PERSPECTIVE-Kevin James (photo) appeared in front of a packed house at the Los Angeles Neighborhood Council Coalition. I give Kevin, with whom I am well acquainted and whom I respect, points for facing the public soon after the release of an audit report that would have made any other Los Angeles city executive run for cover.
As he pointed out, the audit of the Bureau of Street Services (BSS) covered a period from FY 2011 through FY 2013 – before Kevin was appointed by Mayor Garcetti, a fact not highlighted in Galperin’s report. For that matter, the period fell squarely under the regime of former mayor Antonio Villaraigosa.
Villaraigosa’s idea of a good Public Works Board appointment was none other than Andrea Alarcon who served from 2009 through 2012 as the board’s vice president and later president.
Kevin came prepared as a lawyer would for a court appearance. That’s good, and he is an attorney after all. We should expect the same of all officials.
City Controller Galperin’s audit report struck not only at the heart of the problems at the Bureau of Street Services, but it exposed a problem that is probably prevalent throughout the city bureaucracy.
Without competent managers and reliable data, it is impossible to run an efficient operation.
A few years back, former City Controller Wendy Greuel was gung ho about performance-based budgeting. Greuel viewed it as an end in itself; that implementing a system designed to capture metrics and using it to develop financial and operational plans was a panacea for managing the city’s deficient financial performance. It was good press release stuff, but Greuel was, in the words of Mayor Garcetti, the press release controller.
Well, rolling out performance-based budgeting in an organization insulated from modern conventions is as effective as allowing a caveman to drive a car (although I often wonder about some of the drivers on our roads).
I think we have had cave people at the steering wheel of BSS for way too long, Ms. Alarcon being one of them.
Nazario Sauceda, Director of BSS, an affable individual who has reached out to the Neighborhood Councils, knows about pavement, but his management skills are suspect. For example, it appears he is incapable of performing a simple make-or-buy calculation. BSS was contemplating investing $18-million to upgrade its asphalt production facility.
What was the benefit?
None.
At best, the city might come close to matching the production cost of the outside vendors who already provide most of the material to the city today.
Sauceda could have penciled the numbers on a cocktail napkin and concluded it would not be worth the investment under any scenario, and especially so if the city could have sold or leased the land underneath the plant.
Allow me to digress, but Mayor Garcetti should take note: his back to basics agenda should rule out in-house production when reasonably priced sources are available elsewhere.
Kevin strongly disagreed with this finding. His logic was sound, but he failed to view the investment in the greater context of capital budgeting. The city has limited funds – we can go on forever why that is the case – and must ration major improvements. That means even some economically viable projects will not be approved.
Kevin made a good point about the importance of having alternate supply sources and the difficulty of obtaining permits for asphalt production facilities. But do we really want to have city employees with some of the highest fringe benefit loads in the country producing asphalt?
What about licensing the production? Perhaps wrapping it with a sale-leaseback where the proceeds would help fund the reconstruction some of the F-rated streets. Don’t forget, a reconstructed road would have a long useful life which could match the term of the sale-leaseback.
Personnel management isn’t one of Sauceda’s strong suits either. Direct salary cost as a percentage of total salaries for FY 2012-13 is not only very low – 56% compared with 70-80% other cities – but the ratio is worsening. It was over 58% in FY 2010-11. Is Sauceda’s annual bonus increasing?
Kevin challenged this finding as well. What was the basis of Galperin’s comparisons? How did the auditors determine what was direct vs. indirect?
Long Beach and Tacoma, mentioned as examples in the audit report, are not in the same league as Los Angeles, according to Kevin. True, but scales are relative.
The other point regarding delineation of costs is a far more valid issue. The operations do not line up well from city to city. Galperin should disclose how he arrived at them.
The audit also criticized BSS for unsubstantiated performance statistics. Good luck in preparing a strategic plan when you can’t rely on your core statistics. One metric that is highly questionable is for potholes. Potholes come in such a variety of shapes and sizes that BSS may as well be counting almonds, plums and oranges. In would be more meaningful and easier to report the amount of asphalt used to repair potholes rather than the quantity filled. BSS could also measure the repair expense more accurately.
One very disturbing observation made by Galperin’s staff had to do with the overall condition of LA’s streets versus other cities. Los Angeles came in at 64% in poor condition. For that matter, the three worst in the sample of 12 cities were all in California – with San Francisco and San Diego running close behind at 60% and 55%, respectively. Even more perplexing, snowbelt cities such as Chicago, New York and DC were in far better shape. I haven’t seen any snowplows on Sunset Boulevard lately, although one might come in handy about now.
I strongly agree with Kevin’s position on fees charged to utilities who must break through street surfaces to repair their infrastructure. Fees largely transfer funds from one pocket to another and the consumers/taxpayers are ultimately charged indirectly. It is a waste of resources to collect and account for them. However, the BSS budget should include an allowance for this type of work, which is a certain to occur as a water main break. BSS must be fully empowered to coordinate the work of the various utilities.
Overall, the residents owe Ron Galperin and his staff a solid vote of confidence. James should also be grateful … and I believe he is. Galperin has exposed the skeletons before they can jump out and bite the Public Works President. He can now work on solutions, although the road to change will be difficult given the degree of political meddling by the City Council.
Controller Galperin has also committed to revisiting BSS in one year.
Mayor Garcetti and Kevin James should put Sauceda on notice to make substantial improvements. Certainly, BSS, Garcetti and James should reach a consensus as to the specific goals. That’s not really process for an auditor – Galperin has no control over budgets and city operations – but he needs to be informed.
As an appointed commissioner, James will take responsibility for future performance. He is not one to duck them. Sauceda earns $199,000 per year of our tax money. It is reasonable for Kevin to hold his feet to the fire.
The most important takeaway from this audit is it represents a wake-up call to the residents. The front page coverage will increase awareness about city governance and its failure to prioritize.
(Paul Hatfield is a CPA and former NC Valley Village board member and treasurer. He blogs at Village to Village and contributes to CityWatch. He can be reached at: [email protected])
–cw
CityWatch
Vol 12 Issue 63
Pub: Aug 5, 2014