LA WATCHDOG-April will be a telltale month for Mayor Eric Garcetti.
At the urging of Garcetti, our beleaguered Department of Water and Power is expected to announce on Thursday or Friday its intent to begin the process to raise our water and power rates. However, the actual increases may not be fully disclosed, allowing City Hall additional time to gauge the response of skeptical Ratepayers to massive rate hikes ($1 to $2 billion) over the next five years.
On Monday, April 20, Garcetti will present his Budget to the City Council, the media, and the citizens of Los Angeles. This will be accompanied by a well-orchestrated public relations campaign designed to show Angelenos that our Back to Basics Mayor and his budget team are implementing performance based budgeting to balance the books, to free up funds to repair some of our lunar crated streets and broken sidewalks, and, over the next four years, to eliminate the chronic Structural Deficit.
The improvement in the overall economy is good news as tax revenues may well exceed previous projections by over $100 million. This will help to eliminate the anticipated $165 million shortfall.
Sales tax receipts may also increase by $30 million a quarter, or $120 million a year, if the State repays its Economic Recovery Bonds that were issued in 2004 and 2008 to finance the State’s accumulated deficits that were incurred under Governor Gray Davis and the then Speaker of the Assembly, Herb Wesson. This would free up the one quarter of a cent of our sales tax that was hijacked by the State to support the credit worthiness of the Economic Recovery Bonds.
These unanticipated increases in revenues will not be sufficient to eliminate the projected deficit that will be increased by the new police contract, the unwillingness of the civilian unions to contribute to the cost of their Cadillac healthcare plans, and the ambitious Garcetti initiatives involving the LA River, Sustainability, IT, Great Streets, and Earthquake Resiliency.
While balancing the budget will once again require the City to raid the Reserve Fund, short change the Budget Stabilization Fund, and to reduce City services, the City Hall spinmeisters will tout the positive while refusing to address the need for wholesale pension reform or a definitive plan to repair and maintain our streets, sidewalks, and the rest of our deteriorating infrastructure. Nor will they address the contingent liabilities related to the class action lawsuits involving the Telephone Users Tax, our sidewalks that are not ADA compliant, or the legality of the 8% Transfer Fee from DWP that represents over 5% of the City’s budget.
Likewise, City Hall and DWP will promote the need for a $1 to $2 billion increase over the next five years, citing the need to meet burdensome regulatory requirements and to repair and modernize its infrastructure. But how much will we hear about the $40 million that was funneled to the IBEW controlled Joint Safety and Training Institutes; the fiasco involving the Customer Information System; the Feed in Tariff program that will cost Ratepayers an extra $250 to $300 million; the IBEW Labor Premium and the union’s overly restrictive work rules; or the side deals with the IBEW to install solar power?
What is missing from the discussion about the City’s $5.3 billion Budget and the increase in our water and power rates is a review and analysis of the reform recommendations proposed by the LA 2020 Commission, a body created at the request of City Council President Herb Wesson.
Yet this is the same Herb Wesson who refuses to place on the City Council’s agenda four key recommendations of the LA 2020 Commission.
The proposed Office of Transparency and Accountability is designed to oversee the City’s precarious finances while the Commission on Retirement Security would address the need to “achieve equilibrium on retirement costs by 2020.”
Another recommendation involved reviewing the overly optimistic investment rate assumption of 7.5% that understates the unfunded pension liability of the City’s two pension plans.
The LA 2020 Commission also called for a professionally staffed Los Angeles Utility Rate Commission to set DWP’s rates, to appoint its General Manager, and to oversee its operations.
The Budget and the proposed DWP rate increases will provoke considerable discussion as they will be a telltale sign of whether Mayor Eric Garcetti is serious about reforming the City’s finances and our Department of Water and Power.
Over the next several months, we need to follow the cash and the actions (or more likely, the lack of action) of the Mayor and City Council and not believe all the hot air that is being blown in our face by our Elected Elite and their spinmeisters.
(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])
Vol 13 Issue 27
Pub: Mar 31, 2015