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

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

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

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

On the surface, this appears to be the case.  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

City Ballot Measures 

Measure HHH – NO - $1.2 Billion Homeless Bond 

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

Measure JJJ – HELL NO / Affordable Housing and Labor Standards 

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

RRR – YES – DWP Reform 

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

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

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

Metropolitan Transportation Authority 

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

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

County of Los Angeles 

Measure A – NO – Parks Parcel Tax 

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

Los Angeles Community College District 

Measure CC – NO - $3.3 Billion Facilities Bond 

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

State of California 

Proposition 51 – NO - $9 Billion School Facilities Bond 

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

Proposition 53 – YES – No Blank Checks 

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

Proposition 54 – YES – Voters First, Not Special Interests 

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

Proposition 55 – NO – Soak the Rich Income Tax Surcharge 

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

Proposition 56 – YES - Cigarette Tax 

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

Proposition 61 – YES – Prescription Drug Pricing 

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

Conclusion 

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vote NO on Proposition 55.

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vote NO on JJJ.  It is BAD for LA. 

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

– cw

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