared to move the Housing and Community Investment Department (“HCID”) and its 600 employees into this office space.  It intended to finance the tenant improvements and relocation from the leased Garland Building by issuing debt and recouping any debt, operating, and maintenance expenses by hitting up HCID’s special funds. 

But the HCID relocation plan was scrapped when Garcetti’s office realized that it would be easier to dump the surplus office space and the cost of the tenant improvements onto DWP and its Ratepayers, “saving” the City and its General Fund $63 million over the next ten years.  This was despite pushback from DWP’s management.  

The terms of this unfavorable lease need to be reviewed and analyzed by an independent third party in conjunction with the Ratepayers Advocate.  Any opinions and findings, along with all backup material, must be shared in a timely manner with the Ratepayers and the public before the lease is discussed by the politically appointed Board of Commissioners. 

This deal also serves as a call to reform the relationship between DWP and the City.  This would require an ordinance that requires that any transaction between the Department and the City be subject to a thorough analysis by the City, the Department, and the Ratepayers Advocate.  This analysis would also be shared with the Ratepayers and the public.  

Of course, this uneconomic deal that further soils the reputation of our Elected Elite raises the question of how many other stinkers have been approved by the Mayor, the City Council, and the politically appointed Board of Commissioners that are not in the best interest of the Ratepayers. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw 

LA WATCHDOG--At its meeting on Tuesday, the Garcetti appointed Board of Commissioners of our Department of Water and Power will consider the adoption of a ten year, $63 million lease for 124,350 square feet of office space in Figueroa Plaza, a City owned office complex located at 201-221 North Figueroa Street in DTLA.    

This 25 year old property, purchased by the City in 2007 for $219 million, consists of two 16 story towers comprising 615,000 of office space and is located north of the Central Business District and about a quarter of a mile west of DWP’s headquarters on North Hope Street. 

LA WATCHDOG--The politically appointed Board of Commissioners of our Department of Water and Power recently approved two money losing water recycling projects that will result in DWP blowing $93 million of Ratepayer money.  This amount represents about a quarter to a third of the recently approved five year, 25% increase in our water rates. 

These Board decisions (with only one the five Commissioners voting NO on both deals) were made without relying on any financial analysis prepared by the Department.  Nor were these two projects compared to other alternative water saving investments that may have higher rates of return.  To the contrary, I supplied the Commissioners and DWP management with a cash flow analysis (based on the Department’s assumptions) for both recycling projects that showed that these two uneconomic water recycling projects were stinkers. 

But the politically appointed Commissioners were only following the wishes (orders) of Mayor Eric Garcetti (photo above) who, through his Executive Directive No. 5 (Emergency Drought Response – Creating a Water Wise City) dated October 14, 2014, established a goal of reducing the purchase of imported water by 50% by 2024.  This will require increases in local supplies through conservation, the remediation and replenishment of our aquifers, and increases in our local supplies through the recycling of wastewater and storm water. 

Unfortunately, this aspirational, politically inspired Executive Directive was not accompanied by any operational or financial analysis, putting the Department in a very difficult and awkward position. 

The first project, the $20 million Griffith Park South Water Recycling Project, is located within the nation’s largest urban park and will supply 477 acre feet (156 million gallons) of recycled water a year to the Roosevelt Golf Course and the surrounding area.  Based on the Department’s assumptions for the purchase price of treated water from the Metropolitan Water District (“MWD”), this project does not recoup its investment until 2040 (23 years).  

Alternatively, it would take over 40 years for this debt financed project to repay a loan that had an interest rate of 5%. 

Furthermore, this deal is double stinker as it is a pet project of former City Councilman Tom LaBonge and the responsibility of the Department of Recreation and Parks, not DWP and its Ratepayers, since it located entirely within Griffith Park. 

The second water recycling project, the $73 million Elysian Park Downtown Water Recycling Project, will supply 2,561 acre feet (835 million gallons) of recycled water a year to Elysian Park, DTLA, Exposition Park, Boyle Heights, and other adjacent areas, once again reducing the need for potable (drinkable) water. But like the Griffith Park pet project, the DWP does not recoup its investment until 2040 and would not be able to repay the loan until 2057.  

The economics of these two projects assume that they will have a life of 30 to 50 years.  However, this may be a bogus assumption if the recycled water from the LA-Glendale Water Reclamation Plant can be processed into potable water (direct potable reuse or better known as toilet to tap) that can be introduced directly into our water system.  This would result in a “stranded” asset, resulting in an even greater hit to the Ratepayers. 

The debt laden Water System does not have the flexibility to sink cash into money losing projects as its ambitious $5.5 billion capital expenditure budget is already causing its long term debt and debt ratios to balloon to levels where it will endanger its coveted bond rating. 

While the aspirational goal of reducing our dependence on purchased water from Northern California and the Colorado River is worthy target, it must also be accompanied by a rigorous operational and financial analysis that results in the Department investing in projects that have positive rates of return and at the same time discarding the dogs.  Otherwise, Garcetti’s green policies will result in considerably less green in our wallets.  

[Note: On Wednesday, MWD, the major supplier of water to our City, issued a press release stating that its “stress test” showed that it had sufficient water supplies to meet the demands of its customers for the next three years.]

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--Mayor Eric Garcetti and the members of the Herb Wesson led City Council must think we are absolute fools if they believe that we will vote to approve massive tax increases in November while they continue to neglect our City and trash our quality of life.

On Friday, the Rules Committee of the City Council will consider placing on the ballot a measure to authorize the issuance of $1 billion of bonds.  This money will be used to finance the building of more housing for the homeless.  

The County is also considering a yet to be determined $250 million tax to help fund its homeless initiatives, including, subject to Sacramento’s approval, a controversial “millionaire’s tax” of 0.5% on incomes north of $1 million. 

The County is also contemplating a $200 to $300 million parcel tax to fund the repair, operation, and creation of parks throughout the County, especially in underserved areas.  

At the same time, Metro will place on the ballot a permanent half cent increase in our sales tax to fund transportation related projects and operations.  This will increase our sales tax to a whopping 9½%. 

Over the next 40 years, this new Metro tax, along with the existing transportation taxes, will raise almost $300 billion, of which almost $25 billion will be kicked back to City Hall as part of the Local Return program.  

Despite a kickback from Metro of over $200 million this year, City Hall does not have a comprehensive plan to repair our lunar cratered streets and alleys, some of the worst in the country. 

Nor does City Hall have a detailed plan to repair our residential sidewalks in a timely manner. Rather, homeowners may have to wait up to 30 years pursuant to the court mandated Sidewalk Repair Program unless residents are prepared to pony up their own dough to pay for a substantial portion of the cost to fix their broken sidewalks and replant their trees.  

City Hall is also starving our Department of Recreation and Parks by hitting it up for almost $60 million a year as part of its “full recovery cost” program.  This represents a third of its General Fund charter mandated allocation.  As a result, our parks have deteriorated and the Department has embarked on an unpopular program to commercialize our parks. 

The City Council and the Jose Huizar led Planning and Land Use Management Committee are preparing to allow the campaign funding billboard industry to install intrusive digital billboards in many areas outside the designated sign districts.  But the light blight from these highly profitable digital billboards is an assault on our quality of life. 

The Mayor and the City Council are also selling us out to real estate speculators and developers by approving zoning variances for luxury residential skyscrapers that will result in increased congestion on our already clogged streets.  

There are also hot button issues involving small lot subdivisions, short term rentals (AirBnb), granny flats, mansionization, and the hillside communities that have inflamed the impacted residents.  

At the same time that the City is neglecting our infrastructure and failing to protect our neighborhoods, City Hall has no problem entering into a new contract with the City’s civilian unions that will eventually cost an extra $125 million a year. This will result in a structural deficit of over $100 million for the fiscal year ending 2020 as opposed to a previously anticipated surplus of $68 million, a swing of $169 million.  

And this does not include the impact of the “goal” of hiring 5,000 new City employees or the underfunding of the City’s two pension plans by at least $400 million a year as the City relies on an overly optimistic investment rate assumption of 7½%. 

The three ballot measures all have fatal flaws that will make it difficult for them to obtain the approval of two-thirds of the voters.  They are also the beginning of an onslaught of new taxes (including DWP, stormwater, and streets and sidewalks) that will have the cumulative impact of raising our taxes by at least $1.5 billion.  This is the equivalent of a 30% increase in our real estate taxes or a 3% increase in our sales tax to 12%. 

City Hall will put on a full court press to convince us to approve these taxes.  But City Hall’s reputation for neglecting our streets, sidewalks, and parks; for not respecting our quality of life; for selling out to the real estate and billboard industries; for its kowtowing to the City’s civilian unions; and for its unwillingness to really balance the budget will doom these ballot measures to failure. 

Who are the fools now? 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--On Thursday morning, the Rules Committee of the City Council released its recommendations for the reform of our Department of Water and Power.  This 2,300 word document addressed three areas of reform:  1) a more independent Board of Commissioners designed to limit undue interference and meddling by the Mayor and the City Council, 2) more efficient contracting and procurement policies that would free management from overly burdensome overhead, bureaucracy, and red tape, and 3) the establishment of a DWP Human Resources Department, free from the City’s civil service requirements, that would allow for hiring flexibility. 

The recommendations are a constructive start, but need to be refined over the next three weeks if the measure to reform the Department is to be placed on the November 8 ballot for our approval.  

One recommendation of the Rules Committee would require the Department to develop a “four year strategic investment and revenue plan (the “Plan”) for approval by the City Council and the Mayor.”  This would also include a robust discussion on our water and power rates.  While this planning process would give the City Council more authority over the DWP, it would also provide the Board and the management greater operational and financial flexibility as long as they stayed within the Plan’s guidelines. 

[Note: The City Council should take its own advice and develop a multiyear strategic, operational, and financial plan for our City!] 

Once the Plan is approved, the Board of Commissioners, the General Manager, and her management team should be given considerable authority to operate the Department without undue interference and meddling from the City Council and the Mayor.  This would include the elimination of the burdensome requirement that the Board and the Department clear agenda items with the Mayor’s office. 

The Rules Committee recommended that the seven part time commissioners (an increase from the current level of five part time commissioners) serve three year staggered terms.  But three years does not allow Commissioners enough time to learn the intricacies this $5 billion a year enterprise and would deprive the Board of important institutional and industry knowledge.  Rather, the term should be five years as outlined in Councilmember Felipe Fuentes’ January 22 motion that kicked off the discussion of the reform of our Department of Water and Power.  

The Rules Committee recommended that Commissioners could be removed by the Mayor with the concurrence of the Council or by a vote of 75% of the Council.  To the contrary, removal should be only for cause and not at the discretion of our elected officials. 

The recommendations appear to address the General Manager’s request that the Department be granted more freedom in contracting and procurement by amending the City Charter to allow the Department to enter into selected power contracts, leases, and design build arrangements with the approval of the Board of Commissioners, bypassing the need for a time consuming ordinances approved by the slow moving City Council. 

The biggest disappointment is that the Rules Committee was not able to follow through on Fuentes’ motion to “authorize the Department to oversee its own hiring functions and remove the Department from its obligation to follow civil service rules.”   While reform was endorsed by the Union Bo$$ d’Arcy’s IBEW Local 18 (a scary thought to some), this motion ran into a buzz saw as the leaders of the City’s civilian unions were vehemently opposed to the Department establishing its own Human Resources Department, free from civil service.  Rather, they are demanding that the City “meet and confer” which will allow the City unions to demand concessions from the Department in return for their approval.  

This collective bargaining may result in an impasse that will most likely result in litigation if the City Council has the gumption to take the side of the Ratepayers and pursue the establishment of a Human Resources Department that reports to the management of DWP.  

According to insiders, this is a continuation of the bad blood between the City’s civilian unions and IBEW Union Bo$$ d’Arcy as the civilian unions have contract envy and resent d’Arcy’s justified opposition to the 2009 Early Retirement Incentive Program that allowed 2,400 senior City employees to retire early at a cost of over $300 million to the City (and its taxpayers). 

In the meantime, the Rules Committee should recommend that the City’s Personnel Department devote considerable resources to DWP and establish an fully staffed office at DWP to serve the Department’s needs, similar to the successful arrangement with the City Attorney.  Furthermore, the Department should be allowed to have 10% of its work force be exempt from civil service so that it has the flexibility to hire staff to fill positions in IT, customer service, purchasing, training, and other important departments. 

The Rules Committee has conducted an open and transparent process, taking input from many constituencies. This compares to the process with Measure B in 2009 (Mayor Villaraigosa’s ill-conceived solar plan) and Proposition A in 2013 (the permanent half cent increase in our sales tax).  Both were rejected by the voters. 

We have two to three weeks to rework and refine the Rules Committee’s recommendations, during which time we need continued transparency and flexibility.

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

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LA WATCHDOG--If we are to hold the senior management of our Department of Water and Power accountable to the Ratepayers, the City Council, and the Mayor for the efficient operation of this complex, asset-intensive $5 billion a year enterprise that is transitioning its power and water systems to meet overly aggressive environmental mandates, then the management team must have the flexibility and authority to make operational decisions without undue interference from the City Council, the Mayor, the leadership of the City’s unions, and other self-serving special interest organizations. 

There are two operational reforms that will allow DWP to be more nimble and efficient.     

The first operational reform would allow DWP to establish its own Human Resources Department to oversee its 9,000 employees, allowing the Department greater flexibility by removing its reliance on the City’s slow moving, overly bureaucratic Personnel Department and its burdensome civil service rules and regulations.  This would result in increased accountability as Human Resources would report to DWP’s General Manager, unlike the current situation where the Personnel Department is not accountable to DWP management. 

Furthermore, the personnel and hiring policies needed for the successful operation of the nation’s largest municipally owned utility are significantly different than those of the City given the engineering background and specialized skills required by the Water and Power Systems. 

The second operational reform would permit the management greater discretion in its procurement and contracting process, eliminating time consuming bureaucratic delays as contracts work their way through the DWP and the City’s cumbersome bureaucracy.  This reform would eliminate the Mayor’s micromanagement of operational contracts and increase the contracting authority of the General Manager to more realistic levels of $5 to $15 million depending on the type of contract. 

Over the last month, City Council President Herb Wesson and his Rules Committee have held at least four open meetings discussing the reform of our Department of Water and Power, including unprecedented evening meetings in the Valley and South Los Angeles, where numerous people and organizations have had a chance to air their opinions and recommendations and engage in discussions with the Council Members.  (Thank you, Herb.)  But we have yet to see any Committee action or instructions to the City Attorney which will leave us with very little time to review, analyze, and comment on the proposed ballot measure. 

There are also the issues involving the role and independence of the Board of Commissioners, the potentially illegal 8% Transfer Fee from the Power System which supplied the City with $267 million this year, and the impact on the Ratepayers of efforts to have DWP subsidize the operations of various governmental entities (LAUSD and Recreation and Parks) and even greater environmental mandates. 

While these financial and governance issues are very important, they should not overshadow the need to reform the Department’s Human Resources function and the Contracting and Procurement policies so that the Department may operate more efficiently and we, in good faith, can hold the General Manager and the rest of her management team responsible for their management decisions.

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw

LA WATCHDOG--The reform and restructuring of the governance and operations of the our Department of Water and Power is intended to make our utility more nimble and efficient so that it is better able to address the increasing complex operational, organizational, technological, management, financial, and regulatory challenges it faces and will continue to face in a rapidly changing and increasingly complex environment.  At the same time, our engineering focused DWP must earn the trust, confidence, and respect of its 1.5 million Ratepayers by developing into a more customer centric and efficient enterprise.  

There are three areas of reform that have been discussed at multiple meetings throughout the City: 1) a more independent Board of Commissioners designed to limit the interference from the City Council and the Mayor, 2) improved contracting and procurement policies to eliminate overly burdensome overhead and layers of bureaucracy and red tape, and 3) the establishment of a DWP Human Resources Department for the Department’s 9,000 employees, separate and distinct from the City’s slow moving Personnel Department and City’s cumbersome civil service regulations. 

While there has been considerable discussion about the three areas of reform, there has been no meaningful discussion of the Transfer Fee/Tax because of the class action litigation alleging that this fee/tax is illegal because it violates Proposition 26 (the Supermajority Vote to Pass new Taxes and Fees) that was approved by California voters in 2010.  However, Councilmember Felipe Fuentes suggested that the Transfer Fee/Tax, which provided $267 million to the City’s coffers this year, be capped at its 2010 level of $221 million.  

On the other hand, a better idea would be to ask the voters to phase out the Transfer Fee/Tax over a 10 year period and waive the repayment of the $1.5 billion of illegal transfers made since 2011.  But to win over the voters, City Hall must be willing to reform its budget policies by agreeing to place on the ballot for our approval or rejection a charter amendment that will require the City to Live Within Its Means.** 

There also appears to an appetite by City Hall to hit up the Ratepayers to support other initiatives that are not part of the core mission of the Department. 

At Tuesday’s meeting of the City Council, Councilman Mitch O’Farrell, Chair of the Arts, Parks, and River Committee, proposed that DWP (read Ratepayers) subsidize the utility bill of the Department of Recreation and Parks to the tune of $20 million a year.  Mayor Garcetti also proposed to lower the rates for the Los Angeles Unified School District, DWP’s largest customer. 

While Recreation and Parks and LAUSD provide important public services, the Ratepayers should not be required to foot a portion of their utility bill.  This is not our responsibility.  Rather, these poorly managed government entities should feel the pain of the full impact of the recent $1 billion rate increase, just as we Ratepayers are forced to do. 

There are also others on the City Council and in the environmental community who are pushing the One Water agenda which would essentially put Ratepayers on the hook for financing a good chunk of the City’s $8 billion stormwater and urban runoff plan over the next 20 years.   This would deprive Angelenos of the right to approve or reject this massive project.   

There are others who want to expand the Department’s green agenda for the Power System without giving any consideration to the impact on the Ratepayers.  As it is, we are going to be hit with a $1 billion rate increase over the next 5 years plus another $150 million in new DWP related taxes.    

City Council President Herb Wesson has taken DWP reform under his wing, conducting a number of open meetings of the Rules Committee which he chairs.  He has also indicated that he intends to meet with labor and environmental groups, hopefully in open and transparent sessions where the public will be able to listen in and participate.  

We have yet to see any definitive ballot language.  This is disturbing since the ballot language needs to be determined within a month in order to be on the November ballot.  And as we all know, the devil is in the details, especially when it involves the politicians and their cronies who occupy City Hall. 

The reform and restructure of our Department of Water and Power will be a tough sell to the voters who do not trust or respect DWP and City Hall.  Rather than trying to do too much which will only complicate any ballot measure, the City Council and the Mayor (who has yet to come forward with any definitive thoughts) are strongly advised to follow the old KISS adage: Keep It Simple, Stupid.

+++

** The “Live Within Its Means” charter amendment, if approved by the voters, will require the City to develop and adhere to a Five Year Financial Plan; to pass two year balanced budgets based on Generally Accepted Accounting Principles; to benchmark the efficiency of its operations; to fully fund its pension plans within twenty years; to implement a twenty year plan to repair and maintain our streets, sidewalks, and the rest of our infrastructure; and to establish a fully funded Office of Transparency and Accountability to oversee the City’s finances and operations.

+++

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw

 

LA WATCHDOG & POLL--More than likely, our Los Angeles Times will have a new owner as Gannett, the publisher of USA Today and the largest newspaper publisher in the country, has offered to buy Tribune, the owner of The Times and the Chicago Tribune, in an all cash deal for $15 a share, double the price of Tribune’s stock prior to the publication of Gannett’s initial offer of $12.25 a share on April 25.  

While Tribune’s newly installed, self-centered management and clueless directors may resist this very generous offer, most investors will be standing in line to sell their shares at this bonkers price.  At the same time, while Gannett is not an eleemosynary institution, our Los Angeles Times will be better off being free of Chicago based Tribune which has mismanaged The Times ever since Tribune acquired Times Mirror Corporation, the owner of our hometown paper, in 2000 for over $8 billion (including debt). 

It has been downhill ever since for The Times as the ivory tower know-it-alls from Chicago, armed with their MBAs and little else, dictated policy and cut costs, resulting in a LA Times that lost touch with Angelenos.  In 2007, the financial wizards that were running Tribune concocted a complicated leveraged buyout deal led by Sam Zell, a real estate magnate with a questionable reputation, which left Tribune with $13 billion in debt.  A year later, in December of 2008, an overleveraged Tribune filed for bankruptcy.  

Tribune emerged from a contentious bankruptcy in December of 2012, controlled by vulture capitalists whose wheeling and dealing resulted in the August of 2014 tax free spinoff of the Tribune Publishing, a newspaper company with dim prospects and almost $400 million in debt, from Tribune Media, a very profitable broadcasting company.  

At around the same time, Rupert Murdoch’s News Corporation and Gannett spun off their newspaper assets into publicly traded, debt free companies that were better able to transition from print publications to a more competitive digital world.  

About the only good news was that Tribune appointed Austin Beutner as Publisher of The Times in August of 2014.  His vision was local, to focus on the City, the County, and Southern California which included the synergistic acquisition of the San Diego Union Tribune.  But Beutner was canned in September of 2015 by Jack Griffin, Tribune’s power hungry CEO, who was unwilling to invest in local content or in developing a strong digital product. 

Beutner and other Angelenos made a run at returning The Times to local ownership, but they were rebuffed by Griffin and the Tribune Board of Directors. 

The LA Times needs a new owner, do you agree?
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In February, 2016, Jack Griffin and the Tribune sold 5.2 million shares to Michael Ferro, a Chicago internet entrepreneur, for $8.50 a share.  This $44 million investment resulted in Ferro owning 16% of the Company.  Less than three weeks later, he canned Jack Griffin and took control of Tribune.  

[Note: If Ferro sells his shares at $15, he will have a profit of $34 million, a return on investment of 75% in less than 6 months.] 

