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DODGER DOG MOSTLY BALONEY - The impeding cash crisis of the Dodgers is avoidable according to Frank McCourt (“The Boston Parking Lot Attendant”) if only Bud Selig, the consensus building Commissioner of Baseball, would approve the Dodgers $3 billion, 17 year media rights deal with Fox Sports.  As part of this transaction, Fox Sports will advance the Dodgers $285 million, all of which Frank pledged to invest in the Dodgers.

But the Commissioner is right to defer judgment on the Fox Sports media rights deal until he has a better understanding of why there is a cash crisis. 

In his announcement appointing a Monitor to oversee the business and the finances of the Dodgers, the Commissioner said that his office “will continue its thorough investigation into the operations and finances of the Dodgers and related entities during the period of Mr. McCourt’s ownership.”

This investigation should include not only past dealings and promises, but detailed financial projections for the next five to ten years.  It should also include a thorough analysis of all the debt of the Dodgers and related entities, including those related to Chavez Ravine and the already pledged parking revenues.  This would include any debt and personal guarantees of the McCourt family and related entities, including the Los Angeles Marathon.  Such analysis would include the nature of the debt, the interest rates, the maturities, and any related covenants.

Needless to say, this investigation will be very revealing as to how Frank and Jamie essentially looted the Dodgers for over $100 million to support their billionaire life style, depriving the Dodgers of two or three key players.

The Commissioner would also be prudent to wait until the ownership of the Dodgers is settled, especially after the recent court decision that ruled that the agreement supporting Frank’s sole ownership claim was invalid.

The Commissioner also needs to get a better understanding of the rumored interest of the Internal Revenue Service in the tax returns of the Dodgers and the battling McCourts. 

The Commissioner must also analyze the media rights agreement and any other related agreements, such as Frank’s 35% interest in Fox’s Prime Ticket regional sports network.

Of particular interest is the use of the $285 million that Fox Sports is advancing to the Dodgers at the signing of the contract.  While Frank says that it will all be invested in the Dodgers, he has also said that this contract would pay for his divorce settlement with Jamie.  The rumored settlement of $150 million to $200 million is hardly an investment in the Dodgers.

This would essentially increase the Dodgers debt to around $600 million since this advance is the equivalent of debt.

Furthermore, the current lenders who are owed anywhere from $425 million to $500 million will have their hands out since their approval of the media rights deal is more than likely required, especially since the Dodgers are in default on their current indebtedness. 

And given the current banking environment and higher level of scrutiny by bank regulators, the existing lenders will more than likely require that a significant portion of the continuing media rights payments be directed towards repayment, not the team.

In addition, the Dodgers are Frank’s major source of cash.  And he needs this money to pay his high priced lawyers, to maintain his Big Dog lifestyle of multiple estates and private planes, and to repay any personal debts, such as the $30 million personal loan from Fox Sports which he used to meet payroll.

So, at the end of the day, how much is going to be invested in the Dodgers?  Not much.

Ever since the Commissioner announced that he was appointing an overseer of the Dodgers, Frank has suddenly become more visible and vocal, providing some great sound bites for the media, including that the Commissioner’s actions were un-American.  These comments, and those of Steve Soboroff who called the appointment of a Monitor “irresponsible,” only infuriated the Commissioner and a number of the owners.

But this past week, The Boston Parking Lot Attendant had gone to charm school, apologizing to the Dodger fans for his embarrassing behavior, saying in an interview with Bill Shaikin of The Los Angeles Times that he has learned his lesson and deserves a second chance. (Link

But that is all baloney. Frank will say anything to get his hands on the cash, regardless of the consequences.  This is not dissimilar to our corrupt Mayor Villaraigosa who has short changed the underfunded pension plans and failed to fund the maintenance and repair of our lunar crater streets.

