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 --  He can be reached at:            -cw

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 --  He can be reached at:  )  -cw

Vol 9 Issue 31
Pub: Apr 19, 2011