Since Ferro seized control of Tribune, he attended the Oscars, snagging tickets meant for the news staff, and blew the synergistic acquisitions of the Orange County Register and the Press Enterprise in Riverside because he was the smartest guy in the room and was unwilling to listen to experienced advisors who knew how to navigate the antitrust issues.  

This transaction makes sense for Gannett, even if it is a high price given the poor business outlook for the newspaper industry.  Gannett, a publisher of daily newspapers for the most part in small and midsized markets, will acquire the papers in LA and Chicago, two of the three largest markets in the country, as well as papers serving Orlando and Fort Lauderdale, Baltimore, and Hartford.  

We need strong local coverage, because without it, “we’re gonna have corruption at a level we never experienced,” according to Bob Schieffer, the trusted TV journalist who was the moderator of Face the Nation (CBS) for 23 years.  And we all know that we cannot trust City Hall whose occupiers and their cronies are more than willing to sell us out to the real estate speculators and developers and the leaders of the City’s unions.  

We need to make a deal with Gannett, that in return for subscribing to the paper and its web site and supporting its advertisers, it will provide us with strong local coverage.  This support may also involve setting up charitable entities to sponsor journalists covering the City and its proprietary departments (DWP, LAX, and the Port), the County, LAUSD, our failing infrastructure, and underfunded pension plans. 

We need a vibrant Los Angeles Times, one with an institutional memory, properly staffed with inquiring journalists who are willing to spend the time protecting our interests from predatory politicians who have no respect for our wallets.  At the same time, the Times needs our support and our money. 

While we may not agree with The Times on all issues, the paper has helped defeat ballot measures that would have nicked us for billions.  These include its opposition to Measure B, Mayor Villaraigosa’s 2009 solar plan that was a payback for IBEW Union Bo$$ d’Arcy’s generous campaign contributions, or the ill-conceived effort in 2013 to increase our sales tax by a half cent to a mind boggling 9½%. 

Put another way, a few bucks here and there for The Times will save us billions if the Mayor, City Hall, and the newly constituted Board of Supervisors were to have its way.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw

LA WATCHDOG--Our Mayor’s pet project is the revitalization of an 11 mile segment of the Los Angeles River, stretching from Griffith Park to Downtown Los Angeles.  And what is not to like about new open recreational space in the park poor City of Los Angeles other than the not so minor fact that our cash strapped City needs to pony up more than $1 billion over the next ten to twenty years to pay for its share of this $1.4 billion river revitalization project. 

This is considerably more than the $500 million that was originally advertised as our City’s share.  Unfortunately, a more detailed analysis showed the total cost ballooning from an estimated $1 billion to $1.4 billion at the same time that the US Army Corps of Engineers cut its contribution from $500 million to $200 to $300 million.

At this time, our City and its leaders do not have a plan to finance this the ambitious infrastructure project.  Rather, it is scrounging for money, financing bits and pieces from here and there.

For example, buried in the City’s 440 page budget, there is one mention – a line item - for the $60 million purchase of the Taylor Yard G2 parcel that is owned by the Union Pacific Railroad Company.  This river fronting, 40 acre rectangular parcel that lies between the River and the State’s Rio de Los Angeles Park in Cypress Park is considered vital to the rehabilitation of the River.

While this purchase will be financed with debt (and possibly with the proceeds of bond offerings or State grants), is this the best use of the City’s scarce financial resources or debt capacity?  Or should this money be used to finance the repair of our streets and sidewalks, the redo of Pershing Square, the expansion of the Convention Center, or housing for the homeless?

The City has also managed to convince the Metropolitan Transit Authority to set aside $425 million for a 51 mile bike path along the length of the River, from its headwaters in Canoga Park all the way to Long Beach.  But this $8 million a mile earmark for the Mayor’s pet project is over the top excessive, leading one to speculate how many other pet projects will be financed by Metro’s proposed half cent increase in our sales tax to 9½%.    

The City is also considering the establishment of an Enhanced Infrastructure Financing District (“EFID”) that will allow the City to skim off its portion of the increased tax revenues from a boat load of high end real estate developments that border the River and the surrounding communities, much like the old Community Redevelopment Agency that was viewed by many as a corrupt political organization. These EFID funds will then be reinvested in the local community, most likely for streets and transportation projects to serve the more densely populated area that is not served by mass transit. 

But these non-affordable developments are not subject to a long range plan that respects the existing communities and neighborhoods.  Rather, it is the Wild West, a land grab by rapacious real estate speculators. 

Before the City proceeds with the $60 purchase and problematic remediation of the 40 acre Taylor Yard G2 parcel from the Union Pacific, the Mayor and the City Council need to have an open and transparent conversation about whether this expenditure is the best use of our cash strapped City’s scarce resources. 

The City also needs to devote the resources to develop a well thought out, long range plan for the Los Angeles River.  This includes identifying the sources for over $1 billion in cash needed to complete this important initiative.  Most importantly, this plan must respect the surrounding communities who are well aware of the impacts of unplanned development throughout the City where campaign funding real estate speculators have successfully manipulated the Mayor and the members of the City Council.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw

LA WATCHDOG--At its meeting on Tuesday, May 3, the Los Angeles County Board of Supervisors instructed its Department of Parks and Recreation “to report back to the Board on June 21, 2016 with a final draft of the Park and Recreation Funding Measure so that the Board may consider its adoption and placement on the November 8 ballot.”  

But the likelihood of this proposed ballot measure that would raise between $200 and $300 million to fund the repair, operation, and creation of parks throughout the County being approved by the two-thirds of the voters is unlikely unless it undergoes major revisions.  And even then, it will a tough slog given all the competing tax measures that are expected to be on the November and March ballots. 

The Supervisors are considering a parcel tax of 3 to 5 cents on each of the 6.4 billion square feet of developed real estate in the County.  At 3 cents a square foot, this would produce revenues of almost $200 million a year for the Los Angeles County Regional Parks and Open Space District, a jump of 150% from the $80 million received in 2015.  This 3 cent levy would also increase based on the Consumer Price Index while the total haul would benefit from the growth in the developed real estate.

Over the 35 year life of this tax, the total revenue is projected to be in excess of $15 billion. 

But slamming the taxpayers with a 150% increase in the parks parcel tax is not going to be very popular with the voting public.  

One alternative would be to have the County put its money where its mouth is as the Supervisors have been very eloquent about the vital importance of parks and open space.  This plan will involve a hefty 25% bump in the parcel tax from $80 million to $100 million (1.5 cents per square foot or $42 for each of the 2.4 million parcels) accompanied by an annual $100 million contribution from the County’s $22 billion General Fund to its Regional Parks and Open Space District.  At the same time, the County will also be required to allocate adequate resources to its Department of Parks and Recreation. 

Another hot button issue is the allocation of this pot of gold by the Supervisors.  According to the carefully orchestrated Needs Assessment Report, a disproportionate amount of the money will be directed to “under parked’ urban areas of the County.  However, this will result in pushback from suburban voters and open space advocates who believe they will not be getting their fair share.  This may result in many voters rejecting this ballot measure. 

As such, the Supervisors will need to disclose the allocation of funds in the ballot measure that balances the goals of urban dwellers, suburban taxpayers, and open space advocates.  

The Supervisors will also need to provide independent oversight of the Regional Park and Open Space District and the Department of Parks and Recreation by establishing a Citizens Oversight Advisory Board that has the resources to conduct an objective, critical, and constructive review and analysis of the operations, finances, and management of these two entities.  This is critically important now that the fiscally prudent Zev Yaroslavsky and Gloria Molina have been replaced by two Supervisors not necessary known to be respectful of our wallets.   

This ballot measure already starts out with one strike against it as two-thirds of the voters did not approve Proposition P, a modest $50 million parks parcel tax to replace an expiring parcel tax, in November of 2014.  

This ballot measure has also received a second strike from “voter fatigue” as our tolerance will be exhausted by City and County tax initiatives totaling $1.8 billion over the next year or two. Think Metro, Stormwater, Homelessness (both City and County), Streets and Sidewalks, DWP, and Parks.  And this not include any new State taxes.  

These assaults on our wallets are the equivalent of a 37% hike in our real estate taxes or a three cent bump in our sales tax to 12%. 

If the Supervisors decide to proceed with this Parks Parcel Tax, it must be carefully orchestrated where the County limits the impact on property owners and steps up to the plate and contributes 50% of the needed funds.  At the same time, the City and the County will need to disclose their long term plans to increase our taxes and demonstrate that they are using our money efficiently and in our best interests.  

Otherwise, it’s three strikes and you’re out, game over for not only the Parks Parcel Tax, but for Metro’s proposed half cent increase in our sales tax that will cost us $120 billion over the next 40 years.

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw

 

LA WATCHDOG--On Tuesday, the Los Angeles County Board of Supervisors will discuss a $200 to $300 million parcel tax to fund the repair, operation, and creation of parks throughout the County.

LA WATCHDOG--While the combined budgets for the City Council and the Mayor are projected to be $100 million next year, will Paul Krekorian, the Chair of the City Council’s Budget and Finance Committee, conduct an open and transparent discussion of the individual line items of each budget so that Angelenos will have a better understanding as to how and where their money is being spent? 

For example, there has not been an open and transparent discussion about the Councilmembers’ discretionary funds that are reputed to haul in over $20 million a year, money that could be used to repair our streets or fund a portion of the City’s homeless initiative.  

Sources of cash for these slush funds include the Street Furniture Fund (advertising revenues from bus shelters), Oil Pipeline Franchise Fees, the Real Property Trust Fund (50% of the sale of surplus property in a Council District), and AB 1290 Funds (tax increment funds associated with the dissolution of the corrupt Community Redevelopment Agency).  There are also fees from Lopez Canyon Landfill, Sunshine Canyon Landfill, and the Central LA Recycling and Transfer Station that never see the light of day. 

Where the discretionary cash goes is also not very transparent unless you are willing to hire a team of forensic accountants.  Reportedly, Councilmembers use a portion of these slush funds to fund members of their bloated staffs. 

There are discrepancies between the number of positions listed in the budget for the Mayor (94) and the City Council (108) and internal rosters, telephone directories, and web sites which indicate over 450 employees.  Naturally, this gives rise to the question of how are all these staffers being paid and what is the source of the cash to fund the extra salaries, pensions, and benefits.  

This headcount does not include numerous City employees who are on “loan” to the Mayor’s office to work on special projects and initiatives or the many employees throughout the City who are on call to answer the many time consuming inquiries from the offices of the Mayor and the Councilmembers. 

The Mayor’s budget also includes a line item of $36 million for Non-Departmental Allocations that comprises two-thirds of his $54 million fully loaded budget.  But there are no details about how and where this money will be spent in the over 1,700 pages covering the budget.  

Nor is there any information about how last year’s $38 million of Non-Departmental Allocations was disbursed.  

The City Council has also budgeted $6 million for Non-Departmental Allocations.  While this represents only an eighth of its $47 million budget, again there is no information on where this cash is going.  

Tellingly, the budgets for the City Council and the Mayor were the only departments that did not have the Supporting Data that outlines the distribution of 2016-17 total cost of their programs.  This includes pensions and human resource benefits (equal 30% of total salaries for the combined departments) and other departmental expenses.  

The unwillingness of the Budget and Finance Committee to demand transparency from the Mayor and its own City Council is justification as to why the City should implement the recommendation of the LA 2020 Commission to establish an independent Office of Transparency and Accountability to oversee the finances of our cash strapped City, whose elected officials appear to be allergic to the sunshine demanded by skeptical Angelenos. 

●●●

The Budget and Finance Committee should also consider another recommendation of the LA 2020 Commission by creating a Committee on Retirement Security to review and analyze the City’s two underfunded pension plans, especially in light of the projected $101 million deficit in 2020 caused by an increase of over $180 million in pension contributions, wiping out the $68 million surplus that was projected last year. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw

 

LA WATCHDOG--Ever since Mayor Villaraigosa and the Eric Garcetti led City Council eviscerated the budget of our Department of Recreation and Parks in 2010 to help balance the City’s out of control budget, Rec & Parks has been on a mad dash for cash, willing to sell its soul for a few extra bucks, the hell with the neighboring communities.  

Under the new “full cost recovery” program that targeted the Recreation and Parks budget, City Hall slammed the Department with $38 million in chargebacks, consisting primarily of costs for water and power ($16 million) and General Fund expenses ($17.5 million).  This ding represented more than a quarter of the Department’s appropriation in the 2011 budget.   

Despite the healthy increase in City revenues, this policy has only gotten worse as chargebacks for the upcoming year have ballooned to $60 million, representing more than a third of its General Fund revenue. 

As a result, our parks are in disrepair and its programs gutted as the Department has eliminated more than a quarter of its worker bees. 

While the commercialization of our parks is understandable, it has not been well received by Angelenos who believe our parks should be free of billboards, signage, and other forms of intrusive advertising and corporate sponsorship.  And this opposition has only been fueled by the ham handed Department managers and Commissioners who have been less than transparent with the public, especially with those that live in close proximity to the parks. 

A prime example is the near riot by Hollywood residents over a plan to commercialize Runyon Park by allowing Pink + Dolphin, a streetwear company, to place its controversial logo on a newly constructed basketball court in exchange for $250,000.  This situation was further aggravated by Rec & Parks failure to engage the Hollywood community. 

As a result of the furious backlash, Councilmember David Ryu called a halt to this deal, at least for the time being.   

We are also seeing opposition to AngelFest, a new three day “family friendly music, food and cultural festival” that may be held in October in the Sepulveda Basin Recreation Area.  And while the Department will take in an estimated $1 million over the next three years that can be reinvested in the local parks, the Department failed to engage the environmental and conservation communities who are concerned about the adverse impact on the park and its wildlife. 

The Department also stirred up a hornet’s nest when it bungled the proposal to have Live Nation and Anschutz Entertainment replace Nederlander as the operator of the Greek Theatre in Griffin Park.  As a result, Rec & Parks will “self-manage” the venue, a scary thought given the City’s lack of management expertise and the need for the cash strapped City to invest $20 to $40 million to upgrade the aging venue. 

We are also seeing controversies where the residents of Beachwood Canyon, Hollywood Land, Lake Hollywood Estates, and the Hollywood Dells are in open revolt against the Department because of the traffic and safety issues resulting from tourists flocking to see the Hollywood sign. 

We also have issues involving Elysian Park and Councilman Gil Cedillo’s efforts to raid a $12.5 million fund set up by the Department of Water and Power to mitigate the impact of a covered reservoir. 

Now is the time to reform our Department of Recreation and Parks. 

The first step is to establish a better relationship with the public.  This would include a Memorandum of Understanding with the Neighborhood Councils similar to the successful arrangement with the Department of Water and Power.  This would also involve considerable outreach to the public, something the Department has not done with any consistency. 

At the same time, the Department needs to develop a long range operational and financial plan that meets the goals of all Angelenos. 

Once the Department gains the trust and confidence of the public, the City should place a measure on the ballot that would increase the charter mandated appropriation by $75 to $100 million over a four year period.  At the same time, the Department would assume responsibility for all its direct and indirect expenses. 

Importantly, this is not be a new tax, but would require the City to allocate scarce funds to the Department. 

This is similar to Measure L, the March 2011 charter amendment that was approved by 63% of the voters that increased the mandated funding for the Library Department by over 70%. 

The Department of Recreation and Parks has been the center of increasing controversy, in part because of its lack of funding and the failure of its management to develop an open and transparent relationship with the public. 

But now is the time for the Department to develop and implement its good neighbor plan. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw 

LA WATDHDOG--On Wednesday, Mayor Eric Garcetti characterized his $5.6 billion budget for the upcoming fiscal year as a “strong spending plan that is balanced and responsible, with a record investment of $138 million to tackle the City’s homelessness crisis.” 

But “spending” is the operative word as the cumulative deficit over the next four years is expected to exceed $300 million as the growth in expenditures exceeds that of revenues.  This compares to last year’s projection of a four year cumulative deficit of “only” $37 million. 

This change in fortune is exhibited by comparing the outcomes for the fiscal year ending June 30, 2020.  The current April 2016 outlook shows red ink of $101 million in 2020, up from last year’s projected surplus of $68 million, a swing of $169 million.  Underlying this differential is a less than transparent $263 million bump in expenditures caused by increases in pension contributions, employee compensation, and human resource benefits, offset by a modest $95 million growth in revenues. 

Unfortunately, these projections do not take into account the money that is needed to repair and maintain our streets, our parks and trees, the City’s building and facilities, and the rest of our deteriorating infrastructure. 

The City is also short changing its two seriously underfunded pension plans by more than $400 million a year by relying on the bogus assumption that its two pension plans will earn 7½% on its investment portfolio.  This compares to an investment rate assumption of 6½% that is recommended by Warren Buffet and other savvy investors.  

Garcetti’s budget did not include a long term financial plan to attack the homeless crisis, but indicated that he will propose a new tax to provide a dedicated source of funding for this initiative.  

But before the Mayor and the City Council place a homeless tax measure on the ballot for our approval or rejection, they need to develop a comprehensive game plan where the City collaborates with the County and takes into consideration the County’s efforts to fund its homeless initiative.  It will also need to establish a management team with clear lines of authority to offset the interference by grandstanding politicians.  

The City should also take into consideration an array of other taxes that are being considered by both the County and the City.  These include the November ballot measure to increase our sales tax by a half cent to fund Metro’s transportation projects, a County parcel tax to fund its parks, a County storm water tax, and a City tax to finance the repair and maintenance of our streets and sidewalks.  

Along with the recent increase in our taxes associated with the Department of Water and Power rate increase, these hits to our wallets would be the equivalent of a three cent increase in our sales tax to 12% or a 33% increase in our property taxes.  These do not include any new State taxes.    

Ouch! 

The Budget and Finance Committee will begin its public consideration of the Mayor’s budget on Wednesday, April 27.  This will involve discussions with all of the General Managers of the City’s departments.  But the Budget and Finance Committee would be wise to seriously consider the recommendations of LA 2020 Commission involving the establishment of an Office of Transparency and Accountability to oversee the finances of our cash strapped City, the creation of a Committee on Retirement Security to review the City’s pension plans that are over $13 billion in the red, and the annual preparation of a three year budget so that we and the Council members have a better understanding of the long term consequences of City policies and legislation. 

Unfortunately, Budget and Finance Chair Paul Krekorian and City Council President Herb Wesson will once again refuse to consider the excellent, common sense recommendations of the LA 2020 Commission.  Nor will they consider cutting back on the future expenses that contribute to the projected budget deficit of $101 million in 2020. 

But then again, if the City Council does not get its financial act cleaned up, we do not have to approve any tax increases.  

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.)

-cw 

LA WATCHDOG--On Thursday, Mayor Eric Garcetti delivered his State of the City address (photo above) to an enthusiastic City Hall centric audience at the headquarters of Norabachi Corporation, a growing Harbor City manufacturer of LED lighting for industrial and commercial applications.  On Wednesday, April 20, he will present his proposed budget for the year beginning July 1, 2016. 

LA WATCHDOG--City Council President Herb Wesson is hell bent to place on the November ballot a measure to reform and restructure our Department of Water and Power so that it will be a more “nimble and efficient” enterprise that will grant management the flexibility to meet the ever increasing operating, organizational, and financial challenges in our rapidly changing world.  

LA WATCHDOG--“God gave us rain and you figured out how to tax it.” 

The current Board of Supervisors of the County of Los Angeles is considering developing its own Stormwater Plan to capture rainwater, stormwater, and urban runoff in effort to curb pollution in the Santa Monica Bay and to develop new sources of water to recharge our groundwater supplies. 

LA WATCHDOG--The Department of Water and Power will ship $267 million of our hard earned cash to City’s coffers this fiscal year pursuant to the 8% Transfer Fee. Along with the 10% City Utility Tax of $344 million, the City’s total haul will be over $610 million, an amount equal to 16% of the Power System’s revenues. 

LA WATCHDOG--In late February, the City indicated that it was investigating a ballot measure that would authorize a new tax, fee, or bond offering to fund the City’s homeless plans that are estimated to cost $1.85 billion over the next ten years. 

LA WATCHDOG--You need be a skilled forensic accountant with a large, well trained staff to even begin to understand the shenanigans associated with the discretionary slush funds controlled by the fifteen members of the City Council.  You may even need a high priced lawyer to haul the Council Members into court to have them honor your request made pursuant to the California Public Records Act. 

LA WATCHDOG--In 2007, the Bureau of Street Services estimated that the cost to repair our 4,600 miles of broken sidewalks was in the range of $1.2 billion. However, since that time, our City’s “leaders” have made very little, if any, progress in addressing the sorry state of our 10,750 miles of sidewalks that comprise over 2% of the City’s land mass.    

LA WATCHDOG--Mayor Eric Garcetti, City Council President Herb Wesson, Budget Committee Chair Paul Krekorian, (photo above) and Personnel Committee Chair Paul Koretz all have their heads buried in the sand, ignoring the implications of a $15 billion unfunded pension liability, $1.5 billion in annual pension contributions consuming 30% of the General Fund, and a negative net worth in the its Governmental Accounts. 

LA WATCHDOG--On April 9, 2014, almost two years ago, the Los Angeles 2020 Commission recommended unanimously that our City create an independent Office of Transparency and Accountability to review and analyze the City’s budget and finances and the efficiency of its operations.  But this recommendation, along with other constructive, easy to implement measures contained in the LA 2020 report, A Time for Action, was buried in the bowels of City Hall, never to be heard of again. 

LA WATCHDOG--The Los Angeles County Metropolitan Transportation Authority (“Metro”), Mayor Eric Garcetti, and the transportation lobby have started their full court press on the voters of Los Angeles County to approve a new 40 year, half cent increase in our sales tax to a 9½%, one of the highest rates in the country. 