Frank is not to be trusted.  The evidence is overwhelming: the Fox Sports media rights transaction, the $285 million advance, the $30 million personal loan where he failed to consult with the Commissioner, the looting of the Dodgers to support his billionaire life style, and his litigious and less than ethical business dealings back in Boston. And if that is not enough, just look at the way he treated Jamie, his wife of over 30 years and the mother of their four sons.

The Commissioner is right not to approve the Fox Sports media rights deal until he has a better understanding of The Boston Parking Lots Attendant’s long term operational and financial plans that provide for continuing investment in the team and a sizable investment of new equity to pay down debt and buy out either Jamie or Frank. 

The alternative is to encourage the sale of the Dodgers and their related assets to a well capitalized ownership group with a long term investment horizon that will be able to field a championship team and win back the support of the True Blue Dodger fans.

In the meantime, we are fortunate to have an experienced baseball and trustworthy executive as the Monitor to oversee the operations and finances of the Dodgers and protect the team and its fans from the un-American and irresponsible con artist from Boston.

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







CityWatch
Vol 9 Issue 35
Pub: May 3, 2011


DODGER FINANCES ON THE ROCKS - Frank McCourt, affectionately known as The Boston Parking Lot Attendant on a good day, will eventually be spending a considerable amount of time in bankruptcy court.   

We all know that Frank is a riverboat gambler, loves deals, and has the stomach for living with heart wrenching amounts of debt that would not allow a corporate raider to sleep at night. 

No one knows this better than Jamie McCourt, his ex wife and former business partner, whose desire for financial security was one of the major issues that prompted their tabloid divorce war. 

But this time Frank went too far when he violated Bud Selig’s trust by obtaining a personal loan for $30 million to meet the Dodgers’ operating expenses without consulting with the Commissioner’s office in advance.  As a result, the Commissioner has appointed Tom Schieffer, the former President of the Texas Rangers (1991-1998), to be the Monitor of the Los Angeles Dodgers to “oversee the day to day operations, business, and finances of the Dodgers and all of the franchise’s related entities.”

Schieffer’s first action will be to control the check book of the Dodgers and franchise related assets, including Frank’s parking lot revenues.  This means that the Dodgers are no longer Frank’s personal piggy bank.  And without the Dodgers cash, Frank will not have the resources to meet his many financial obligations, both personal and corporate.

While the extent of Frank’s personal and corporate obligations are not known, we know that he is strapped for cash and has few assets that are not mortgaged.  The only collateral for the $30 million personal loan from Fox Sports is the net proceeds from the potential litigation against Bingham McCutchen, the law firm that bungled the ownership agreement between Frank and Jamie.  But that will be a long time in coming, if at all, since Bingham preempted Frank and filed a law suit in its hometown of Boston.

So how is The Boston Parking Lot Attendant going to pay his alimony?  Or the taxes, mortgage payments, and upkeep on his $100 million of residential real estate?  Or service the $30 million personal loan from Fox Sports?  

Frank also has obligations on other ventures, such as the Los Angeles Marathon that he purchased in September 2008.

We also know that the Dodgers are in default on their loans to the banks.  And this no doubt includes Frank since more than likely he cosigned the notes. 

In addition, there will be considerable pressure on McCourt to service the defaulted loans on the Dodgers “related assets” such as Dodger Stadium and the Chavez Ravine real estate that is not owned by the Dodgers, but by McCourt in separate entities.

And how will Frank pay his many high priced lawyers?  His and her divorce lawyers will continue to cost a fortune as will lawyers to fight the Commissioner and the Bingham McCutchen law firm.  Plus, he is on the hook to pay the lawyers of his lenders as they try to remedy his defaulted loans.

Compounding the massive amounts of debt and his total lack of liquidity and financial flexibility is a very complicated corporate structure with multiple guarantees and the cross collateralization of assets.  And more than likely, there will be some nasty surprises that will further alienate the lenders and the Commissioner.

At the same time, the Dodgers may lose money this year because attendance is in the tank, off 25% over the last eight games.

