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--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--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 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--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--“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

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