LA WATCHDOG--A simple investigation into how much it would cost to implement Councilmember Mitch O’Farrell’s motion to establish Indigenous Peoples Day as a legal holiday in the City of Los Angeles revealed that the average city employee’s fully loaded compensation is in excess of $165,000 a year for each of the City’s 31,000 civilian and sworn employees. 

LA WATCHDOG--On January 22, Councilman Felipe Fuentes introduced a motion calling for a 2016 ballot measure to reform and to restructure our Department of Water and Power by creating a full time, professional Board of Commissioners, eliminating civil service for the Department, and placing a cap on the Transfer Fee at the pre Proposition 26 level of $221 million.  

LA WATCHDOG--NIMBY is a pejorative label used by real estate speculators when they are having a hissy fit about local residents fighting their oversized, out of character, luxury developments that will create even more traffic congestion and gridlock, adversely impacting small mom and pop businesses, affordable housing, and the quality of life of the renters and homeowners in the surrounding communities.  

LA WATCHDOG--Our Department of Water and Power cannot get out of the spotlight these days as it has proposed to raise our rates by more than $1 billion over the next five years.  This estimated 22% bump in our rates will also be accompanied by about a $175 to $200 million tax increase based on the less than transparent 8% Transfer Fee and the City Utility Tax. 

There have also been calls to reform and restructure the Department by Council Felipe Fuentes, Mayor Eric Garcetti, and others, including Mickey Kantor and Austin Beutner, the co-chairman of the LA 2020 Commission which called for an independent Los Angeles Utility Rate Commission almost two years ago to oversee the Department and its rates, finances, operations, and management. 

There are three areas of reform.  

The first calls for a more independent Board of Commissioners, free - for the most part - from the counterproductive political meddling by the City Council and Mayor.  This Board would be supported by a more robust Ratepayer Advocate.  However, there are some significant differences between the Fuentes and Garcetti proposals that need to be reconciled by June 17 so that this reform may be placed on the November ballot. 

The second reform would establish an independent DWP Personnel Department, free from the stifling City Hall bureaucracy and its restrictive civil service rules.  It may also allow for a more flexible contracting process.  

The third and most controversial reform involves the taxes that are paid by the Ratepayers.  The two taxes consist of the City Utility Tax and the 8% Transfer Fee that together are expected to contribute about $640 million to the City’s coffers this year.  However, there is a high probability that the 8% Transfer Fee will be tossed out by the courts.  As a result, Fuentes is proposing lowering the Transfer Fee to $220 million from its current level of $267 million, subject to the approval of the voters. 

On the other hand, Kantor and Beutner are proposing to freeze the payments to City Hall at its current level of $640 million which would essentially result in a lowering of the Transfer Fee over time. 

But the rate increase and the three reforms are on a very slow boat as Felipe Fuentes has refused to place these individual matters on the agenda of the Energy and Environment Committee.  Rather, it appears that he wants to delay the process by lumping them all together in a big bundle and hold the rate increases, deemed reasonable by the Ratepayers Advocate, and the two non-monetary reforms hostage to voter approval of the $220 million Transfer Tax.  

However, at a meeting of the Rules Committee last Friday, City Council President Herb Wesson took control of the process and pledged to have “an open and public conversation about making the City’s utility run more efficiently and effectively while ensuring accountability.” But it remains to be seen if this “outreach” will be a dog and pony show, with the City Council trying to sell us on its already drafted ballot measure that was created behind closed doors by Fuentes with help from IBEW Union Bo$$ d’Arcy.  Or will the City Council and the Mayor enter into a real give and take dialogue with the Ratepayers, the Neighborhood Councils, and other interested parties?  

While the increases in our water and power rates are not our idea of a good time, DWP has been open and transparent throughout the process and has made significant concessions, including lowering its rate request and agreeing to measureable goals that are subject to review and analysis by a more robust Ratepayers Advocate.  

As such, the Energy and Environment Committee and the City Council should move to approve the rate increases separate and apart from the proposed reforms.  Furthermore, each of the three reforms should be considered separate and distinct and allowed to stand on its own merits. 

Holding the rate increases and the non-monetary reforms hostage to the tax increase will backfire, resulting a lose-lose situation, where already skeptical voters will reject these reforms and tax increase because of their contempt for City Hall.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

LA WATCHDOG--The primary goal of the ballot measure to reform and restructure the governance of our Department of Water and Power is to have the voters of the City of Los Angeles approve a new $221 million DWP Transfer Tax on Ratepayers in the November Presidential election.  

LA WATCHDOG--At the Tuesday morning meeting of the City Council’s Public Safety Committee, Police Chief Charlie Beck told Mitch Englander and his fellow committee members that our Police Department needed to beef up its ranks to 12,500 officers by 2020 to “most effectively protect the City and keep crime down.” 

But there was no discussion about the cost of adding 2,500 officers, not an insignificant issue since the City is anticipating years of red ink as a result of the budget busting contract with the City’s civilian workers. 

Over the next four years, the City is expected to have a cumulative deficit of over $400 million.  This does not include any additional funds to fund the proposed homeless initiative, the hiring of 5,000 new civilian workers as outlined in the new labor contract with the civilian workers (some of which will replace retiring employees), or the repair and maintenance of our lunar cratered streets.  

Assuming that the LAPD could increase the size of the department to 12,500 officers and an all in cost (including pension contributions and healthcare benefits) of $100,000 a year for the new hires, the four year budget deficit would increase by over $600 million, resulting in a $1 billion shortfall over the next four years. 

However, it is highly unlikely that the LAPD will be able to hit the 12,500 officer target by 2020 as many experienced veterans will be retiring.  This is compounded by the LAPD’s difficulty in attracting qualified recruits given its poor reputation relative to other law enforcement agencies.  

The LAPD has the difficult mission of maintaining public safety.  It also has to report to the Police Commission and the City Council who often second guess the Department, relying on their 20-20 hindsight, especially now the crime rate has spiked and there have been some unfortunate killings of civilians. 

The Police Department is also a large, complex organization with almost 14,000 sworn and civilian employees and a budget, including all related costs, of almost $2.6 billion, an amount that may be understated because of all the recent liability claims that have contributed to this year’s budget deficit of almost $100 million.  The department also needs almost $300 million over the next five years to replace old equipment.  

As with any large, complex organization, the most important factor is management and its ability to develop and implement a strategy and communicate with its constituency.  But that seems to be lacking at our Police Department as Chief Charlie Beck is under fire by the Department’s union and many members of the minority communities.  

That includes many voters who remember his threat that a “minimum of 500 officers that patrol our neighborhoods will be laid off and our historically low crime rates may be in danger” unless the voters approved Proposition A, the proposed permanent half cent increase in our sales tax.  Of course, shortly after Proposition A was rejected by 55% of the voters in March of 2013, Mayor Villaraigosa announced that there would be no layoffs. 

The Police Department cannot afford to increase the size of the police force to 12,500 officers unless there is a sizeable tax increase that will most likely be in the range of $500 million.  This equates to a 10% increase in our real estate taxes or a 1% increase in our sales tax.  But Chief Charlie Beck does not have the necessarily credibility with the voters which would result in another failed ballot measure. 

Maybe it is time for Chief Charlie Beck to retire. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

LA WATCHDOG--While the Ratepayers Advocate opined that the five year, 25% increase in our power rates proposed by our Department of Water and Power is “just and reasonable,” the accompanying $160 million increase in our utility taxes that flow to City Hall is not just and reasonable.  Rather, it is continuation of a pattern where Mayor Eric Garcetti, City Council President Herb Wesson, and the rest of City Council treat Ratepayers as an ATM to finance their pet projects and to pay for the $125 million a year in higher labor costs as a result of the new union contract for the City’s civilian employees. 

LA WATCHDOG--On Tuesday, the Los Angeles Unified School District’s Board of Education engaged in some last minute grandstanding by issuing a press release calling for LAUSD to engage in discussions with the Los Angeles City Council because its DWP bill will be increasing by 27%, or $22.4 million, over the next five years.  

LAUSD is also overreaching by requesting that the City provide it with $11 million of services, financed with a portion of the $267 million Transfer Fee from DWP’s Power System to the City’s General Fund.  These services would include paying for street crossing guards near elementary schools, providing free refuse removal, and performing tree trimming services. 

While LAUSD is a very important governmental entity, the Department of Water and Power and its Ratepayers are not allowed to subsidize its operations, a point that was hammered home by a recent court decision involving the City of San Juan Capistrano and its tiered water rates.   

Nevertheless, the Department has worked with LAUSD, explaining on multiple occasions the reasons for the rate increases.  The Department even agreed in September to invest a staggering $43 million of our money in energy efficiency and water conservation projects which are intended to offset the proposed increases in its power and water rates. 

The Energy and Environment Committee can also expect to hear from Recreation and Parks whose utility bill is expected to double over the next five years to $30 million because of the recent court ruling involving San Juan Capistrano, Proposition 218, the cost of service, and why subsidized rates are illegal.  But again, the Department has been working cooperatively with this large customer, investing millions of Ratepayer money in water conservation and energy efficiency projects.  

The Department also has to contend with lame duck Councilman Felipe Fuentes, the Chair of the Energy and Environment Committee.  He is rumored to be considering limiting the rate increase to only three years since the five year proposal will involve rate hearings in 2020, an election year. 

But why is he considering a last minute change when he has known about the five year plan for over a year, especially since he will be leaving the Council in 2017 after only one term? 

Fuentes is also considering holding the much needed rate increases hostage to his plan to reform the governance of the Department.  This would involve the creation of a full time paid Board of Commissioners, a new personnel department free from the City’s civil service rules, and a lower Transfer Fee that would need to be approved by the voters.  

Based on the details in the four page motion (most are only one page), it is probably safe to assume that Fuentes’ proposed ballot measure and the supporting documentation have already been written, most likely ghostwritten under the watchful eye of IBEW Union Bo$$ d’Arcy.  This is a stunt that Fuentes mastered in Sacramento where he was considered “The Worst Legislator in California.” 

But why is Fuentes rushing this already controversial DWP reform plan to the ballot without engaging in a robust and transparent discussion and debate that involves Ratepayer participation?  After all, he needs our votes to approve the necessary charter amendments and $221 million Transfer Fee. 

According to speculation by City Hall insiders, Fuentes is either angling to be a full time, paid Commissioner (would you call that reform!) or a high ranking executive in IBEW Local 18, the DWP’s domineering union, so that he is in line to succeed Union Bo$$ d’Arcy as the union’s highly compensated  Business Manager.  

The issues involving the five year rate increase, deemed “reasonable” by the Ratepayers Advocate in light of the need to repair DWP’s infrastructure and meet unfunded environmental mandates, and its impact on LAUSD, Recreation and Parks, and single family residences deserves a full airing, separate and distinct from Fuentes controversial plan to reform our Department of Water and Power.  

Reform of our Department of Water and Power and its long term implications are too important to be rushed to the ballot. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

LA WATCHDOG--On Saturday, the Neighborhood Council DWP Memorandum of Understanding Oversight Committee unanimously approved the following resolution: 

The DWP Oversight Committee calls on the City Council to follow the recommendation of the charter mandated Industrial, Economic, and Administrative Survey to form “a committee to examine governance reforms for the Department with the explicit task of reporting its findings and recommending a measure for the 2017 ballot.” 

LA WATCHDOG--The City of Los Angeles is embarking on an ambitious, $470 million plan to modernize and expand the Convention Center so that it can compete with other first tier, West Coast cities such as San Francisco, San Diego, and Anaheim in attracting large scale conventions. This undertaking is expected to be completed by 2020 and is designed to promote tourism, one of the main drivers of our economy, and to stimulate the private development of hotels, restaurants, residences, and office and retail space in the South Park neighborhood and the rest of DTLA. 

This expansion will increase the Convention Center offering to almost 1.25 million square feet, up 43% from the current level of 870,000 square feet.  At the same time, the new and improved Convention Center campus is designed to be an integral part of the community, linking seamlessly with the neighborhood, LA Live, and Staples. 

The City will also encourage the development of several thousand new hotel rooms in DTLA to accommodate highly desired, big spending, out of town conventioneers who will not only stimulate our economy, but will also contribute generously to the City’s coffers through the 14% Transit Occupancy Tax on their hotel bill.  

This also includes a privately financed, upscale Convention Headquarters Hotel of at least 1,000 rooms that will be strategically located on City owned property, most likely near Staples and LA Live on the north end of the campus.    

The City intends to finance this $470 million expansion with debt, which, when combined with existing Convention Center debt of almost $300 million, will total a staggering $770 million. This debt will be serviced by the Convention Center’s 25% share of the Transit Occupancy Tax which is expected to yield the Convention Center $54 million this fiscal year.  By 2020, this tax is projected to increase by over 20% to $261.8 million, resulting in $65 million to service Convention Center debt. 

However, our cash strapped City does not have the financial flexibility to finance this expansion and other immediate worthwhile projects, including the $1 billion to replace its aging and neglected equipment (including police cars, fire engines, and ambulances) without blowing a gaping hole in its Debt Management Policy which limits debt service for Non-Voted Indebtedness to less than 6% of General Fund revenues.  This violation would send the wrong message to the investment community, resulting in a downgrading of the City’s credit rating and higher interest rates.  

The City Administrative Officer has recommended that the City enter into a Public Private Partnership (a “P3”) where the City would select a turnkey development partner to design, build, finance, operate and maintain the expansion of the Convention Center and the development of the surrounding real estate.  Under this recommended alternative, the 44 year old West Hall would be demolished and rebuilt (not retrofitted as currently envisioned).  The partner would also develop 9 to 14 acres of the 54 acre campus by creating “an integrated mixed-use real estate development” that would help to offset the costs of associated with the Convention Center, a loss leader that cannot even begin to pay the interest on $770 million of debt.  Needless to say, any development plans need to be consistent with the Community Plan.  

A P3 also protects the City from any cost overruns associated with the expansion of the Convention Center and the construction of the Headquarters Hotel and isolates it from any operating losses.  The partner is also responsible for maintaining the campus in excellent condition, a task that the City has demonstrated that it is incapable of doing on a sustained basis. 

While the terms of the P3 need to be worked out, including any “availability service payments” by the City to service the debt, the net result will result in more cash for our City’s deficit prone budget by creating a more vibrant Convention Center, more out of town visitors resulting in higher increased Transit Occupancy Tax revenue, and lower contributions to the Convention Center. 

The expansion of the Convention Center in conjunction with a well-capitalized partner is a win-win for our financially challenged City.  Don’t blow it. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

LA WATCHDOG--According to a December 31 Facebook posting by Mayor Eric Garcetti, “2015 was a big year. We laughed together, cried together and worked together to make our city better. Just in time for the New Year, check out this short video we made to celebrate all that Los Angeles has accomplished over the last 12 months. Can't wait to see how we'll outdo ourselves in 2016!” 

But rather than go through the 21 modest accomplishments (see below) presented in “Looking Back at the Past Year in LA,” we should review what was not highlighted in this professionally produced two minute video. 

There was no substantive discussion about our Department of Water and Power and the massive $1.4 billion, 30% increase in our utility rates over the next five years.   

There was no mention of reforming DWP’s chaotic governance despite Garcetti’s 2013 campaign pledge and the recommendations of both the LA 2020 Commission and the charter mandated Industrial, Economic, and Industrial Survey.  

Nor was our cash strapped City’s budget a topic of conversation even though the City is expected to have a budget deficit of more than $400 million over the next four years.  

Nor was the budget busting new labor contract for the City’s civilian workforce mentioned even though it will add over $125 million in annual costs and roll back pension reform.  It will also make it more difficult for the City to outsource work (such as road repairs) to more efficient, better managed private contractors. 

Nor was the $13.5 billion unfunded pension liability (71% funded) of the City’s two pension plans discussed or that pension contributions are devouring over 20% of the General Fund budget.  

Nor was the state of our lunar cratered streets, our broken sidewalks, and the rest of our deteriorating infrastructure mentioned.  

But rather than dwelling on 2015, we need a better understanding of what Garcetti is planning for 2016 and beyond.  And this does not mean platitudes and aspirations, but definitive policies and goals so that we can render a judgment on his leadership when he is up for reelection in 2017. 

Will Garcetti pursue the recommendation of the LA 2020 Commission to establish an Office of Transparency and Accountability to oversee our City’s strained finances and its budget shenanigans? 

Will Garcetti follow the blue ribbon Commission’s advice to form a Committee for Retirement Security to review the City’s retirement obligations and to make “concrete recommendations on how to achieve equilibrium on retirement costs by 2020?” 

Will Garcetti lead the reform the governance of our Department of Water and Power as was recommended by both the LA 2020 Commission and the Industrial, Economic, and Administrative Survey? 

Will Garcetti follow up on the LA 2020 Commission’s recommendation to update the City’s Community Plans “to enhance neighborhood input and establish a thoughtful growth strategy?”  

Will Garcetti develop an operational and financial plan to repair and maintain our lunar cratered streets, our broken sidewalks, and the rest of our failing infrastructure? 

There are many other issues that need to be addressed, including, but certainly not limited to, balancing the budget without raiding the Reserve Fund, fixing the City’s poorly managed and inefficient work force, updating its management information systems, and funding the Los Angeles River and the 2024 Summer Olympics. 

Eric, Angelenos elected you to lead the City, not to kick the can down the road.  And to judge your leadership, we need results and not a lot of political hot air.  Otherwise, how can you expect us to vote for you when you are up for reelection in March of 2017 or when you run for higher office in 2018?

●●●●●

Looking Back at the Past Year in LA

 

1.  Mayor Garcetti signs LA’s first-ever Sustainability City pLAn.

 

2.  Angelenos work together to Save a Drop and conserve water.

 

3.  Shadeballs help conserve and preserve water quality in our reservoirs.

 

4.  CicLAvia turns 5.

 

5.  LA commits to acquiring the largest Electric Vehicle Fleet in the country.

 

6.  The US Army Corps of Engineers signs off on a plan to restore the Los Angeles River.

 

7.  Los Angeles hosts first-ever US-China Climate Leaders Summit.

 

8.  Mayor Garcetti represents Angelenos and Climate Mayors at UN Climate Conference in Paris.

 

9.  Los Angeles becomes the host city for the 2015 Special Olympics World Games.

 

10. Los Angeles becomes the official US bid City to host the 2024 Summer Olympics.

 

11. Mayor Garcetti signs historic minimum wage increase into law.

 

12. An $8.5 billion modernization and a record number of passengers at LAX.

 

13. California new Film Tax generates an estimated $1.07 billion in economic activity.

 

14. LA makes new investments in smart infrastructure, including ultra-high speed internet, smart poles, and solar powered small benches and bus stops.

 

15. City and County leaders begin an unprecedented collaboration to combat homelessness in Los Angeles.

 

16. #HomesforHeroes helps house homeless veterans and their families.

 

17. Mayor Garcetti signs a groundbreaking seismic retrofit bill into law.

 

18. Los Angeles prepares for El Nino.

 

19. LA first responders adopt new tactics to reduce emergency response time.

 

20. Metro’s Silver Line Express expands to San Pedro.

 

21. Construction on the new Crenshaw line and expansion of Metro’s Gold and Expo lines will transform LA’s transportation network in the coming year.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

 

CityWatch

Vol 14 Issue 2

Pub: Jan 5, 2016

LA WATCHDOG--On Friday, Councilmember Felipe Fuentes “introduced a motion calling for a 2016 ballot measure to reform and restructure” our Department of Water and Power.  

LA WATCHDOG--On Tuesday, the Board of Water and Power Commissioners approved a five year, 21% increase in our power rates that were appropriately deemed “just and reasonable” by the Ratepayers Advocate.  This represents a bump of 4% a year, considerably lower than the 8% that was tossed around a year ago. 

But there was no discussion about how DWP Ratepayers would be hit with $150 million in new taxes as a result of the $770 million increase in revenues over the next five years.  Overall, the City’s haul from the Ratepayers is projected to increase to over $800 million, up from the current level of around $650 million. 

There are two taxes on power system revenues, the City Utility Tax and the 8% Transfer Fee. 

The City Utility Tax is equal to 10% of residential revenues and 12½% of commercial revenues with a blended rate of about 11½%.  Based on projected revenues of $4.22 billion for the fiscal year ending June 30, 2020, this tax will generate around $485 million for our friends that occupy City Hall. 

The 8% Transfer Fee is equal to 8% of the prior year’s revenue and according to DWP’s projections, it is scheduled to increase to $327 million in 2020, up from $266 million last year.  

But this fee is the subject of a class action lawsuit (Eck v. City of Los Angeles) that alleges that this “fee” is a violation of Proposition 26 (The Supermajority Vote to Pass New Taxes and Fees Act), a ballot measure that was passed by voters of California in November of 2010 that prohibits the collection of “disguised taxes” in the form of fees or rates. 

This issue was addressed in public comment at the Tuesday Board meeting by Walter McNeill, a Redding based attorney who successfully sued the City of Redding and its municipally owned utility in a similar case.  But that was the end of the discussion because the City (and not the Department of Water and Power) is opposing the class action lawsuit. 

But unlike the class action lawsuit involving the Telephone Users Tax (Ardon v. City of Los Angeles) where the City hoodwinked Superior Court Judge Amy Hogue and escaped a billion dollar liability owed to Angelenos for an estimated $25 million plus a very generous $18 million in legal fees, this litigation is higher profile and more clear cut as it concerns easily identifiable payments from DWP to the City and does not directly involve DWP’s 1.4 million Ratepayers. 

If the City were to lose this case, and there is a high likelihood that it will, the revenue stream from the 8% Transfer Tax would come to a screeching halt, blowing an even larger hole in the City’s already unbalanced budget.  Over the next four years, the City’s cumulative deficit will exceed $400 million as a result of the new labor contract with its 20,000 civilian workers.   

The City would also be liable for over $1.5 billion for past transfers.  This would cost the City $150 million a year to service the Judgement Obligation Bond that would be floated to pay this liability.  

