LA WATCHDOG-The City of Los Angeles is the defendant in two major class action lawsuits alleging that the City illegally collected over $2 billion in taxes from the Taxpayers and Ratepayers that were not approved by the voters.
The City, Mayor Eric Garcetti, City Council President Herb Wesson, Budget and Finance Chair Paul Krekorian, and the rest of the City Council have a massive conflict of interest as they attempt to minimize the return of our money that was illegally collected while we, their constituents, want full recovery of our hard earned money.
The first lawsuit, Ardon v. City of Los Angeles, was filed in December, 2009. It alleges that that the 10% Telephone Users Tax was an illegal tax, resulting in the collection of approximately $750 million between 2006 and 2008. With interest, the potential liability to the City is more than $1 billion.
Parenthetically, in a special election held in February, 2008, 66% of the voters approved the 9% Communication Users Tax (Proposition S). This replaced the 10% Telephone Users Tax.
The second class action lawsuit, Patrick Eck v. City of Los Angeles, was filed in April, 2015. It alleges that the undisclosed 8% Transfer Fee levied by the Department of Water and Power is an illegal tax. This has resulted in the collection of over $1.25 billion from Ratepayers since the passage of Proposition 26 in November, 2010. The plaintiff is requesting the elimination of the 8% Transfer Fee ($266 million for the Fiscal Year ending June 30, 2015) and the return of over $1.25 billion to Ratepayers.
Another lawsuit, Tyler Chapman v. City of Los Angeles, was filed in January, 2015. It also involves the illegal 8% Transfer Fee.
The City has been less than transparent about the potential liability involving the $1 billion liability associated with Ardon litigation. To the contrary, the City failed to disclose its potential liability in the contingency section of its audit financial statements, referring only to a class action litigation. The City is continuing to fight this litigation and its certification as a class action, all on our nickel.
Rather than waging a war against the Taxpayers and the Ratepayers, the City needs to develop a plan to finance the repayment of our $2 billion without paying big fat contingency fees to the class action lawyers with our money. This plan will involve new taxes that will need to be approved by the electorate, not an easy ask since the voters do not trust the fiscally irresponsible City Council.
Therefore, the City will need to engage in wholesale financial, budget, pension, and work place / personnel reform. This would include, at a minimum, placing on the ballot a Live Within Its Means charter amendment that would require the City to develop and adhere to a Five Year Financial Plan, to pass two year balanced budgets based on Generally Accepted Accounting Principles, and, over the next twenty years, to repair our streets and sidewalks and to fully fund the City’s two pension plans.
The longer Mayor Garcetti and the Herb Wesson-led City Council wait, the city’s bargaining and financial condition will deteriorate. Now is the time to repay the Taxpayers and Ratepayers their $2 billion.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, The Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at: [email protected])
-cw
CityWatch
Vol 13 Issue 47
Pub: Jun 9, 2015
