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 --  He can be reached at:


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 --  He can be reached at:


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 --  He can be reached at:


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 --  He can be reached at:


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 --  He can be reached at:


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 --  He can be reached at:


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 --  He can be reached at:


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