Rather than play Russian Roulette with the City’s finances, where there are at least four bullets in the six shooter, the City needs to reach a negotiated settlement with the plaintiffs, the Ratepayers, and the City’s voters that requires the City to reimburse DWP and its Ratepayers, that places a new tax on the ballot to help the City balance its budget and repair its infrastructure, that truly reforms the governance of the DWP, and that requires the City to Live Within its Means. 

Otherwise, the City, true to form, will continue to “kick the can down the road” until the spaghetti and meatballs really hit the fan.

 

(Note: On Friday, Councilmember Felipe Fuentes will introduce a motion to the City Council that will have recommendations on how to reform the governance of our Department of Water and Power.  But any reform must include significant input and buy in from the Ratepayers who do not trust the Herb Wesson led City Council and Mayor Eric Garcetti who view Ratepayers as their dedicated ATM.  See DWP Reform: Set for Yet Another Burial.”)  

 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

 

CityWatch

Vol 14 Issue 7

Pub: Jan 22, 2016

 

 

 

 

 

 

 

LA WATCHDOG--In April of 2014, the LA 2020 Commission recommended that our City establish the Los Angeles Utility Rate Commission to oversee the operations our Department of Water and Power, set policy, appoint the General Manager, and set utility rates. 

But City Council President Herb Wesson buried this constructive measure in the bowels of City Hall, never to be discussed again, including by Mayor Eric Garcetti who promised us that he would reform DWP.  

In December of 2015, the charter mandated Industrial, Economic, and Administrative Survey recommended reforming the governance of DWP to limit the political interference by City Hall in its operations, management, and finances.  But Navigant, the consulting firm that was retained by the Controller, the Mayor, and the Herb Wesson led City Council, did not outline any specific reforms other than to form a “committee to examine governance reforms for the LADWP, with the explicit task of reporting on its findings and recommending a measure for the 2017 ballot.” 

Unfortunately, this Governance Committee will consist of City Hall insiders, including “representatives from the Mayor’s office, City Council Energy & Environment Committee, CAO, CLA, Controller, City Attorney, Office of Public Accountability, Board of Water and Power Commissioners, the general manager of LADWP, and a representative from labor.”  

But who is representing the Ratepayers, the “working slobs” who are paying the bills and being fleeced for over $1 billion a year by City Hall and its cronies? 

While the Governance Committee that consists of City Hall insiders will claim to be working in the best interests of the Ratepayers, rest assured that our Elected Elite will try to game the new system of governance to their advantage at our expense, especially when it comes to using us as an ATM. 

However, Ratepayers need to be an integral part of this process if the findings of the Governance Committee are to have any credibility with Angelenos who do not trust the Department and the hot air know-it-alls at City Hall.  Furthermore, the Governance Committee needs to conduct its business in an open and transparent manner and not behind closed doors as is so often the case at City Hall, especially when it comes to issues involving our wallets. 

Any recommendation by the Governance Committee must also include a requirement that the Department provide Ratepayers with timely information that is consistent with investor owned utilities such as Southern California Edison.  This would include not only financial information and operating statistics, but a comprehensive letter written to Ratepayers discussing the Department’s operations and financials. 

Ratepayers must also insist on transparency on all discussions between City Hall and the Department.  This would require that all conversations and meetings be documented in writing and agreed to by both parties, subject to the penalty of perjury, and be made available to the public on the web within 48 hours.  These “ex parte” rules would also apply to any conversations between City Hall and the IBEW, the Department’s domineering union.  

The Governance Committee needs to allow the DWP to establish its own Personnel Department and rules, freeing it from the City and its overly restrictive civil service regulations that do not give this 9,000 person organization with almost $5 billion in annual revenues the necessary flexibility to operate in an efficient manner. 

The Governance Committee should support a more robust and independent Ratepayers Advocate that has the resources to analyze the operations and finances of the Department on a timely basis to make sure DWP is hitting its operating and financial metrics.  The Ratepayers Advocate must also have the resources to improve its outreach to the Ratepayers and other DWP stakeholders, including those who occupy City Hall. 

The Governance Committee should also consider direct Ratepayer participation.  This would include allowing Ratepayers to vote on any rate increase that exceeds the rate of inflation and/or permitting the Ratepayers to elect the Board of Directors as is the case with the Sacramento Municipal Utility District. 

One of City Hall’s major goals would be to legitimize the 8% Transfer Fee from the Power System that is currently the subject of a viable class action lawsuit.  This year, it is expected to be in the range of $275 million.  But rather than agree to continue this less than transparent tax, Ratepayers should approve its gradual phase out over a ten year period. 

Over the next five years, DWP is anticipating spending between $15 and $20 billion transforming the Department.  This includes getting off coal, developing sources of local water, meeting numerous unfunded environmental mandates, and repairing and maintaining its aging water and power infrastructure. 

The key to this successful transition is excellent management that is allowed to operate an efficient, well-funded, flexible organization without undue interference from City Hall. 

We cannot afford to have the politically ambitious duo of Eric Garcetti and Herb Wesson bury the reform of our Department of Water and Power in the bowels of City Hall yet again.

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

 

CityWatch

Vol 14 Issue 4

Pub: Jan 12, 2016

LA WATCHDOG--At its December 10 meeting, the Garcetti appointed City Planning Commission unanimously approved the “up zoning” of the Palladium Residences (photo: proposed) to allow the development of two thirty story towers that will house 731 luxury rental apartments.  The doubling of this project’s density will result in additional profits of at least $50 million for Crescent Heights, the Miami based developer. 

This mixed use development will also include a mere 24,000 square feet of retail space and restaurants and also includes improvements to the 63,000 square foot Palladium, the 1940 Art Deco venue located in the heart of Hollywood, one block east of Sunset and Vine. 

The supporters of this $500 million project claim that it will help alleviate the City’s housing crisis.  But the rents in these luxury apartments are not affordable unless you are making north of $100,000 a year.  This is double the City’s median household income of less than $50,000 a year. 

Nor are these apartments family friendly unless there is a household income in excess of $200,000 a year.  

The developer and its bought and paid for supporters in City Hall are touting that 5% of the apartments are being reserved for working class Angelenos who make no more than 120% of the median income. But that will result in a modest decrease in revenues of less than 2%, or $600,000 a year, a small price to pay for at least $50 million in additional profits.  

To put the 5% set aside in perspective, New York City is demanding that 25% of the units in an up zoned building be reserved for affordable housing. 

The Planning Commission was also impressed that this “elegant density” project was in an area served by the Metro Red Line and numerous bus routes.  But most of the residents in these two luxury high rises will not be schlepping to work on the subway or bus, but rather tooling to their offices in high powered BMWs.  

This will lead to increased gridlock at Sunset and Vine and Hollywood and Vine, two of the most dangerous intersections for pedestrians in the City.  And this does not include the impact of Millennium Hollywood and many of the other projects in the surrounding area that will add thousands of new residents and cars to the already stressed street and freeway infrastructure. 

Real estate speculators and developers and their cronies argue that this “up zoned” project is good for the economy.  While that can be argued, the need for high end apartments is questionable as the City’s Housing and Community Investment Department reported that there is a 12% vacancy rate for apartments built in the last ten years.  Furthermore, there are many other development opportunities in Hollywood and throughout the City that will not destroy our neighborhoods, be less stressful on the infrastructure and public safety, and most importantly, provide affordable housing to thousands of hard working Angelenos. 

The Palladium Residences is just another poster child in a long list of developments where City Hall has sold out to campaign funding real estate speculators and developers who could care less about ordinary Angelenos. 

So it is not surprising that former Mayor Richard Riordan has endorsed the Neighborhood Integrity Initiative that would eliminate “spot zoning” of mega projects if it is approved by the voters in November. 

While a recent poll indicated that 72% of the voters approved of the Initiative, Riordan’s game changing endorsement has put City Hall and Mayor Eric Garcetti on the defensive.  As Riordan said, Garcetti “isn’t doing anything for the poor but helping the rich get richer -- through these zoning deals on land development.”

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

 

CityWatch

Vol 14 Issue 5

Pub: Jan 15, 2016

LA WATCHDOG--On April 9, 2014, the LA 2020 Commission endorsed a series of actionable recommendations designed to “enhance transparency and accountability in City Hall, put the City on a path to fiscal stability, and renew job creation in Los Angeles.”   

In January of 2015, City Council President Herb Wesson buried the Commission’s report, including the recommendations involving the our City’s finances, its pension plans, the governance of our Department of Water and Power, and the updating of the City’s Community Plans. 

LA 2020 called for the creation of the Office of Transparency and Accountability to oversee our cash strapped City’s finances.  But Paul Krekorian, the chair of the Budget and Finance Committee, tells us that the city’s budget is balanced, despite the fact that there is no plan or money to repair our lunar cratered streets and that the City raided its rainy day Reserve Fund for $150 million despite record tax revenues. 

The Commission also called for the establishment of a “Commission on Retirement Security” to “review the City’s retirement obligations in order to promote an accurate understanding of the facts” and to make “concrete recommendations on how to achieve equilibrium on retirement costs by 2020.”  This is a reasonable suggestion as the City’s two pension plans are underfunded by $13.5 billion (assuming a more realistic investment rate assumption of 6½%), representing a funded ratio of only 71%. 

The city is also underfunding its pension plans by at least $400 million a year by relying on the overly optimistic 7½% investment rate assumption, a rate that Paul Koretz, the chair of the Personnel Committee believes is too low since he is smarter than Warren Buffett who recommended a rate of 6½%. 

This twelve member blue ribbon commission, including IBEW Union Bo$$ Brian d’Arcy, called for the establishment of an independent, professionally staffed Los Angeles Utility Rate Commission that would appoint the General Manager and set rates with the intent of limiting the interference in the operations and finances of DWP by City Hall. To the surprise of no one, Felipe Fuentes, the chair of the Energy and Environment Committee, ignored this reform as the City continues to use DWP and its Ratepayers as an ATM. 

The LA 2020 Commission also called on the City to update its 35 Community Plans every five years.  This would allow residents, businesses, investors, and City Hall to have a clearer understanding of the zoning rules and regulations so that they are not “subject to the whims of special interests, nimbyism, and individual elected officials.”  However, reform has been rejected by Jose Huizar, the chair of the Planning and Land Use Management Committee, as the real estate speculators and developers, their lobbyists and lawyers, contractors, and their cronies has been a major source of campaign cash. 

While Mayor Eric Garcetti and the Herb Wesson (photo right) led City Council will close out 2015 with high fives knowing that they snookered us for yet another year, 2016 has the potential to be very different. 

The City’s finances are under pressure as this year’s budget is already $100 million in the red because of excessive legal settlements.  Next year, the City will have to finance its new labor agreement with the City’s civilian workers that will end up costing us over $100 million beginning in 2017.  Pension contributions will increase as the return on the pension plans’ investment portfolios are significantly below the overly optimistic investment rate assumption of 7½%. 

DWP will be front and center because of the five year, 30%, $1.4 billion increase in our utility rates.  And the pressure for reform has increased as the charter mandated Industrial, Economic, and Administrative - overseen by Controller Ron Galperin, Garcetti, and Wesson - has called for a change in the governance of the inefficient DWP because there are no clear lines of authority.  

Wesson and Garcetti may tell us to buzz off once again.  But the need for our votes in the November election will provide us mushrooms (in the dark covered with manure) with considerable leverage. 

In November, we will have the opportunity to approve the Neighborhood Integrity Initiative that will require the City to do “real planning,” eliminating the right of the local councilmember to “up-zone” gridlocking developments that are inconsistent with our neighborhoods.  This initiative will be opposed by our Elected Elite who are addicted to the campaign cash they receive from the real estate “gang.”    

There will also be several ballot measures to increase our taxes, despite the fact that we are one of the highest taxed states in the country with one of the lowest growth rates.  This includes a new half cent increase in our sales tax to finance transportation projects, of which 25% is returned to the City.  

In March of 2013, 55% of the voters rejected a half cent increase in our sales tax as we did not trust City Hall which refused to reform its finances and Live Within Its Means.  This was in spite of massive campaign contributions by the real estate community to Herb Wesson’s campaign slush fund in support of Proposition A.  

In November, we will be able to send a clear message by voting NO on the proposed tax increases and YES on the Neighborhood Integrity Initiative. 

In 2015, Garcetti, Wesson, and the City Hall gang kicked the can down the road.  In 2016, we can kick them in the can. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

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CityWatch

Vol 14 Issue 1

Pub: Jan 1, 2016

 

 

 

LA WATCHDOG-Comcast’s decision to terminate its $45 billion acquisition of Time Warner Cable may be good news for the 3.5 million Southern Californian households that have been deprived of the right to watch the Dodgers from the comfort of their own homes.  

Underlying this blackout of 70% of the market is the unwillingness of DirecTV, Charter, Cox, and other cable companies to pass along the $5 a month subscriber fee associated with TWC’s over-the-top offer to pay the Dodgers $8.35 billion over the next 25 years to distribute SportsNet LA, the Dodgers regional sports network.  Assuming five million subscribers, the public would eventually be tagged for $600 million a year when you factor in the 100% markup that is needed to preserve the distributors’ 50% gross profit margin.  

TWC has been reluctant to lower its price per subscriber because it may trigger a substantial write-off of its investment, probably in the range of $500 million to $1 billion. But TWC has been concerned that this sizeable hit to its financials would have an adverse impact on the market’s perception of its proposed deal with Comcast. 

But now that the deal with Comcast is history due to the opposition of the Federal Government, TWC is in a position where it can write-off not only its costs associated with the failed merger (probably in excess of $100 million), but a portion of the Dodger contract associated with a lower subscriber fee, probably in the range of $1 to $2 per subscriber, or $500 million to $1 billion. 

This write-off, while substantial, represents at most 2% of TWC’s $45 billion market value.  Furthermore, sophisticated investors, including Charter Communications which is interested in buying TWC, will see through the smoke and value the Dodger contract based on more rational assumptions. 

Consequently, it would be in everyone’s best interest for TWC to lower its price to around $3 a subscriber.  Unfortunately, life has become more complicated since early in 2013 when TWC inked its deal with the Dodgers. 

According to several newspaper accounts, the independent distributors may be trying to offset some of the high costs and low ratings associated with the TWC’s 20 year, $3 billion contract with the Lakers by lowering the subscriber fees for the Dodgers.  There may also be efforts to tie the fees of both the Dodgers and Lakers to their performance, thereby increasing TWC’s risk profile. 

The cable and satellite companies are also experiencing the increasing loss of subscribers as consumers are “cutting the cord,” embracing streaming services such as Netflix and Amazon in an attempt to lower their overhead.  This is forcing the distributors to become more cost conscious as can be seen by their reluctance to overpay for the Dodgers.

There is also considerable pressure for distributors to “unbundle” their basic offering which would allow consumers to choose channels on an a la carte basis. This is particularly true of the sports related offerings which comprise an estimated 50% of the cost of the basic cable TV package, but are only viewed by only 25% of the subscribers. 

This effort to “slim” down the basic offering is playing out in a lawsuit as Verizon, the sixth largest pay TV provider, is attempting to offer a basic package without ESPN, contrary to its contractual arrangement with the channel.  As a matter of interest, ESPN, along with its affiliated offerings that are forced upon the distributors, is by far and away the most expensive network.  

TWC is in an interesting predicament of its own making.  

Does it continue to lose $100 to $200 million a year by holding out for a $5 subscriber fee or does it take the $1 billion hit to its financials, recognizing that in its exuberance that it overpaid big time for the Dodgers’ media rights, cut its losses, and lower the subscriber fee to $3? 

If it is worried about its reputation, it is time for Time Warner Cable to take the hit for the home team.  It is time for Dodger baseball. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, The Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com
-cw

  

CityWatch

Vol 13 Issue 35

Pub: Apr 28, 2015

LA WATCHDOG-“Public, Private Sector Wage Gap Heavily Favors Many LA Workers,” a front page article in Sunday’s Los Angeles Times, marks the beginning of the conversation involving the efficiency of the City’s operations and whether the City should “outsource” a portion of its operations, including the repair and maintenance of our deteriorating streets and broken sidewalks. 

In their 1,300 word article, Peter Jamison and Catherine Saillant detailed how many city workers earn considerably more than their private sector counterparts, with premiums ranging from 40% to over 100%.  

City workers are also entitled to very hefty benefits that far exceed those in the private sector, including a Cadillac healthcare plan, a generous defined benefit pension plan, ample vacation time, 13 paid holidays, and 12 sick days at full pay.   

The City’s operations also appear to be poorly managed, hindered by the lack of management information systems as was detailed in Controller Ron Galperin’s audit of the Bureau of Street Services.  As a result, the Bureau does not have a very good grasp of its performance metrics and overall operation.  

Galperin also revealed that the Bureau has very low direct labor utilization rates (57%) which results in the overstaffing of its work crews.    

The City’s cost structure is also burdened by a bloated, paper pushing bureaucracy which results in excessive department overheads.  This is compounded by unsupported allocations for centralized services and City Hall administrative expenses that are needed, in part, to handle the disruptive interference from members of the City Council, their staffs, and their favor seeking cronies. 

Our cash strapped City can no longer support these inefficient operations that are crowding out the City’s ability to provide basic core services such as the repair and maintenance of streets and sidewalks and the enforcement of traffic laws, planning and zoning rules, building and safety regulations, and local zoning ordinances, all of which impact our quality of life.     

As a first step, the City needs to determine the efficiency of its departments by benchmarking their operations against other governmental entities and private enterprise. While this may be a novel experience for the City, it is standard operating procedure in the private sector.  

The City should also implement a policy of “managed competition” where the City contracts with private contractors for a portion of the work and compares the results with those of City work crews.  

The Department of Water and Power had such a policy to replace selected water mains.  This resulted in a DWP construction work crew incurring 100% cost overruns while at the same time blowing its deadlines.  The private contractors were, for the most part, on time and on budget.  

The City should also consider implementing performance based evaluations of its employees while lessening the importance of seniority.  This would provide the City with considerably more operational flexibility to lower its costs and deliver a finished product on time and on budget.  

Together, these three reforms, benchmarking, managed competition, and performance based personnel evaluations, would result in significant savings, freeing up to $200 million (less than 10% of the civilian personnel costs) that would be devoted to eliminating the Structural Deficit, repairing and maintaining our streets and sidewalks, and restoring vital city services that are essential to our quality of life. 

Unfortunately, the Herb Wesson led City Council will reject these reforms because it does not have the courage to stand up to the campaign funding City unions.  Its solution is to continue to play games with the budget by raiding the Reserve Fund and deferring needed expenditures.  At the same time, they are concocting a plan to persuade the City’s skeptical voters to approve a massive increase in our taxes.  

But this rope-a-dope strategy of prioritizing their own personal political goals at our expense is not going to fly as the voters will demand work place and budget reform.  Maybe it is time that City Hall took the advice of former New York Governor Mario Cuomo: 

“It is not government’s obligation to provide services, but to see that they are provided.”

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, The Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com
-cw

 

CityWatch

Vol 13 Issue 36

Pub: May 1, 2015

LA WATCHDOG-We are entering the Silly Season of LA politics as the candidates for the open City Council seats are promising paved streets, level sidewalks, pension reform, a more efficient work force, restored services, development that is respectful of our neighborhoods, less traffic congestion, lower parking fines, affordable housing, housing for the homeless, a revitalized Los Angeles River, and the phase out of the gross receipts business tax, all without raising our taxes. 

These campaign pledges are nothing but hot air unless the City is able to fund its existing operations and these ambitious programs.  

However, this gives us the opportunity to ask the candidates a series of very simple questions about how they propose to eliminate the City’s projected budget deficits and its $25 to $30 billion mountain of unfunded pension liabilities, deferred maintenance, and existing long term debt. 

For openers, how do you intend to eliminate next year’s projected budget deficit of $165 million and the $425 million cumulative deficit over the next three years? 

The City Administrative Officer is projecting a budget surplus of $24 million for the 2018-19 fiscal year.  It assumes that there will be no raises or cost of living adjustments for City employees and that civilian workers will contribute 10% towards the cost of the City sponsored health plan.  Do you support these assumptions? 

Do you support the unanimous recommendation of the LA 2020 Commission to establish an Office of Transparency and Accountability to oversee the City’s finances? 

How do you propose to pay for the repair and maintenance of our streets and sidewalks? 

Do you support the LA 2020 Commission’s proposal to form a Committee on Retirement Security that will report its recommendations on how to “achieve equilibrium on retirement costs by 2020” within 120 days? 

Do you support the City’s creation of the new tier of pension benefits for new civilian employees even though the Employee Relations Board questioned its legality?  

What are your plans for pension reform?  

Do you believe that the City’s pension plans should be fully funded within 20 years?  

Do you support the proposal that would allow the City to amend future benefits for existing workers as was supported by San Jose Mayor Chuck Reed? 

Do you support the recent lowering of the investment rate assumption by the City’s two pension plans to 7½% even though it increased the City’s annual required contribution?  

Under what conditions would you support the lowering of the investment rate assumption to 6½%, a benchmark recommended by Warren Buffett of Berkshire Hathaway fame and fortune? 

How do you propose to finance the Mayor Garcetti’s plans for the Los Angeles River, Great Streets, and Sustainability? 

Mayor Garcetti pledged to phase out the $470 million gross receipts business tax? How would you replace the lost revenue? 

Do you support the “benchmarking” of City services to determine their effectiveness and efficiency?  And under what conditions would you support the contracting out of City services?  

Do you support transparent labor negotiations where all proposals and offers must be disclosed within 24 hours and that any proposed agreement be reviewed and analyzed by an independent third party prior to being approved by the City Council? 

Under what conditions would you support a half cent increase in our sales tax to fund the restoration of City services? 

