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

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


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 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



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


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


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