Finally, do you support placing a measure on the ballot where voters would have the opportunity to accept or reject an amendment to reform our charter that would require the City to develop and adhere to a long term financial plan, pass two year balanced budgets based on Generally Accepted Accounting Principles, and, over the next twenty years, fully fund the City’s two pension plans and repair and maintain our streets, sidewalks, and the rest of our infrastructure? 

We deserve detailed written answers to all of these basic questions on how the candidates propose to eliminate the sea of red ink and reduce the $25 to $30 billion of liabilities that the current City Council is dumping on the next generation of Angelenos because of its inaction and its unwillingness to make tough decisions.  

Come to think of it, we should demand that Mayor Eric Garcetti, Council President Herb Wesson, Budget and Finance Chair Paul Krekorian, and all of the other members of the “kick the can down the road” City Council provide us with written answers to these questions. 

After all, it is not only our money they are squandering, but the future of our children and grandchildren. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, The Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com.) 
-cw

 

 

 

CityWatch

Vol 13 Issue 2

Repub: Jan 6, 2015

 

LA WATCHDOG--The City is projecting a year-end budget deficit of almost $100 million according to the Second Financial Status Report dated December 4, 2015. 

This shortfall is primarily the result of the City Attorney’s projection that liability claims associated with legal judgements and settlements will soar to $138 million for the year ending June 30, 2016, an $84 million increase from the budgeted $54 million. 

While the specifics of this 155% increase have not been disclosed, “much of the shortfall is attributable to a small number of extremely significant cases arising from incidents or conduct which occurred many years ago.”  More than likely, however, the Los Angeles Police Department is responsible for a good chunk of this increase as the LAPD has been responsible for almost 60% of the $272 million in payouts over the last five years.

But how does the City intend to cover this projected $100 million budget deficit?

One alternative would be to raid the $375 million Reserve Fund.  But this would deplete this rainy day fund to a level of 5% of the $5.4 billion General Fund, an amount $50 million short of the 6% target recommended by the City Administrative Officer and $266 million below the 10% level suggested by many public finance experts.

Besides, in preparing the Budget eight months ago, Mayor Eric Garcetti, the Budget and Finance Committee chaired by Paul Krekorian, and the Herb Wesson led City Council already raided the Reserve Fund for $130 million.

The City also has the option to issue $100 million of Judgment Obligation Bonds to cover this projected deficit.  In City speak, this would “save” the City $100 million.  In reality, this bond offering would be dumping the sins of the past onto a future generation of Angelenos who would be burdened with annual debt service payments of $13 million for the next ten years.

The third (and preferred) alternative would be to allocate the $138 million in liability claims to the responsible departments who would then have to determine how to pay for the messes they created.  This would also have the added benefit of increasing the accountability of the Police Chief and other department managers as they would be responsible for the actions of their employees and the impact on their budgets.

Certain members of the City Council believe the City will be bailed out as revenues will exceed the budgeted General Fund receipts of $5.4 billion. But this opinion may be wishful thinking as budget revenues already represent a hefty 5% increase from the previous year.  Furthermore, revenues through the first four months of the fiscal year are off by $40 million because of lower property tax collections and lower revenues from the City Utility Tax levied on DWP Ratepayers.

This $100 million deficit does not include any real money for the City’s homeless initiatives or any appropriations or reserves related to the havoc from the El Nino storms that are expected to drench California this winter.

The Second Financial Status Report highlights the fact that the City, like many of its businesses and employers, is a victim of California’s legal system that is consistently ranked as the top “Judicial Hellhole” in the country.  This will result in cutbacks to an already tight City budget and should result in calls to reform our civil justice system, a move that will alienate the campaign funding plaintiff’s bar.   

For example, the $84 million hit for liability claims would fund the City’s homeless initiative, repair miles and miles of our lunar cratered streets, or allow the Planning Department to update the City’s outdated Community Plans. 

It also puts the Mayor and the Herb Wesson led City Council on notice that the City does not have the financial flexibility to introduce new initiatives unless it is willing to reallocate revenues, a painful process that will result in significant pushback from the targeted departments, or to outsource operations to more efficient service providers, a move that would cause the City’s unions to go ballistic. 

Over the next four months, the Mayor, the City Council, and the City’s budget mavens will be working on next year’s budget behind closed doors.  How will they cover the $100 million deficit and fund existing programs and new initiatives? How will they pay for higher pension contributions; the repair of streets, sidewalks, and parks; and its new labor contract?

Stay tuned.  2016 is already shaping up to be an interesting year.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

CityWatch

Vol 13 Issue 103

Pub: Dec 22, 2015

LA WATCHDOG--In April of 2014, the Los Angeles 2020 Commission recommended the establishment of the Los Angeles Utility Rate Commission to oversee the operations and finances of our Department of Water and Power, determine our utility rates in an objective manner, and appoint the General Manager. 

But this attempt to eliminate or minimize the “political interference” from City Hall, the Mayor, and their cronies never saw the light of day as City Council President Herb Wesson and Energy and Environment Chair Felipe Fuentes buried this recommendation deep in the bowels of City Hall.  

Two other excellent measures posed by Mickey Kantor’s LA 2020 Commission were also deep sixed by Wesson.  These included the formation of an Office of Transparency and Accountability to monitor the finances of our cash strapped City and the establishment of the Commission for Retirement Security to review the City’s seriously underfunded pension plans and to make “concrete recommendations on how to achieve equilibrium on retirement costs by 2020.” 

However, last week, Controller Ron Galperin, in collaboration with the Mayor and City Council, released the charter mandated Industrial, Economic, and Administrative Survey covering DWP that called for, among other things, the reform of the Department’s governance. According to this 581 page report, the current system is plagued by too many cooks in the kitchen, where no one entity is responsible for the Department’s operations and where our all-knowing Elected Elite are second guessing management, developing unrealistic policies and goals, and have no respect for the wallets of the Ratepayers.  This is compounded by the overall lack of transparency, flawed management information systems, unclear lines of authority, and a general distrust of the Department and the City’s meddling politicians.  

Navigant Consulting, the well regarded firm that prepared the IEA Survey, called for a hybrid committee of City Hall insiders to develop a consensus on a solution that would then be placed on the 2017 ballot.  

But this recommendation is flawed because it does not include input from the Ratepayers and the Neighborhood Councils.  

The Ratepayer Advocate and its consultant, Navigant, are also calling for “Performance Reporting” to be included in the ordinance authorizing the increase in our utility rates.  This would require management to provide the Ratepayers Advocate and the Board of Commissioners with periodic reports identifying performance metrics and goals and comparing them to actual results.  This would result in increased transparency, especially if this information was made available to the Ratepayers.  

The Ratepayers Advocate also indicated that the Water System’s proposed five year rate increase of 25% to 30%, or about 5% a year, was “reasonable.” Unfortunately, he found that the rate increase was less than what is needed to repair its aging pipes, valves, and water mains, but this was justifiable because DWP does not currently have the capacity to meet the desired long-run replacement cycle because of constraints on outsourcing and anticipated retirements. 

Navigant’s report indicated that the Department does a good job of keeping the water flowing and the lights on, but that to meet the future operational, organizational, and financial challenges, it is necessary to reform its current system of governance in order to be a dependable and efficient provider of water and power. 

And while this reform has met some resistance by Mayor Garcetti and certain members of the City Council who want to treat Ratepayers as mushrooms (in the dark and topped with manure) and as an ATM, now is the time to address change and bring the Department into the 21st Century.  With, of course, input from the Ratepayers. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

CityWatch

Vol 13 Issue 101

Pub: Dec 15, 2015

LA WATCHDOG--In early July, our Department of Water and Power proposed $1.4 billion increase in our utility rates over the next five years.  This bump of over 30% is subject to the review and analysis by the Ratepayers Advocate prior to the approval of the politically appointed DWP Board of Commissioners, the Energy and Environment Committee, the City Council, and the Mayor. 

But after five months, we still do not have any report, in large part because the Department has not provided the Ratepayers Advocate and its expert consultants with definitive financial information detailing the rate case.  The City Attorney has also not produced the final ordinance that spells out the very important (as the devil is in) details of this complex rate increase. 

Fred Pickel, the Ratepayers Advocate, and his staff expect to issue their reports on the water rate increase, the power rate increase, and the Department’s compensation polices within the next two weeks, assuming they receive the necessary information from DWP and the City Attorney.  This will begin the political process to approve this unprecedented rate hike which is expected to be finalized by April 1, 2016.  However, the rate increase will be backdated to July 1, 2015, meaning that Ratepayers will be hit with a two year increase during the first year. 

While the Ratepayers Advocate’s report will analyze the proposed rate increases, it will also need to address the transparency of DWP’s operations.  This would involve detailing the Department’s financial relationship with the City and all of its departments, including the Port, Los Angeles International Airport, and Public Works and its Bureau of Sanitation.  

For example, there has been some scuttlebutt from Port employees about the high cost of the power generated by solar panels installed by inefficient DWP work crews. There are also rumors that the Port has failed to pay its DWP bill on a timely basis, meaning that the Ratepayers will have to make up this unacceptable shortfall. 

The report will also need to analyze the DWP’s multibillion dollar utility built solar program and whether it makes sense to outsource this very ambitious endeavor to more efficient, independent contractors.     

The Ratepayers Advocate will also need to review the Department’s involvement with the City’s One Water LA 2040 Plan to ensure that DWP is not getting soaked for very expensive (as in billions) stormwater projects that are the responsibility of the Bureau of Sanitation and other City departments. 

There also needs to be full disclosure on all “pet projects” that are not related to the core mission of the Department as well as all below market leases of DWP property to other City departments and favored nonprofit organizations.  This disclosure also includes “Special City Services” and how these costs are determined, especially as it relates to the massive overhead charges imposed by the City on such services as the inspection of fire hydrants by the Los Angeles Fire Department.    

Interestingly, the Ratepayers Advocate has commissioned a study of DWP’s compensation arrangements, including benefits, compared to other regional utilities.  This analysis, along with the benchmarking efforts of the Department, will be very controversial.  

No study would be complete without the discussion of the legality of the $273 million, 8% Transfer Fee given the recent class action lawsuits.  One interesting suggestion by Richard Moss, a former DWP Commissioner, and Gregory Lippe, a former chairman of the Valley Industry and Commerce Association, is to freeze all payments, including the Transfer and the City Utility Tax, from DWP to the City at its current level of around $650 million and invest the five year, $500 million surplus in DWP’s operations.   

The Ratepayers Advocate and DWP’s management must also outline the Department’s goals over the next five years and determine a process to monitor its progress.  One idea would be for the General Manager to publish a quarterly report within 60 days of the quarter’s end similar to one that is required by a public company.     

Over the last three years, the Ratepayers Advocate has been an excellent investment.  Pickel and his understaffed office have produced strong analytical work.  He has also developed a working relationship with the Department and City Hall which has allowed him to temper the proposed rate increase.  

This positive review is in spite of the unfounded, self-serving claims by the publicity hungry Santa Monica based Consumer Watchdog regarding the settlement of the class action lawsuit involving the botched introduction of the Customer Information System.

The major complaint involving the Ratepayers Advocate is the lack of outreach and his failure to use his position as a bully pulpit to protect our wallets.  On the other hand, it was and is important to preserve his relationship with the Department’s management and the politicians and bureaucrats that occupy City Hall.  

But now is the time for Fred Pickel, the Ratepayers Advocate, and his staff to sound off as they go to bat for the us, the Ratepayers, and our wallets. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

CityWatch

Vol 13 Issue 99

Pub: Dec 8, 2015

 

 

LA WATCHDOG--The new, four year labor agreement covering the City’s civilian workforce is a huge success according to Paul Krekorian, the Chair of the Budget and Finance Committee, and Paul Koretz, the Chair of the Personnel Committee.  

The contract provides for no salary increases for the three year period ending June 25, 2017 and then only a 2% increase in the last year of the contract.  Of course, this is after a budget busting 25% increase that was agreed to by Mayor Villaraigosa and the Eric Garcetti led City Council in 2007.  

The City was also able to modify the automatic salary hikes under the step increase program, resulting in major savings over the next thirty years.  

The City also agreed to establish a Strategic Workforce Development Task Force with the goal of hiring 5,000 new employees by the end of the contract on June 30, 2018.  This would include replacing retiring employees, resulting in a net increase of an estimated 3,000 workers. 

The City also agreed to establish a pension plan (Tier 3) for new civilian employees to replace the previous pension plan (Tier 2) that was unilaterally imposed by the City in 2012.  While the savings related to the new Tier 3 plan are $1.7 billion less over the next thirty years compared to Tier 2, the Tier 3 savings over thirty years compared to the current Tier 1 plan amounts to $5.2 billion. 

[Note: The present value of the $5.2 billion in savings is $1.2 billion.  This is equal to 15% of the unfunded pension liability for the City’s two pension plans of $8 billion assuming a 7.5% investment rate assumption, but only 9% of the $13.5 billion unfunded liability assuming a Warren Buffett’s recommended 6.5% investment rate assumption.] 

The new labor agreement also provides for a settlement agreement between the City and the unions over the acrimonious Tier 2 pension squabble.  

Unfortunately, the City was unable to achieve its goal of having City employees contribute 10% of the cost of their Cadillac healthcare plan. 

While Krekorian and Koretz were bubbling over about the new contract, the lower salary schedule, and the massive savings associated with the new pension tier for newly hired employees, they failed to consider the impact of this labor agreement on the City’s annual budget and its Structural Deficit. 

According to the City Administrative Officer’s budget outlook, the City was projecting a surplus of $36 million for the fiscal year ending June 30, 2019.  But this new contract will eliminate that surplus. 

Over the next four years (Fiscal Years 2017-2020), the CAO was projecting a budget gap of $37 million.  As a result of the new labor agreement, this deficit is estimated to balloon to between $300 and $400 million.  This also assumes the unlikely outcome that there will be no raises or increased benefits for sworn and civilian workers when their contracts expire on June 30, 2018.  

And this does not take into consideration the recent revelation that this year’s City budget is about $100 million in the hole because of larger than expected legal settlements and judgements. 

With these projected deficits, how will the City be able to afford to hire 3,000 new employees?  And this also raises the question whether the City has the management resources and information systems to effectively utilize its work force.  This concern is justified given Controller Ron Galperin’s damning audits of Street Services, Transportation, and Recreation and Parks. 

The City Council is expected to approve this new labor agreement on January 12, 2016. In the meantime, the Herb Wesson led City Council and Mayor Eric Garcetti need to address the impact of this new agreement on the City’s budget and its Structural Deficit.  

The City should also consider implementing two recommendations of the LA 2020 Commission that was established at the urging of Herb Wesson. 

The first is to establish an Office of Transparency and Accountability to oversee the City’s finances.  

The second is to form a Commission for Retirement Security to analyze the City’s pension plans and make “concrete recommendations on how to achieve equilibrium on retirement costs by 2020.”  This would help justify the claims of $16 billion in savings over the next thirty years from this new agreement (an average of over $500 million a year!) as well as shed light on the impact of reducing the investment rate assumption to 6.5% as recommended by Warren Buffett. 

Angelenos deserve to know what the hell is going on with the City’s budget and whether we can afford this new labor contract.  And without transparency, the City’s (and the County’s) efforts to increase our taxes will be met with a resounding NO WAY. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

CityWatch

Vol 13 Issue 100

Pub: Dec 11, 2015

LA WATCHDOG--In 368 days, we will be voting for the next President of the United States.  In very blue California, the outcome is not in doubt.  Nor is the party of our next US Senator.  

On the other hand, the statewide ballot measures will be a donnybrook as special interests with wads of campaign cash are looking to raid our wallets and to prevent citizens from authorizing the issuance of billions in debt on major public works projects. 

The educational establishment, the teachers’ unions, and the building industry have placed a $9 billion general obligation school bond measure on the ballot.  This will end up costing taxpayers an average of $500 million a year for the next 35 years, a total of $17.6 billion, including $8.6 billion in interest.  The proceeds from these bonds will be used for new construction ($3 billion), modernization of K-12 public school facilities ($3 billion), charter schools ($1 billion), and California Community Colleges ($1 billion). 

The “No Blank Checks Initiative” has also qualified for the ballot.  This measure would require a public vote to approve any revenue bonds on state projects that exceed $2 billion.  Unlike general obligation bonds that are serviced with our tax dollars, revenue bonds rely on the cash flow of the particular project which, in turn, relies on the fees paid by the citizens using the services of the particular project.  

The provisions of this constitutional amendment would apply to Governor Brown’s two legacy pet projects, the $68 billion High Speed Rail boondoggle connecting Los Angeles and San Francisco and the $15 billion Twin Tunnels that will convey hundreds of billions of gallons of water every year from the Sacramento River to the California Aqueduct that serves Southern California and to farms in the Central Valley.     

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While No Blank Checks only qualified for the ballot on November 2, the political establishment and business and labor groups are already trashing this initiative that will limit their ability to pick the pockets of the citizens of California unless they have our approval. The opposition to this citizen empowering amendment will no doubt devote huge resources to defeat this measure sponsored by Dean Cortopassi, a Stockton based farmer who opposes the Twin Tunnels. 

We can also expect several other tax measures on the ballot, including efforts by the public sector unions to extend or make permanent the temporary tax increases imposed by Proposition 30 that was approved by 55% of the voters in November of 2012.  This measure increased our sales tax by a quarter of a cent until December 31, 2018 and the marginal tax rate on higher incomes ($250,00 and up) until December 31, 2016.  

Alternatively, State Senator Bob Hertzberg (D-Van Nuys) is considering a proposal to extend the sales tax to include services in order to smooth out the revenue swings of our boom or bust tax system that relies heavily on upper income residents and a good stock market.  But under the guise of reform, Hertzberg wants to raise $10 billion in additional revenue for the State.  Otherwise, to use the $10 Billion Man’s own words, “it’s not worth the effort.”  

But that’s not all folks!!!! 

There is also an effort to increase our gas tax to fund the $59 billion repair bill for our highways as designated funds were diverted by our free spending Legislature to pay for ever increasing personnel costs, including ballooning pension contributions. 

Other political insiders and union leaders are pushing for a “Split Roll” ballot measure where Proposition 13 would not apply to commercial properties, raising an estimated $9 billion for local governments. Of course, these proponents will fail to mention that these additional taxes will be passed along to us through higher prices for goods and services.  

In Los Angeles County, Metro and the Board of Supervisors are preparing to place on the ballot yet another half cent increase in our sales tax to pay for transportation projects.  Mayor Garcetti has endorsed this tax increase, in large part because the Local Return provision will kick back 25% of the tax revenue to our profligate City which, despite huge increases in tax revenues, still has not eliminated its Structural Deficit or made an effort to Live Within Its Means. 

Prepare for barrage of propaganda and a heavily financed assault on our wallets by the fiscally irresponsible politicians, the public sector unions, self-serving special interests, and their ring kissing cronies.  But until the City, County, and State reform their finances and inefficient operations, we need to reject their efforts to pick our pockets.  

After all, we are already one the highest taxed states in the nation, right up there with financial basket cases like New York, New Jersey, and Connecticut.  

We are not striving to be Number One.  Just Say No.  

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

CityWatch

Vol 13 Issue 90

Pub: Nov 6, 2015

LA WATCHDOG--City Council President Herb Wesson likens the Los Angeles’ bid to be the Host City for the 2024 Summer Olympics as the “engagement.  It is not the wedding.  And now it’s time to work on the pre-nup.” 

But it is also reminiscent of the family that decides to have their daughter’s wedding at home to save money, but ends up taking out a third mortgage to finance the wedding and the sprucing up of their house. 

The Los Angeles 2024 Bid Committee and its supporters in City Hall tell us that the Olympics will generate a profit of over $150 million on revenue of almost $5 billion. 

This “conservative” profit projection also includes a contingency fee of $400 million as well as a payment to the City of $200 million to reimburse it for expenses such as police, fire, and traffic control. 

But this projection does not include any funds for over $2 billion of capital expenditures needed to construct the Olympic Village and the International Media Center and to renovate the Memorial Coliseum and other sporting venues. This amount may be short by a $1 to $2 billion as the cost for the Olympic Village may be seriously understated according to Zev Yaroslavsky, the former County Supervisor and City Councilman who is respected for his long record of fiscal responsibility. 

The City will also use the Olympics as a reason to “accelerate” spending on selected infrastructure projects, including extending the Purple Line to Century City and UCLA by 2024 and completing the revitalization of the Los Angeles River, Mayor Garcetti’s pet project. 

While this multibillion dollar construction boom will fuel our local economy, at least temporarily, the City may be on the hook for billions as a result of its agreement to indemnify the International Olympic Committee against any losses. 

For example, if the City was responsible for a $1 billion shortfall, Angelenos would be tagged for $130 million a year for the next ten years.  This would require about a 3% increase in our real estate taxes ($130 for the average home valued at $500,000).  Alternatively, the City could propose to slap us with a parcel tax ($160) or a quarter of a cent increase in our sales tax. 

But why should the Angelenos absorb 100% of the potential losses while 6 million other County residents derive significant benefits from the Olympics?  And why should Angelenos absorb 100% of the risk when any profits would benefit the State’s eight southernmost counties as is the case with LA84 Foundation? And why should the City take on this financial obligation when it cannot eliminate its Structural Deficit, balance its budget, or repair and maintain our lunar cratered streets?  

If the County of Los Angeles were to protect the IOC from a $1 billion loss, Angelenos tax liability would drop by 60%, where the average homeowner’s liability would be decreased to $50, down from $130 a year. 

Mayor Eric Garcetti and City Council President Herb Wesson are eloquent in promoting the City’s bid to be the Host City for the 2024 Summer Olympics. Unfortunately, the City’s track record does not inspire confidence.  

Rather than going it alone, the City should team up with the more efficient and fiscally responsible County.  And while that may limit Eric and Herb’s bragging rights, Angelenos will sleep better knowing that the County is working with the City to oversee the finances and operations of the 2024 Summer Olympics. 

And even though 80% of Angelenos support hosting the Olympics, we still have our doubts when it comes to footing the bill for potential losses. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

CityWatch

Vol 13 Issue 92

Pub: Nov 13, 2015

LA WATCHDOG--During the last year’s budget hearings, Los Angeles City Council Members Paul Krekorian, the Chair of the Budget and Finance Committee, and Paul Koretz, the Chair of the Personnel Committee, were pushing to increase the investment rate assumption for the City’s two underfunded pension plans to 8%, up from the current level of 7.5%.  

This would have the dual effect of lowering the then $8 billion unfunded pension liability and decreasing the City’s Annual Required Contribution by an estimated $200 million.  This additional cash would allow the City Council to fund the new budget busting labor contract for the City’s 20,000 civilian workers, begin the repair of our lunar crated streets, or pay for new initiatives or pet projects.    

Both Krekorian and Koretz felt that this increase was reasonable since the five year average return was over 13% for both the Los Angeles City Employees’ Retirement System (“LACERS”) and the Los Angeles Fire & Police Pension Plans (“FPP”). In addition, the rate of return for the fiscal year ending June 30, 2014 was a bonkers 18%.

Unfortunately, the following year’s rate of return for the two plans averaged 3.3%, resulting in a $400 million increase in the unfunded pension liability.   

But rather than increasing the investment rate assumption, many well respected investors believe that the investment rate assumption should be lowered to 6.5% (or lower).  This would include the legendary Warren Buffett (photo above) of Berkshire Hathaway whose investment returns over the last 40 years are double those of the Standard & Poor’s 500.

For comparison, corporate pension plans rely on a 4% investment rate assumption according to a recent article by Melody Petersen in our Los Angeles Times. 

The Times also disclosed that the $300 billion California Public Employees’ Retirement System (otherwise known as CalPERS) is reducing its investment rate assumption to 6.5% from 7.5% over the next 20 years, granted more slowly than the more aggressive schedule advocated by Governor Jerry Brown. 

If the investment rate assumption for City’s two pension plans was 6.5%, the unfunded pension liability at June 30, 2015 would increase to $13.5 billion, up from $8 billion, while the funded ratio would decrease to 71% from 80%. 

(On a relatively positive note, LACERS and FPP have been funding their Other Post-Employment Benefits (read medical) since the late 1980’s.  The County and the State have not funded any of these obligations, resulting in unfunded liabilities of $27 billion and $71 billion, respectively).   

The lower rate would also increase the Annual Required Contribution by an estimated 33% to $1.45 billion, a $350 million increase from the current level of $1.1 billion.  The increased contribution would chew up 27% of the General Fund, up from the current level of 20%.  This compares to 10% in 2005 when Antonio Villaraigosa became our mayor. 

The City’s pension plans have generated considerable controversy over the last decade as they have devoured an ever increasing share of the budget, crowding out other pressing needs such as increased public safety; the repair of our streets, sidewalks, and parks; and affordable housing and homelessness.  And even with the new tiers that were established for recently hired sworn and civilian workers, the pension plans will continue to consume a disproportionate chunk of the City’s budget as they rely on the overly optimistic rate of return of 7.5%.  

One of the key recommendations of the LA 2020 Commission was to “establish a Commission on Retirement Security to review the City’s retirement obligations in order to promote an accurate understanding of the facts.”  But this call for action has not seen the light of day as City Council President Herb Wesson, an original sponsor of the LA 2020 Commission and a smiling participant in the press conferences, has buried it deep in the bowels of City Hall. 

Governor Brown, CalPERS, and the $188 billion California State Teachers Retirement System have taken meaningful steps to address the State’s underfunded pension plans and the ever increasing contributions required by state and local governments.  Now is time for the City of Los Angeles to come clean about the facts surrounding its severely underfunded pension plans and develop “concrete recommendations to achieve equilibrium on retirement costs by 2020.”

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

CityWatch

Vol 13 Issue 94

Pub: Nov 20, 2015

LA WATCHDOG--“The power to rezone is the power to create great wealth and using that power wrongfully is just as bad as stealing public money.” 

This comment by Superior Court Judge Pearce Young in the 1969 sentencing of Los Angeles City Councilman Thomas Shepard on his conviction for bribery in connection with rezoning of land in the San Fernando Valley still appears to be the operative as members of the City Council have no problem granting special favors in return for campaign contributions and other monetary favors. 

Earlier this year, Mayor Eric Garcetti, the Planning and Land Use Management Committee led by Jose Huizar and Mitch Englander, and the Herb Wesson led City Council approved a 27 story luxury high rise in Koreatown.  This political action overturned the unanimous decision of the City Planning Commission to reject this oversized development because it was not compatible with this low rise, densely populated, lower income neighborhood that just happened to be located in Herb Wesson’s Council District. 

This zoning change will provide the Beverly Hills developer, Michael Hakim, with a windfall profit estimated to be in the range of $15 to $20 million.  In return, Hakim will “contribute” $1,000,000 to the City’s Affordable Housing Trust Fund and $250,000 to a Community Benefits Trust Fund, both of which are controlled by Council President Herb Wesson. 

In February of 2013, Wesson orchestrated a $1 a year lease with the Korean American Museum for a 24,540 square foot parking lot on the southwest corner of Vermont and 6th Street.  This property had been appraised for more than $8 million.  This coincided with several generous contributions to Wesson’s “Yes on Proposition A” slush fund that promoted the permanent half cent increase in our sales tax.  This measure was rejected by 55% of the voters in March of 2013. 

In June of 2015, Wesson introduced a motion that would authorize the Korean American Museum to expand its development from a three story, 45,000 square foot museum to a seven story, 85,000 square foot building consisting of a two story, 28,375 square foot museum and five stories consisting of over 100 market rate apartments. 

While Wesson hailed this as a “creative partnership,” there is an unpleasant aroma surrounding this deal involving a bargain basement long term lease for a very valuable City property to a nonprofit museum that is engaging in a for profit residential development. 

In 2011, just down the street at Vermont and Wilshire, Wesson arranged for $17.5 million in loans from the City and the Community Redevelopment Agency to J.H. Snyder Company, a well-heeled, successful developer, to help finance its $200 million apartment and retail complex.  In less than three years from the date of the loans, Snyder flipped the two towers, pocketing a profit in the range of $75 to $100 million.  This raises the question as to whether these loans were necessary, other to augment Snyder’s return on its equity investment that is estimated to be in excess of 100%.   

Snyder’s strong relationship with Wesson and his reputation as a successful developer allowed him to take over the failed development of the CRA controlled property at 1601 North Vine, strategically located between Sunset and Hollywood Boulevards.  This deal allows Snyder to buy this 18,208 square foot lot that is permitted for an eight story, 124,000 square foot office building for the bargain basement price of $825,000.  This is considerably less than the City’s cost of $6.5 million.  

Of course, it does not hurt Snyder was a generous contributor to the Wesson’s “Yes on Proposition A” slush fund as well as many other local campaigns. 

The power to rezone properties on a spot basis is poor public policy because residents and their neighborhoods are subject to the whims of the City Council who, despite their protests that they are representing our best interests, are heavily influenced by real estate developers, their lawyers and lobbyists, and their wads of cash.  All we need to do is look at the overdevelopment in Hollywood, DTLA, the Westside, and the Valley that is clogging our streets and making our lives miserable.  

The lack of trust in the Herb Wesson led City Council will result in voters approving “The Neighborhood Integrity Initiative,” a proposed ballot measure that will limit the powers of the City Council to spot zone for the benefit of the campaign funding real estate developers.  

More later on this long overdue ballot measure!  

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council.  Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com)

-cw

 

 

 

CityWatch

Vol 13 Issue 93

Pub: Nov 17, 2015

LA WATCHDOG - (Editor’s Note: In light of the online Bloomberg news report on Tuesday, it seemed appropriate to revisit this Jack Humphreville LA Watchdog column from 2009 on the same subject … proving Jack is ahead of his time.)

Why is the City Council hell bent on approving the huge five year wage package for IBEW workers at the Department of Water and Power without adequate hearings and transparency?

LA WATCHDOG - Over the last six years, Los Angeles City payroll and related benefits have increased by $720 million, a 24% bump, as average salaries have increased to $82,000 a year, not including very generous benefits. And contributions to the City’s two pension plans have increased by $540 million (over 150%) as pension liabilities ballooned by almost $10 billion, a 40% increase.

So what is the source of all the cash that is needed to fund these out of control personnel costs?

One source of ready cash was the money needed to maintain and repair our infrastructure: our streets and bridges (ranked the worst in the nation), sidewalks, parks, stormwater drains, street lights, and buildings.  The City has also short changed its motor vehicle fleet such as police cars, fire engines, and garbage trucks and has neglected to modernize our Stone Age computer systems and hardware.

LA WATCHDOG - Hallelujah.  We have a Ratepayers Advocate.

But now the heavy lifting begins as the newly appointed Ratepayers Advocate, Dr. Frederick H. Pickel, must review and analyze the proposed three year increases of 22% and 25% in our water and power rates, respectively.And it appears we have a winner in Dr. Pickel, the unanimous selection of the Citizens Committee.  

Beginning in early December, this volunteer Committee, along with Heather Renschler of the executive search firm of Ralph Anderson & Associates, did yeoman’s work, screening over 60 qualifying resumes and conducting two rounds of in person interviews, including the final in depth interviews that required the four finalists to review and analyze reams of information about our Department of Water and Power and the proposed rate increases.

LA'S BUDGET CRISIS - The Mayor and his staff have developed a very good Budget Survey that addresses the issues and choices concerning next year’s budget deficit that is estimated by the City Administrative Officer to be in the range of $200 million to $250 million.

The survey questions involve Budget Priorities, Potential Service Reductions, a Sustainable Workforce, Revenue Opportunities, Public Private Partnerships, and Improved Financial Management Tools. There is also the opportunity to provide ample comment.

LA’S BUDGET CRISIS - The Mayor wants your thoughts on how to close next year’s budget deficit that is expected to be over $200 million in the red.

LA WATCHDOG - Of the 22 commissioners for the Department of Water and Power, the Port of Los Angeles, Los Angeles World Airports, and Public Works, 50% are women and 60% are non white.  Over 40% are lawyers.  About two thirds work for governmental or non profit organizations. Of the one third of the commissioners that work in the for profit sector, over 60% are lawyers.

These four City Departments have budgets of over $5 billion and are responsible for about 20,000 positions / employees, about 40% of the City’s work force.

However, of particular note, none of the commissioners have specific industry expertise or management experience in large complex organizations.

Why? As one elected official commented, “Rest assured, with maybe one exception, the Mayor’s recent appointments of politically pliant “Know Nothings” is not by accident!”

No wonder the City is broke!

 

Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com. He can be reached at: lajack@gmail.com ) –cw

 

 

Volume 7, Issue 97

November 27, 2009

LA WATCHDOG - Throughout the recent discussions regarding the Department of Water and Power and the Energy Cost Adjustment Factor, there have been few if any concrete discussions about the impact on electric rates over the next ten years, especially as it relates to the Mayor’s 2020 goals of No Coal and 40% Renewables.

Needless to say, the lack of a Strategic Plan and an Integrated Resource Plan makes it very difficult to predict the costs and the impact on rates.

However, over the next decade, it would not be surprising if DWP had capital expenditures in excess of $10 billion.  This in itself will have a dramatic impact on rates.  

And this is one of the primary reasons for Transparency recommended in the Independent Fiscal Review by PA Consulting.  The existing and future programs for Alternative Energy, Demand Supply Management, and Energy Efficiency would be separated from the current Energy Cost Adjustment Factor and would be subject to the automatic review and approval of the City Council, just like Base Rates Increases that were approved in April 2008.

With Transparency, Ratepayers would have a much better understanding of why their rates were increasing as compared to the current black box methodology.

But how much will rates increase over the next decade? To date, the vocal and politically influential environmental community, along with the Mayor and his blackmailing minions, Carr, Carson and Szabo (none of whom know an amp from an ohm), have also been silent as to the costs and impact on residential and commercial Ratepayers.

However, when one environmental hot shot was asked if an increase of 25% a year for the next decade was reasonable, the response was: “25% a year is not unreasonable.”

If rates increased at 25% a year for the next ten years, our rates would increase over nine times, from 12.2¢ to 113.6¢ per kilowatt-hour.

No wonder the Mayor and the environmental community do not want Transparency.

(Jack Humphreville writes LA Watchdog for CityWatch He is  the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com He can be reached at lajack@gmail.com)  -cw





CityWatch
Vol 8 Issue 26
Pub: Apr 2, 2010

 

LA WATCHDOG - IF the proposed $254 million Transfer Fee from the Power System of the Department of Water and Power to the City’s General Fund is not permitted pursuant to the recently passed Proposition 26 (Super Majority Vote Required to Pass New Taxes and Fees Act), then the City’s projected deficit for the fiscal year beginning July 1, 2011 will soar to $712 million, a 55% increase over the current projection of $458 million.  (Link)

The less than transparent Transfer Fee, equal to 8% of the Power System’s prior year retail revenues, is one of the largest sources of cash for the City’s General Fund, representing 5.8% of the $4.38 billion of General Receipts. The Transfer Fee is typically paid in four installments, beginning in March when about 60% is put on the Money Train to City Hall.

However, the Transfer Fee may be illegal based on the provisions of Proposition 26 which was passed by 53% of the voters in November 2010.  Prop 26 requires a two-thirds vote of the electorate to pass fees that are not related to the actual costs of the services provided.

As a result, on February 4, the City of Redding was sued in Superior Court to prevent the Redding Electric Utility, a city department like DWP, from imposing a “Payment In-Lieu of Taxes” of almost $6 million on the Ratepayers. 

LA’s General Fund loss of the $254 million Transfer Fee from the DWP Power System will throw a monkey wrench into the current budget negotiations. 

As it is, the City is having a difficult time closing the projected $458 million General Fund Deficit, relying on yet to be negotiated savings from the most sacred of all cows, the Police Department and its very police protective league, the Fire Department and its obstreperous union, and the unionized Civilian Workforce.  There are also over $100 million of “Reductions and Efficiencies” which need to be implemented.

There are also a few more gimmicks that involve dumping unfunded mandates on Special Revenue departments and issuing commercial paper to pay off existing Convention Center debt and to fund pension fund payments related to the fiscally irresponsible Early Retirement Inventive Plan that added over $200 million to the unfunded pension liability of the 60% funded Los Angeles City Employee Retirement System. 

This is the equivalent of paying your second or third mortgage with a credit card that has a low teaser rate.

And remember, the current budget does not provide for the adequate repair and maintenance of our infrastructure (such as our lunar crater streets, sidewalks, and parks) or the proper funding of the $11.7 billion unfunded pension liability, including about $6 billion of the 68% funded Fire and Police Pension Plans. 

And these “devastating” reductions do not even address the projected deficit of $281 million for the following fiscal year beginning July 1, 2012. 

Needless to say, The Mayor Who Broke LA will go into high gear, denouncing Prop 26 and saying it does not apply to the 8% Transfer Fee.  But that will be for the courts to decide. 

In the meantime, the municipal bond investment community, including the influential credit rating agencies, will be making their own judgments on the merits of the City’s June offering of Tax and Revenue Anticipation Notes that are required to fund the City’s operations for the first half of the fiscal year. 

But who would buy the very risky Tax and Revenue Anticipation Notes?

Individual retail investors who are focused on the preservation of capital would pass because of the high level of risk.

The most likely buyers would be large mutual funds who are stretching for yield. But these are the same mutual funds that conservative investors buy. But who are these mutual funds that are rolling the dice with investor money?  More than likely the large mutual fund complexes and banks such as Fidelity, Vanguard, Wells Fargo, T Rowe Price, Bank of America, JP Morgan, Merrill Lynch, Schwab, Northern Trust, and a host of other gambling investment funds.

But even if the yield hogs invested in this highly speculative junk paper, they would focus on the shorter maturities that mature within seven months, not like the current issue that has maturities of over $600 million in May and June.

To insure a successful offering of Notes that will provide the cash to fund the City’s operations, the City needs to address the $712 million budget deficit in a manner that is acceptable to the investment community.  And the City needs to brace itself for very high interest rates.  Otherwise, the City will run out of cash.

One alternative is for the City to ask the voters to approve the 8% Transfer Fee.  But what is the likelihood that voters would approve such a tax or a fee given the electorate’s lack of trust and confidence in the Mayor, City Hall, and the campaign funding leadership of City’s unions?

At the same time, DWP, which has its own set of trust issues, is asking for another significant increase in our water and power base rates.

But if our Elected Elite placed the 8% Transfer Fee on the ballot, what would the Citizens of Los Angeles demand in return?

The City must address the need for true structural reform, including the development and implementation of a long term solvency plan that addresses the repair of our infrastructure; true pension reform as suggested by The Little Hoover Commission; work place reform that focuses on the efficient delivery of core services and the rationalization of the compensation, benefit, and seniority arrangements; and a complete reform of the collective bargaining process.

As an incentive to Ratepayers, the Transfer Fee also needs to be restructured whereby the transfer is equal to 5% of the Power System’s revenues, provided that it is not lower than the current level of $254 million, adjusted for inflation. 

The City must also establish a Citizens Advocate, consisting of non political independent grownups, which has the right to review and oversee the operations and finances of the City and its related entities, not dissimilar to the New York City’s Emergency Financial Control Board that was established in 1975 when the Big Apple almost tanked. 

While the loss of the $254 million Transfer Fee has draconian implications, it will force our Mayor Villaraigosa, Controller Wendy Greuel, City Council President Eric Garcetti and the rest of our Elected Elite to address its structural deficit and make the necessary and reasonable financial and work place reforms that will be demanded by the electorate. 

And who knows, the inability of DWP to put the Transfer Fee on the Money Train to City Hall may offset the proposed increase in our electricity rates. 

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com . He can be reached at:    lajack@gmail.com)             -cw





CityWatch
Vol 9 Issue 38
Pub: May 13, 2011


CITY HALL MEMO: GARAGE SALE IS ON AGAIN? - In February, the City Council voted unanimously to kill the fiscally irresponsible fire sale of nine of the City’s parking garages and their over 8,200 parking spaces. This was contrary to the consequences-be-damned Mayor’s strong support of the sale, otherwise known as the Public Private Partnership. (Link)

But once again, the issue of the sale of our parking garages has surfaced as the result of inquiries from fee grubbing investment banks and private equity firms trying to take advantage of the City’s financial distress by offering our Elected Elite upfront cash, cash being the most powerful aphrodisiac known to politicians.

In a May 4 Inter-Departmental memo (see below) to the Budget and Finance Committee of the City Council, Miguel Santana, the City Administrative Officer, indicated that his office had received several “unsolicited offers” with respect to the nine parking garages.

These offers included a proposal to sell the parking garages for an upfront payment of over $200 million, similar to the proposals that were rejected by the City Council.  There are also convoluted Lease-Leaseback transactions that involve considerable financial engineering.  But again, they all appear to involve upfront cash in return for the ability to operate the parking garages.

But such offers are hardly unsolicited.  More than likely, there have been many back channel, off the record, not for attribution, back and forth conversations involving investment bankers, lawyers, consultants, city officials, Council Members, the Mayor, and their staffs and campaign consultants.

Santana also suggested that the City consider a management contract with an experienced private company to operate and manage the garages, accompanied by an upfront payment to pay off the parking related debt and upgrade the systems and technology.

As part of his recommendation, the City Administrative Officer suggested that the City Council address this issue in a CLOSED SESSION, in part because one the investment banks believed its offer contained proprietary and confidential information.

But closed sessions are totally unacceptable to the public, in large part because Angelenos do not trust City Hall to do what is in the best interests of the City or the impacted communities such as Hollywood, Downtown, and Westwood. 

However, since February, there has been considerable progress, especially as it relates to including the local impacted communities in the discussions and decision making.

In Westwood, there have been constructive conversations between the Westwood community and its Council Member, Paul Koretz, to develop a “fair and productive parking rate plan and parking district.”  It also includes the possible introduction of diagonal parking. 

And according to Eric Garcetti, Hollywood is working on the idea of a parking district.

Garcetti also indicated that a transaction involving the parking garages is not true structural reform, but rather a “short-sighted, one-off idea” that is not in the best interests of our neighborhoods.

As we have recommended in the past, the City should retain an experienced and well capitalized management company to oversee the management of the parking garages; assist in the collection of the 10% Parking Tax from private operators; develop an operating, rate, technology, and capital investment plan for each facility; and assist in the refinancing of the garages and the Parking Fund.

This concept should also be expanded to include the City’s 38,000 on-street parking meters. (Link)

And most importantly, there should be no more closed sessions.  We need an open and transparent process where the impacted communities and other citizens groups are intimately involved in the development of local plans for both the parking garages and on-street parking. 

As for the memo to the Budget and Finance Committee, the City Council spoke in February against the fire sale of our parking garages.  As such, the City Administrative Officer should dismiss these vulture investors and investment bankers and focus on working with the local communities to develop viable parking strategies and alternatives.    


●●●
Insider City Hall Memo

CITY OF LOS ANGELES
INTER-DEPARTMENTAL CORRESPONDENCE
Memo 113


May 4, 2011
To:       Budget and Finance Committee
From:   Miguel A. Santana, City Administrative Officer

Subject: PARKING ASSET OPTIONS

Since the Council took action to terminate the Public-Private Partnership (P3) for certain City parking structures in February 2011, this Office has received several unsolicited offers with respect to these assets. The following is a summary of those proposals.

Public-Private Partnership (P3) for Parking Revenue to City: over $200 million

We received a proposal from an investment bank offering an upfront payment of over $200 million in exchange for a long-term concession and lease agreement for the nine parking structures previously contemplated under the P3 parking project. The bank, in partnership with an experienced operator, would assume management and operation of the facilities, including technological and capital investments for a period of 50 years.

The City Attorney has advised that we cannot release the offer, absent explicit consent by the proposer, because the proposer has requested that it be kept proprietary and confidential. The proposer seeks to maintain its competitive position by keeping the offer confidential. If the Council wants to pursue further, instructions must be provided to schedule this item for closed session so the Council can provide this Office with negotiation instructions.

Lease-Leaseback Revenue to City: TBD

We received two offers for a lease-leaseback transaction. One proposal by an investment firm in partnership with an experienced operator specified a term of 20 to 35 years and provided that the City would retain operational control, including rate setting authority and usage. The firm would make an upfront lease payment in exchange for annual lease payments by City over the term of the agreement. The City would retain revenues in excess ·of lease payments.

The second proposal by an infrastructure firm specified a term of 15 to 30 years and provides that the firm purchases the buildings, but the City retains ownership of the land, with the title reverting to the City at the end of the term. The firm would lease the facility back to the City based on tax-exempt bond rates.

Lease-Leaseback Alternative Revenue to City: TBD

We received another offer for a transaction similar to a lease-leaseback transaction wherein the firm would pay the City an up-front inducement fee structured as debt and the City would make payment to the firm for management fees and debt service over a 25 year term. Revenues would be split 95 percent to the City, 5 percent to the firm. An experienced operator would be retained to manage and operate the structures.

The issue of currently outstanding debt and associated restrictions would need to be taken into consideration and may present obstacles that cannot be satisfactorily mitigated by some of these proposed transactions. Additional discussions would be needed to explore and further refine the terms and conditions of these proposed transactions, if the Council wishes to further pursue these offers. These offers would also be subject to a competitive bid process.

Management Contract Revenue to City: TBD

Another option would be a management contract for the City's parking structures. The City would contract with a Private Parking Operator to operate and manage all of the City's parking structures with either an upfront payment to payoff the debt, revenue sharing or a combination of both. Also contemplated is having this Operator upgrade the capital equipment with more efficient payment technology to reduce costs and increase revenue collection. This contract could also include meters and/or parking lots.

FISCAL IMPACT STATEMENT

Additional investigation and negotiations would be required in order to further assess the financial impacts of these offers.

RECOMMENDATIONS

If the Council determines that one of these proposals aligns with the Council's goals for optimizing the City's parking structures, direct the City Clerk to schedule a closed session hearing so that Council can provide the City Administrative Officer negotiation instructions.

●●●


(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com. He can be reached at:   lajack@gmail.com)             -cw




CityWatch
Vol 9 Issue 37
Pub: May 10, 2011



DWP RATES ARE GOING UP BUT …  - At the Tuesday meeting of the Board of Commissioners of our Department of Water and Power, General Manager Ron Nichols informed the Board that the DWP intended to increase our water and power rates. 

According to the timetable, the unspecified rate increases would take effect in November, but only after a thorough public and transparent review that would begin May 23.  This would include “stakeholder workshops and briefings” as well as working with the City Council and its Energy and Environment Committee.

This public review will need to include a thorough analysis of the DWP’s Strategic Plan which calls for outlays of $60 billion over the next 10 years, $45 billion for the Power System and $15 billion for the Water System.  We will also need to get a better understanding of the Integrated Resources Plan and the Urban Water Management Plan and the impact on rates and the credit ratings of both the Water and Power Systems.

Ratepayers understand all too well that water and power rates are going to increase, in large part because of the call for renewable energy, the increased regulatory requirements, and the need to repair and maintain the DWP’s infrastructure.

At the same time, Ratepayers must be assured that their money is being used efficiently.  The recent announcement by General Manager Nichols that DWP is reducing operating costs by $440 million over the next three years is obviously a step in the right direction. 

But Ratepayers need further assurances.  DWP needs to benchmark its operations and compare them to other regional utilities, both investor and municipally owned, and to other comparable city workers.  And Ratepayers need to get a better understanding of the IBEW Labor Premium, estimated to be over $250 million a year.

We also need a better understanding of the relationship between the DWP and the City, the pricing of any services, and the impact of Proposition 26 that requires the two-thirds approval of the voters for certain fees and taxes. 

And, we also need a better understanding of the DWP’s pension plan and its unfunded liability.  While the actuarial unfunded liability is $1.6 billion (81% funded), the unfunded liability based on the market value of the assets is $2.6 billion (70% funded).  This assumes an Investment Rate Assumption of 7.75%, considerably higher than the 6% and 6.5% recommended by Warren Buffett and Wilshire Associates.

An integral part of the process will be the Energy and Environment Committee of the City Council.  Fortunately, the City Council has retained PA Consulting to provide an independent review of the proposed increases in our water and power rates.

PA Consulting is very familiar with DWP, having completed the Charter mandated Industrial, Economic, and Administrative Survey in February 2009.  More importantly, PA Consulting did a first class job in analyzing the Energy Cost Adjustment Factor in February 2010 and then working with the City Council throughout the Mayor induced ECAF Fiasco.

But where are the Ratepayer Advocate and the Office of Public Accountability?

On March 8, almost 80% of the voters approved Measure I that authorized the Office of Public Accountability and the Ratepayer Advocate, to be effective July 1.  But during the last two months, little progress has been made other than a six page memo dated April 25. Compare this to the three weeks that it took the City Council to approve Measure B, the $4 billion plus Solar Initiative boondoggle that was a payback to Union Bo$$ Brian D’Arcy, the campaign funding, public be damned business manager of the IBEW, the DWP’s domineering union.

This is the same Union Bo$$ D’Arcy who pressured the IBEW Eight (Garcetti, Hahn, Zine, Wesson, Alarcon, Reyes, Huizar, and LaBonge) to water down Measure I and veto the ballot measure that would have allowed the City Council to remove the DWP General Manager or any Commissioner with a two-thirds vote.

While DWP customers understand that rates are going to go up, the Ratepayer Advocate needs to represent the underrepresented and underfunded Ratepayers to make sure that their interests are duly considered and that they are not going to be shafted. 

On the other hand, environmentalists have well funded organizations that rake in hundreds of millions of dollars of year in revenue to employ their paid advocates.  And the IBEW is certainly well represented at City Hall, especially since the IBEW was the major contributor to Mayor Villaraigosa and Controller Wendy Greuel.

Before approving any rate increases, the Office of Public Accountability and the Ratepayer Advocate must be established in a proper manner so that they can duly represent the Ratepayers. The DWP needs the trust and confidence of the Ratepayers and all Angelenos.

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com. He can be reached at:  lajack@gmail.com)             -cw






CityWatch
Vol 9 Issue 36
Pub: May 6, 2011

DODGER DOLLAR DILEMMA - The Dodgers once again do not have enough money to meet their $8.25 million payroll at the end of May, according to Bill Shaikin of The Los Angeles Times, the leading voice on the financial woes of the Dodgers and their beleaguered 50% owner, Frank McCourt, the “irresponsible” Boston Parking Lot Attendant. (Link)

This crunch is after Frank borrowed $30 million from Fox Sports last month to meet the two April payrolls and the first payroll in May. The Fox Sports loan was after his family’s Boston based business, McCourt Construction (www.McCourtConstruction.com), prudently refused to extend credit to its wayward son.

But why are the Dodgers short of cash, especially now that the season has started and the cash is rolling in from attendance, concessions, and parking? For the first 18 games, while attendance is down 15.5%, the 650,000 fans generated revenues in excess of $25 million.

There is a very simple answer.  Frank has squandered all of the money received in advance from the season ticket sales to pay interest and principal on over $425 million in debt and support his Big Dog lifestyle.  And more than likely, he has also spent any advances related to broadcast rights and advertising sales.

To give you an idea of how much money Frank blew, if the Dodgers sold 20,000 season tickets for 81 home games at $20 per game, the team would have received over $32 million before the start of spring training. 

The parking revenues are not available since they are already pledged to secure borrowings on the Chavez Ravine land, which borrowings were part of the over $100 million that Frank looted from the Dodgers.

But what is truly amazing is that Frank has the audacity to question why the Commissioner of Baseball inserted Tom Schieffer to monitor the business and financial affairs of the Dodgers and its related assets.

But there is some good news for Dodger fans.  Now that Frank has depleted the Dodgers’ treasury of money that it is needed to pay tomorrow’s payroll and expenses, money that it has not “earned,” this trustee of Georgetown University has demonstrated to the world that he is morally and fiscally bankrupt, does not deserve the trust of Major League Baseball, is “not in the best interest of the game,” and is unfit to own the City’s beloved Dodgers. 

But as Frank knows, life is full of second chances.  It is the American way. So if life gets really tough for The Boston Parking Lot Attendant, he can still hang out with the Big Dogs, parking their cars at Dodger Stadium, or even better, at Fenway Park.

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com. He can be reached at:  lajack@gmail.com)             -cw





CityWatch
Vol 9 Issue 36
Pub: May 6, 2011



LA WATCHDOG - Janice Hahn, a candidate for the Congressional seat recently vacated by Jane Harman, is not a friend of the Ratepayers of our Department of Water and Power. 

Just this last fall, Hahn was a member of the IBEW Eight (which includes LA City Councilmembers Wesson, Alarcon, Reyes, wannabe Controller Zine, Garcetti, and Huizar) that watered down the Ratepayers Advocate ballot measure in response to Union Bo$$ Brian D’Arcy’s fear of increased transparency and accountability in the operations and finances of DWP. 

Yet, during the citywide forums on the proposed ballot measures, Hahn supported the Ratepayers Advocate Term Sheet that called for a well funded, empowered, and truly independent Ratepayers Advocate to oversee the operations, finances, and management of DWP on a timely and continuous basis.

Hahn and the other members of the IBEW Eight also supported Mayor Villaraigosa and Union Bo$$ D’Arcy by voting not to place on the ballot a measure that would have permitted the City Council to remove the DWP General Manager or a Commissioner with a two-thirds vote.

In the spring of 2010, Hahn was closely involved in Mayor Villaraigosa’s effort to increase our electricity rates by a breath taking 28%. She and Alarcon were the only Council Members to vote against the City Council asserting jurisdiction over the DWP Board of Commissioners action to implement these massive rate increases. 

She and her co-conspirator Richard Alarcon, with the support of Mayor Villaraigosa, also introduced a poorly conceived motion that called for affirming the 28% increase and a “Compromise Plan” that would have increased the exposure of Ratepayers to the Energy Cost Adjustment Factor.  This motion received only two votes.

As a result, the Mayor created the ECAF Fiasco as he tried to extort the City Council into approving the 28% increase by threatening to withhold $73.5 million of the DWP transfer to the City’s cash starved General Fund.

In 2009, Hahn was also one of the leading proponents of Measure B, the Solar Initiative that was a payback to campaign funding Union Bo$$ D’Arcy, the public-be-damned business manager of the IBEW, the DWP’s dominant union. But the blonde Hahn was clueless as to the financial impact of this Solar Initiative on Ratepayers.

Hahn was also a leading proponent of the 2008 increases in our water and power base rates, once again not understanding the impact on ratepayers. She was a strong supporter of the Power System’s Rate Restructuring Plan and the Water System’s Shortage Year Water Rates, both of which resulted in huge increases in the bimonthly bills of homeowners.

Hahn has also demonstrated that she is unwilling to make the tough decisions that are needed to solve the City’s structural budget deficit.  While she is good at giving lip service to balancing the budget, she is unwilling to take the necessary actions out of fear of offending her campaign funding Partners in Labor, putting her own political interests and those of the City Family ahead of the fiscal integrity of the City and the best interests of Citizens of Los Angeles.

On May 17, many Ratepayers will have the opportunity to vote for their next Congressional representative.  And in making that decision, Ratepayers may want to consider Hahn’s failure to watch out for their wallets. 

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com. He can be reached at: lajack@gmail.com)             -cw




CityWatch
Vol 9 Issue 35
Pub: May 3, 2011


DODGER DOG MOSTLY BALONEY - The impeding cash crisis of the Dodgers is avoidable according to Frank McCourt (“The Boston Parking Lot Attendant”) if only Bud Selig, the consensus building Commissioner of Baseball, would approve the Dodgers $3 billion, 17 year media rights deal with Fox Sports.  As part of this transaction, Fox Sports will advance the Dodgers $285 million, all of which Frank pledged to invest in the Dodgers.

But the Commissioner is right to defer judgment on the Fox Sports media rights deal until he has a better understanding of why there is a cash crisis. 

In his announcement appointing a Monitor to oversee the business and the finances of the Dodgers, the Commissioner said that his office “will continue its thorough investigation into the operations and finances of the Dodgers and related entities during the period of Mr. McCourt’s ownership.”

This investigation should include not only past dealings and promises, but detailed financial projections for the next five to ten years.  It should also include a thorough analysis of all the debt of the Dodgers and related entities, including those related to Chavez Ravine and the already pledged parking revenues.  This would include any debt and personal guarantees of the McCourt family and related entities, including the Los Angeles Marathon.  Such analysis would include the nature of the debt, the interest rates, the maturities, and any related covenants.

Needless to say, this investigation will be very revealing as to how Frank and Jamie essentially looted the Dodgers for over $100 million to support their billionaire life style, depriving the Dodgers of two or three key players.

The Commissioner would also be prudent to wait until the ownership of the Dodgers is settled, especially after the recent court decision that ruled that the agreement supporting Frank’s sole ownership claim was invalid.

The Commissioner also needs to get a better understanding of the rumored interest of the Internal Revenue Service in the tax returns of the Dodgers and the battling McCourts. 

The Commissioner must also analyze the media rights agreement and any other related agreements, such as Frank’s 35% interest in Fox’s Prime Ticket regional sports network.

Of particular interest is the use of the $285 million that Fox Sports is advancing to the Dodgers at the signing of the contract.  While Frank says that it will all be invested in the Dodgers, he has also said that this contract would pay for his divorce settlement with Jamie.  The rumored settlement of $150 million to $200 million is hardly an investment in the Dodgers.

This would essentially increase the Dodgers debt to around $600 million since this advance is the equivalent of debt.

Furthermore, the current lenders who are owed anywhere from $425 million to $500 million will have their hands out since their approval of the media rights deal is more than likely required, especially since the Dodgers are in default on their current indebtedness. 

And given the current banking environment and higher level of scrutiny by bank regulators, the existing lenders will more than likely require that a significant portion of the continuing media rights payments be directed towards repayment, not the team.

In addition, the Dodgers are Frank’s major source of cash.  And he needs this money to pay his high priced lawyers, to maintain his Big Dog lifestyle of multiple estates and private planes, and to repay any personal debts, such as the $30 million personal loan from Fox Sports which he used to meet payroll.

So, at the end of the day, how much is going to be invested in the Dodgers?  Not much.

Ever since the Commissioner announced that he was appointing an overseer of the Dodgers, Frank has suddenly become more visible and vocal, providing some great sound bites for the media, including that the Commissioner’s actions were un-American.  These comments, and those of Steve Soboroff who called the appointment of a Monitor “irresponsible,” only infuriated the Commissioner and a number of the owners.

But this past week, The Boston Parking Lot Attendant had gone to charm school, apologizing to the Dodger fans for his embarrassing behavior, saying in an interview with Bill Shaikin of The Los Angeles Times that he has learned his lesson and deserves a second chance. (Link

But that is all baloney. Frank will say anything to get his hands on the cash, regardless of the consequences.  This is not dissimilar to our corrupt Mayor Villaraigosa who has short changed the underfunded pension plans and failed to fund the maintenance and repair of our lunar crater streets.

Frank is not to be trusted.  The evidence is overwhelming: the Fox Sports media rights transaction, the $285 million advance, the $30 million personal loan where he failed to consult with the Commissioner, the looting of the Dodgers to support his billionaire life style, and his litigious and less than ethical business dealings back in Boston. And if that is not enough, just look at the way he treated Jamie, his wife of over 30 years and the mother of their four sons.

The Commissioner is right not to approve the Fox Sports media rights deal until he has a better understanding of The Boston Parking Lots Attendant’s long term operational and financial plans that provide for continuing investment in the team and a sizable investment of new equity to pay down debt and buy out either Jamie or Frank. 

The alternative is to encourage the sale of the Dodgers and their related assets to a well capitalized ownership group with a long term investment horizon that will be able to field a championship team and win back the support of the True Blue Dodger fans.

In the meantime, we are fortunate to have an experienced baseball and trustworthy executive as the Monitor to oversee the operations and finances of the Dodgers and protect the team and its fans from the un-American and irresponsible con artist from Boston.

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com .   He can be reached at:    lajack@gmail.com)    -cw







CityWatch
Vol 9 Issue 35
Pub: May 3, 2011


TICKETGATE - No sooner than the ink was dry on the April 1 Settlement Agreement where Mayor Antonio Villaraigosa essentially pleaded guilty to corruption in connection with his illegal use of over $200,000 of free tickets to prime time events such as the Lakers, Oscars and Emmys, he and his political operatives were hitting up the usual suspects of City Hall supplicants and ring kissers to fund the slap-on-the-wrist fine of $42,000 and the related legal expenses.

To facilitate the fund raising effort, our Ever So Clever Mayor has established three Legal Defense Funds: one for the City Ethics Commission and another for the California Fair Practices Political Commission.  However, the third Legal Defense Fund relates to the inquiry by the District Attorney who does not appear to be a party to the Settlement Agreement.

And not one to miss an opportunity to tap those ring kissers who can benefit from a well placed friend at City Hall, the Mayor is also soliciting “donations” to his Officeholder Account, essentially his personal slush fund.

For those of you who are interested, contributions are limited to $4,000 per person, $1,000 for each of the four accounts, or $8,000 per couple.

As we all know, lobbyists, lobbying firms, and MTA contractors are unable to make donations.  However, as is blatantly evident in the solicitation letter below, our ethically challenged Mayor and his cronies have no shame.  They are asking the lobbying and contractor communities to be “bundlers” by raising funds from “other sources.” 

The whole ticket scandal is a disgrace, beginning in late May when John Schwada of Fox 11 and Phil Willon of The Los Angeles Times blew the whistle on the Mayor’s ticket escapade. Initially, our ubiquitous Mayor said his attendance at these high profile events was part of his official duties.  But this lame excuse did not stand the light of day as it was apparent that the Mayor and his office devised ways to skirt the law and its intent.

Then the Mayor and his staff, aided by high priced outside lawyers and advisors that probably cost more than $100,000, spent 10 long months negotiating a well crafted Settlement Agreement which praised the Mayor for his cooperation and candor. Please!  He had no choice.  He was caught with both his hands in the cookie jar.  

And finally, the Settlement Agreement imposed a nickel dime fine relative to the value of the tickets, and then compounded that slap on the wrist by not having Villaraigosa pay the fine personally.  

Importantly, neither the City Ethics Commission nor the California Fair Practices Political Commission investigated how Mayor Villaraigosa manages to support his millionaire lifestyle on a mere $225,000 a year, despite ample anecdotal evidence that he is living way beyond his means.  Perhaps a visit by the Internal Revenue System would be appropriate.  

The failure of the politically appointed City Ethics Commission to vigorously enforce the law, compounded by its turning a blind eye to Villaraigosa’s finances and man about town life style, confirms that our insolvent City is for sale to those that are willing to grease the Mayor’s palm.

And if you have any doubts, read the following e mail that was sent out by one of the Mayor’s lobbyist buddies.

●●●


April 5, 2011

Dear [Jack],

Last week, the Fair Political Practices Commission released a copy of an agreement between that agency, the Los Angeles City Ethics Commission, and Major Villaraigosa resolving an investigation into the Mayor’s acceptance of free tickets to important entertainment industry events such as the Oscars, Emmy’s, and Grammy’s, sporting events, and concerts.  The agreement acknowledges that the Mayor attended these events in his “official capacity” to serve “an official purpose,” and that the Mayor had a “good faith and reasonable belief that he had no obligation to report his attendance” at these events on his annual gift reporting form “because he believed they fell within the exceptions” to the reporting requirements.

Nevertheless, the agencies determined that 34 of the 3,000 events attended by the Mayor did not fall within the exceptions, and imposed a combined agreed upon administrative penalty of approximately $42,000.  The agencies explained that the penalty is quite modest when compared to the possible maximum for a number of reasons, including the fact that the violation was “unintentional,” and caused by the Mayor’s “mistaken understanding” of his reporting requirements.  The Mayor’s “full cooperation,” “candor,” and lack of prior violations also helped lower the penalties.

We opened legal defense funds on behalf of the Mayor to pay the penalties and his legal bills.  Of course, we cannot accept donations from lobbyists or lobbying firms registered with the City, or from MTA contractors.  But I was hoping that you might help us raise funds from other sources.  The maximum contribution for an individual or entity is $4,000 (that breaks down to $3,000 for the legal defense funds and $1,000 for the Mayor’s “Officeholder Account.”)  A couple with a joint account can double that an amount if both people sign the form.

Here’s the hard part: we need to raise the $42,000 by the end of the week.

Contribution forms and additional information are attached.

Thank you and all the best.  Let’s talk soon.

●●●


(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com.  He can be reached at:  lajack@gmail.com)             -cw





CityWatch
Vol 9 Issue 33
Pub: Apr 26, 2011



DODGER FINANCES ON THE ROCKS - Frank McCourt, affectionately known as The Boston Parking Lot Attendant on a good day, will eventually be spending a considerable amount of time in bankruptcy court.   

We all know that Frank is a riverboat gambler, loves deals, and has the stomach for living with heart wrenching amounts of debt that would not allow a corporate raider to sleep at night. 

No one knows this better than Jamie McCourt, his ex wife and former business partner, whose desire for financial security was one of the major issues that prompted their tabloid divorce war. 

But this time Frank went too far when he violated Bud Selig’s trust by obtaining a personal loan for $30 million to meet the Dodgers’ operating expenses without consulting with the Commissioner’s office in advance.  As a result, the Commissioner has appointed Tom Schieffer, the former President of the Texas Rangers (1991-1998), to be the Monitor of the Los Angeles Dodgers to “oversee the day to day operations, business, and finances of the Dodgers and all of the franchise’s related entities.”

Schieffer’s first action will be to control the check book of the Dodgers and franchise related assets, including Frank’s parking lot revenues.  This means that the Dodgers are no longer Frank’s personal piggy bank.  And without the Dodgers cash, Frank will not have the resources to meet his many financial obligations, both personal and corporate.

While the extent of Frank’s personal and corporate obligations are not known, we know that he is strapped for cash and has few assets that are not mortgaged.  The only collateral for the $30 million personal loan from Fox Sports is the net proceeds from the potential litigation against Bingham McCutchen, the law firm that bungled the ownership agreement between Frank and Jamie.  But that will be a long time in coming, if at all, since Bingham preempted Frank and filed a law suit in its hometown of Boston.

So how is The Boston Parking Lot Attendant going to pay his alimony?  Or the taxes, mortgage payments, and upkeep on his $100 million of residential real estate?  Or service the $30 million personal loan from Fox Sports?  

Frank also has obligations on other ventures, such as the Los Angeles Marathon that he purchased in September 2008.

We also know that the Dodgers are in default on their loans to the banks.  And this no doubt includes Frank since more than likely he cosigned the notes. 

In addition, there will be considerable pressure on McCourt to service the defaulted loans on the Dodgers “related assets” such as Dodger Stadium and the Chavez Ravine real estate that is not owned by the Dodgers, but by McCourt in separate entities.

And how will Frank pay his many high priced lawyers?  His and her divorce lawyers will continue to cost a fortune as will lawyers to fight the Commissioner and the Bingham McCutchen law firm.  Plus, he is on the hook to pay the lawyers of his lenders as they try to remedy his defaulted loans.

Compounding the massive amounts of debt and his total lack of liquidity and financial flexibility is a very complicated corporate structure with multiple guarantees and the cross collateralization of assets.  And more than likely, there will be some nasty surprises that will further alienate the lenders and the Commissioner.

At the same time, the Dodgers may lose money this year because attendance is in the tank, off 25% over the last eight games.

Frank is a fighter.  But in this case, the deck is stacked against him.  The Dodgers are in default on their loans and may lose money this year.  The team is having trouble making payroll.  He is in default on numerous loans that are collateralized by the franchise, the stadium, and the land.  And fighting the Commissioner has not been successful in the past.

The only viable alternative for Frank to protect the value of his assets is bankruptcy court where he and his creditors can restructure of his debts and assets in an orderly manner, including his ownership interest in the Dodgers, the franchise related assets, and the multiyear contract with Fox Sports.

About the only good news is that the Commissioner of Baseball has appointed a well respected baseball executive with an excellent record of public service to protect the Dodgers from McCourt and its lenders.

Hopefully, we will have a new, well capitalized owner that will provide a safe environment for a winning team.  And maybe if we let our fantasies run wild, we might have the same problem that the Texas Rangers had last year when they were under the supervision of the Commissioner: a trip to the World Series. 

Other commentaries on the MLB takeover of the LA Dodgers

● D J Waldie- “Take Them Out of the Ballgame” 
● Glenn Rothner- “Do We Want Another Rich Man’s Plaything or a Community Asset?” 

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com.  He can be reached at:   lajack@gmail.com)             -cw




CityWatch
Vol 9 Issue 34
Pub: Apr 29, 2011


LA WATCHDOG - Standard & Poor’s, one of the major bond rating companies, cut its outlook for US Treasury paper to “negative” from “stable” because of Washington’s mounting budget deficits.  There is a 1-in-3 chance that Government will lose its AAA (Triple A) credit rating.

This potential downgrading of the credit of the US Treasury will impact the City of Los Angeles, its credit rating, and the maturity and interest rate of any offerings, including the June offering of Tax and Revenue Anticipation Notes that are needed to fund the City’s operations for the first half of the fiscal year.

As a result, investors are going to be focused on credit quality, and that is not good for the City.

While the Los Angeles’ credit rating is a AA- (Double A minus), the Mayor’s proposed 2011-12 Budget financials would indicate a credit rating approaching junk (non investment grade) status.

The Mayor’s new budget is projecting to cure a budget deficit of $463 million.  But this is based on numerous one time gimmicks and fails to make few, if any, structural changes to address the chronic budget deficits related to out of control employee costs.

This year, The Major Who Broke LA and his crack financial staff propose to “balance” the budget by extracting $151 million from the notoriously obstinate LAPD and LAFD and $115 million of furloughs yet to be negotiated from Coalition and other Civilian employees. 

An additional $101 million comes from the elimination of positions and the consolidations of departments. 

Another $40 million of savings is from dumping unfunded mandates onto special revenue departments and another $44 million is from fishy financial engineering related to the Convention Center and Early Retirement Incentive Plan.

Finally, the Mayor proposes to defer $48 million of necessary capital expenditures.

But the Mayor’s “non budget” does not address the $281 million deficit for the next fiscal year (2012-13), the result of the $296 million increase in employee related costs (compensation, pensions, health, and workmen’s compensation).

Nor does the Mayor’s “non budget” address the failure to fund the repair and maintenance of our lunar cratered streets, our sidewalks, street lamps, and parks despite claims to the contrary in his budget message. 

Nor does the Mayor’s “non budget” address the proper funding of the $11.7 billion unfunded pension liabilities associated with the Los Angeles City Employee Retirement System and the Fire and Police Pension Plans.

Overall, the City has a budget deficit north of $1 billion before the smoke and mirror savings and unspecified reductions in City services.

A key component to City’s financial plan is the offering of Tax and Revenue Anticipation Notes to finance the operations of the City prior to the December and January receipt of real estate taxes.  The last offering of these short term notes are scheduled to be outstanding for 357 days compared to 314 days in the previous year.  This allows the City to roll over the previous year’s deficit. 

The City is also playing the “float.” To use Wall Street lingo, the average life of the current offering of notes is about 10.5 months (there are four repayments at the end of March, April, May, and June) compared to 5.5 months if the notes were amortized based on the receipt of the real estate taxes in December and January and the amortization of the pension payments over a 12 month period.

But there is little that the Citizens of Los Angeles can do to force the City to truly balance the budget.  Our Elected Elite, led by the Little Three (Villaraigosa, Greuel, and Garcetti), have not even developed a long term solvency plan.  Nor are The Little Three willing to address the necessary structural changes in the City’s operations because of the fear of offending their campaign funding Partners in Labor and the City Family.

The only way that The Little Three will adopt a truly balanced budget and develop and implement a long term solvency plan is that they are required to by the investors, not dissimilar to what happened in New York City in 1975.

This will require the bond rating companies (S & P, Moody’s, and Fitch) to open their eyes to the financial shenanigans at City Hall and downgrade the City’s credit rating.  And investors also need to do their homework, not only with regards to the junk status of the City’s notes, but the risks associated with buying paper with maturities in April, May and June.

Even if the City is able to sell the Notes, the yield hogs will demand substantially higher rates than last year to compensate for the increased risk.

Of course, this assumes that the City is able to come up with $316 million at the end of May and almost $300 million at the end of June to pay off the outstanding Notes.

If S & P is willing take the political heat from President Obama and Treasury Secretary Geithner when they lowered the outlook for credit rating of the United States to “negative,” then the rating agencies should not have any problem taking on the fiscally irresponsible Little Three and the other City Hall politicians who are willing to ignore the best interests of the Citizens of Los Angeles to further their own political careers.

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com.  He can be reached at:   lajack@gmail.com)             -cw





CityWatch
Vol 9 Issue 34
Pub: Apr 29, 2011

DODGER STEW - Holy cow, did you see that move! Selig picked off McCourt, preventing Frank from stealing another $100 million from the Dodgers and their loyal but beleaguered fans.

On Wednesday, Bud Selig, the Commissioner of Baseball, announced that he will appoint a representative to “oversee all aspects of the business and the day-to-day operations” of the Dodgers.  The Commissioner’s Office will also “continue its thorough investigation into the operations and finances of the Dodgers and related entities during the period of Mr. McCourt’s ownership.”

This move was finally precipitated by Frank McCourt’s flagrant breach of trust when he personally borrowed $30 million from Fox Sports to help the Dodgers meet payroll (and probably a few personal obligations) without consulting with the Commissioner. That is a real No-No.

While unprecedented, this drastic action is warranted given the systematic looting of the Dodgers by Frank McCourt to support his family’s billionaire life style. Now the Dodgers have an unsupportable amount of debt and lack the financial flexibility to properly fund the team’s operations and payroll. 

The need for cash to service the increasing mountain of debt and fund the family’s over the top life style resulted in business decisions that led to the increase in sales of beer and booze and the cut back in the presence of uniformed LAPD officers and overall security, creating an attractive venue for gangbangers and abusive, foul mouthed drunks. 

This alcohol and drug infested environment finally resulted in the highly publicized unprovoked assault on Opening Day of Byran Stow, a 42 year old Giants fan from Santa Cruz, in the parking lot after the game.  The resultant adverse publicity has caused a 27% decrease in paid attendance for the last seven home games, resulting in a loss of about $3.4 million in highly profitable, incremental admission, parking, and concession revenue.

No wonder the Dodgers are having problems meeting payroll.

Of course, Frank is baffled by Selig’s action since he believes he is in compliance with Major League Baseball’s financial guidelines. Even his new best friend, Steve Soboroff, launched a spirited defense of the Boston Parking Lot Attendant, saying that the Commissioner’s actions were “irresponsible” and that Frank was “financially fine.” 

Of course, that is inconsistent with the fact that Dodgers are in default on their banks loans.  And Frank is on the hook for those loans because of his personal guarantee.

It also seems inconsistent with the fact that all Frank had to pledge as collateral for the Fox Sports $30 million personal loan was the anticipated proceeds from his potential lawsuit against Bingham McCutchen, the Boston based law firm that bungled the ownership agreement between Frank and his ex wife, Jamie. However, the Bingham law firm launched a lawsuit against Frank in Massachusetts seeking to bar him from suing the firm for malpractice, claiming that Frank was responsible for his own problems.

Unfortunately for Frank, there are other interested parties in addition to Major League Baseball that do not trust Frank and his Boston malarkey.

Jamie McCourt, his ex wife, for example, issued the following comment.  "As the 50% owner of the Los Angeles Dodgers, I welcome and support the Commissioner's actions to provide the necessary transparency, guidance and direction for the franchise and for Dodgers fans everywhere."

And you can bet the banks that own the Dodgers defaulted loans are none too pleased with the shenanigans at Dodger Stadium.  If attendance is off 25% this year, that is a $35 million hit to revenue, resulting in a situation where the Dodgers financials would be covered with red ink.  The Dodgers would be hard pressed to make their cash interest payments.

One of the consequences of the Commissioner’s action to control the Dodgers and its cash is that it may accelerate the collapse of Frank’s house of cards.

With the Commissioner and the banks controlling the cash, Frank will not have adequate resources to meet his other obligations, such as alimony, upkeep of his multiple estates (including real estate taxes and mortgage payments), personal loans, and his and her legal bills. This will result in other creditors surfacing, filing claims and heading to the courthouse to protect their interests.

Frank’s life is further complicated by the interest of the Internal Revenue Service and the California Board of Equalization in his tax returns, his aggressive tax strategies, the personal use of over $100 million of Dodger funds, and the no show jobs for his sons. 

The Boston Parking Lot Attendant will not give up without a fight. However, unlike his shenanigans back in Boston, he is battling with adversaries that have significantly more resources than the cash constrained McCourt who will not be able to rely on the Dodgers cash flow to pay high priced lawyers, tax accountants, and the other costs of litigation.

More than likely, Frank will have to file for personal bankruptcy to protect the value of his assets and give him time to rearrange his affairs in an orderly manner that respects all of his creditors.

But fortunately, the bold and proper actions of Commissioner Bud Selig to “protect the best interests of the Club, its great fans, and all of Major League Baseball” will separate the daily operations of the Dodgers from the meddling of Frank and Jamie McCourt and their financial demands.

Commissioner Bud Selig also has the power to force the sale of the Dodgers (and their related assets such as the Stadium and parking lots), an event that would be welcomed by Dodger fans, the players, the Dodger organization and all of its employees, and all Angelenos.

This Bud is for you, the true Blue Dodger fans.  Thank you.

You Might Also Like

● Dodger Boos-Frank’s Real Problem: Nobody Trusts the Bum-Humphreville (link

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com.  He can be reached at: lajack@gmail.com.)             -cw



CityWatch
Vol 9 Issue 32
Pub: Apr 22, 2011


LA WATCHDOG - It is Budget Season.  And surprise, surprise, we have another budget crisis.

This year, the newly announced budget gap is $463 million, up from $350 million just a month ago.

But as we go through the theatre of balancing the budget, ask yourself the following two questions.

Do you trust Mayor Antonio Villaraigosa, Controller Wendy Greuel, and City Council President Eric Garcetti (the “Little Three”) to do what is in the best interests of the Citizens of Los Angeles?

Or do think that Villaraigosa, Greuel, and Garcetti have sold out to their campaign funding Partners in Labor to protect the City Family to the detriment of the Citizens of Los Angeles?

Unfortunately, the Little Three have yet to develop a long term solvency plan, despite the fact that former Mayor Riordan and Alex Rubalcava stated in a widely read Wall Street Journal opinion piece said the City would be bankrupt in 2014.

Nor have the Little Three made any concerted attempt to eliminate the “Structural Deficit” by addressing the ever escalating costs associated with payroll, benefits, and pensions, despite constructive suggestions by the City Administrative Officer, which included those of the Little Hoover Commission relating to reduction of current retirement benefits.

Once again, the Mayor has elected to “kick the can down the street” by relying on one time budget solutions and gimmicks to balance the budget.

The projected budget deficit is $463 million.  However, the major components of the increase from the $350 million deficit projection of last month have been known for months: the return to cash based over time for the police ($80 million) and the elimination of “rolling brownouts” for the Fire Department ($41.2 million). There is also a revenue reduction of $40 million due to the slow economy and lower telephone tax receipts. (Link)

While this implies a budget deficit of $511 million, the Mayor’s financial wizards have deferred $48 million related to the Capital Improvement Expenditure Program, calling it an expenditure reduction, not part of the solution.

Hence, we have a budget deficit of $463 million, but lower than the $492.4 million that we had a year ago.

The Mayor, his budget team, and his sound bite specialists have devised many one time “solutions” to close the budget gap, but few, if any, address the Structural Deficit.

The “solutions” include yet to be negotiated concessions of $51 million and $100 million respectively from the always cooperative Fire and Police Departments as well as “savings” of $115 million from Coalition and Civilian furloughs.  There is another $101 million of unspecified “savings” from “Reductions, Efficiencies & Other.”

There are $40 million in Special Fund Swaps where the City transfers responsibilities of the General Fund to a Special Revenue Fund.  For example, the responsibility for cleaning our 800 miles of alleys will be offloaded from the General Fund’s Bureau of Street Services to the Bureau of Sanitation, a special revenue department that is funded by our ever increasing trash tax.

There are also $40 million of one-time savings related to the refinancing at very favorable rates the obligations of the Convention Center and the Early Retirement Incentive Plan. ( link)

Conspicuously absent is any funding to repair and maintain our infrastructure, such as our lunar crater streets, crumbling sidewalks, and our deteriorating parks.  Nor is there any conversation about properly funding of the City’s two pension plans that are $11.7 billion underwater (64% funded).

In reality, our budget deficit is north of $1 billion.

On Wednesday, April 20, the Mayor will present his budget to the City which will reveal the details of the various “solutions.” But no doubt, they will be convoluted and difficult to understand, even if you are familiar with the City’s less than transparent accounting policies and antiquated management information systems.

And needless to say, there will be politics underlying every decision, many of which may not be in the best interests of all Angelenos.

The Mayor and his gang will no doubt discuss all the hard choices they have made over the years. 

The spinmeisters will discuss how they have reduced the work force by 4,000 positions.  However, 2,400 were the result of the Early Retirement Incentive Plan where participating senior employees were incented with over $150,000 extra in retirement benefits, burdening the already underfunded Los Angeles City Employee Retirement System with over $200 million in increased liabilities after counting higher employee contributions.

And a number of City employees were transferred to special revenue or the three proprietary departments.  The net is that less the 500 employees were laid off.

Or the Mayor and Eric Garcetti may tout the recent “pension reform” where employees contribute an additional 4% to fund their retirement healthcare benefits. Unfortunately, this plan is not actuarially sound, severely restricts the City’s operational and financial flexibility, provides the Coalition of Unions even more leverage in the renegotiation of their MOU, and extends the contract so that union wages and benefits will not become a hot button issue in the 2013 mayoral election. 

After considering the two questions of whether you trust the Little Three and whether they have sold out to the highest bidder, you will realize that they are not acting in the best interests of all Angelenos, but working to protect their campaign funding Partners in Labor, the City Family, and their own political ambitions. .

That is why we need an independent, well funded, and empowered CITIZENS ADVOCATE to oversee the operations and finances of the City and to help develop and implement solutions to eliminate the Structural Deficit, to repair and maintain our rapidly deteriorating infrastructure, and to insure that our pension plans are actuarially sound.

Otherwise, we will continue to be mushrooms in the dark with manure piled on top of us. 

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com.  He can be reached at:     lajack@gmail.com            -cw




CityWatch
Vol 9 Issue 31
Pub: Apr 19, 2011






DODGER BOOS - It was not so long ago that Frank McCourt was running with the Big Dogs: a billionaire life style, private jets, and estates in Bel Air, Malibu, and Cape Cod.  And in 2009, he was the toast of town as the Dodgers won the division title and the first round of the playoffs and led all teams in attendance as 3.76 million fans (an average of 46,440 per game) came to Chavez Ravine.

But today, the Dodgers have a losing record and attendance for the first eight home games is off 13.3%. And the general feeling is that the Dodgers will be lucky to have a winning season.

Frank’s finances are becoming increasingly desperate. The highly leveraged Dodgers are in default on their bank loans, denying him cash to pay his alimony, his multiple mortgage payments, the upkeep and taxes on his many houses, and even his high priced lawyers.  The Commissioner of Baseball rightfully rejected his $200 million loan deal with Fox Sports because it would not benefit the team. 

But the very clever Boston Parking Attendant pulled an end run around the Commissioner and personally borrowed $30 million from Fox Sports, supposedly to help meet payroll on April 30.  More than likely, Frank will skim a few dollars off the top for his personal obligations.  

But the coup de grace may have been the unprovoked Opening Day beating of Byran Stow, a 42 year old Giants fan from Santa Cruz, by two out of control gang bangers in the parking lot after the game.  As Stow, a paramedic and the father of two lies in a coma, the police have a high profile dragnet looking for these hoods. 

The financial consequences of this violence and the resulting adverse publicity will be enormous.

Without doubt, the Dodgers will need to beef up security.  As part of his public relations campaign, Frank even hired Billy Bratton, a Boston native, who just happened to be LA’s former Chief of Police. But the added security at Dodger Stadium will more than likely cost an additional $2 million a year.

Then there is the cost of litigation. While the Dodgers may have adequate insurance, the insurance companies will no doubt investigate the level of security at Dodger Stadium to see if the Dodgers were doing a proper job.  And what they will find is what fans have known for a long while: Dodger Stadium is no longer a safe family environment and that security is so lax that the joint, especially the right field bleachers, has been overrun with gang bangers and drunken, foul mouthed jerks. 

This will give rise to the question as to whether the Dodgers, its management, and its owners were grossly negligent, which may negate any coverage.

In any event, the Dodgers’ insurance premiums will increase significantly.

However, the impact of the adverse publicity on this losing team will be devastating, causing many fickle fans to stay at home rather than risk their lives at Dodger Stadium.

If attendance for the year is down 13.3% for all 81 home games, there would be 475,000 fewer admissions (about 5,900 per game), resulting in a revenue loss of about $19 million in admissions, concessions, and parking.

However, the drop in attendance might be even greater.  In the four game series against the hot hitting Cardinals, the average per game head count was 28.6% lower than last year’s three games against St. Louis.  If that trend were to continue throughout the year, then revenues would be off $40 million.

This compares to operating profits after MLB Revenue Sharing and interest payments of only $10 million in 2009.

Needless to say, the lenders to both the Dodgers and McCourt are very concerned about the impact of significantly lower attendance and higher security expenses, both of which come off the bottom line. 

But of greater concern is that the Commissioner of Baseball and the other owners do not trust the Boston Parking Lot Attendant, especially after he pulled a “fast one” by borrowing $30 million personally from Fox Sports.  A reliable source indicated that the Commissioner is more than a little upset at this breach of trust.

But then again, this is nothing new to the people who did business with Frank back in Boston.

To compound Frank’s difficulties, Bingham McCutchen, the Boston based law firm that bungled the agreement that may have given Frank sole ownership of the Dodgers, filed a preemptive law suit in Massachusetts State Court that would effectively bar Frank from suing the firm for malpractice. 

In the law suit, Bingham alleges that “any injury, loss or expense he [Frank McCourt] has sustained or will sustain were caused not by Bingham's conduct, but by his own widely publicized financial problems, huge withdrawals of cash from the Dodgers, and strained relations with Major League Baseball.  None of this is attributable to Bingham's work."

Of course, Frank may not have the cash to fund a defense!

Frank appears to be down and out in Holmby Hills and Chavez Ravine.  He is running out of cash.  His lenders do not trust him.  The Commissioner and the other owners do not trust him.  And most important, the fans do not trust the Bum.

The Boston Parking Lot Attendant is not running with the Big Dogs any more.  Rather, the Big Dogs are trying to chase his sorry ass out of town and out of Major League Baseball.

Let’s hope they are successful. 

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com.  He can be reached at: lajack@gmail.com  )  -cw



CityWatch
Vol 9 Issue 31
Pub: Apr 19, 2011

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