Frank is a fighter.  But in this case, the deck is stacked against him.  The Dodgers are in default on their loans and may lose money this year.  The team is having trouble making payroll.  He is in default on numerous loans that are collateralized by the franchise, the stadium, and the land.  And fighting the Commissioner has not been successful in the past.

The only viable alternative for Frank to protect the value of his assets is bankruptcy court where he and his creditors can restructure of his debts and assets in an orderly manner, including his ownership interest in the Dodgers, the franchise related assets, and the multiyear contract with Fox Sports.

About the only good news is that the Commissioner of Baseball has appointed a well respected baseball executive with an excellent record of public service to protect the Dodgers from McCourt and its lenders.

Hopefully, we will have a new, well capitalized owner that will provide a safe environment for a winning team.  And maybe if we let our fantasies run wild, we might have the same problem that the Texas Rangers had last year when they were under the supervision of the Commissioner: a trip to the World Series. 

Other commentaries on the MLB takeover of the LA Dodgers

● D J Waldie- “Take Them Out of the Ballgame” 
● Glenn Rothner- “Do We Want Another Rich Man’s Plaything or a Community Asset?” 

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




CityWatch
Vol 9 Issue 34
Pub: Apr 29, 2011


DODGER STEW - Holy cow, did you see that move! Selig picked off McCourt, preventing Frank from stealing another $100 million from the Dodgers and their loyal but beleaguered fans.

On Wednesday, Bud Selig, the Commissioner of Baseball, announced that he will appoint a representative to “oversee all aspects of the business and the day-to-day operations” of the Dodgers.  The Commissioner’s Office will also “continue its thorough investigation into the operations and finances of the Dodgers and related entities during the period of Mr. McCourt’s ownership.”

This move was finally precipitated by Frank McCourt’s flagrant breach of trust when he personally borrowed $30 million from Fox Sports to help the Dodgers meet payroll (and probably a few personal obligations) without consulting with the Commissioner. That is a real No-No.

While unprecedented, this drastic action is warranted given the systematic looting of the Dodgers by Frank McCourt to support his family’s billionaire life style. Now the Dodgers have an unsupportable amount of debt and lack the financial flexibility to properly fund the team’s operations and payroll. 

The need for cash to service the increasing mountain of debt and fund the family’s over the top life style resulted in business decisions that led to the increase in sales of beer and booze and the cut back in the presence of uniformed LAPD officers and overall security, creating an attractive venue for gangbangers and abusive, foul mouthed drunks. 

This alcohol and drug infested environment finally resulted in the highly publicized unprovoked assault on Opening Day of Byran Stow, a 42 year old Giants fan from Santa Cruz, in the parking lot after the game.  The resultant adverse publicity has caused a 27% decrease in paid attendance for the last seven home games, resulting in a loss of about $3.4 million in highly profitable, incremental admission, parking, and concession revenue.

No wonder the Dodgers are having problems meeting payroll.

Of course, Frank is baffled by Selig’s action since he believes he is in compliance with Major League Baseball’s financial guidelines. Even his new best friend, Steve Soboroff, launched a spirited defense of the Boston Parking Lot Attendant, saying that the Commissioner’s actions were “irresponsible” and that Frank was “financially fine.” 

Of course, that is inconsistent with the fact that Dodgers are in default on their banks loans.  And Frank is on the hook for those loans because of his personal guarantee.

It also seems inconsistent with the fact that all Frank had to pledge as collateral for the Fox Sports $30 million personal loan was the anticipated proceeds from his potential lawsuit against Bingham McCutchen, the Boston based law firm that bungled the ownership agreement between Frank and his ex wife, Jamie. However, the Bingham law firm launched a lawsuit against Frank in Massachusetts seeking to bar him from suing the firm for malpractice, claiming that Frank was responsible for his own problems.

Unfortunately for Frank, there are other interested parties in addition to Major League Baseball that do not trust Frank and his Boston malarkey.

Jamie McCourt, his ex wife, for example, issued the following comment.  "As the 50% owner of the Los Angeles Dodgers, I welcome and support the Commissioner's actions to provide the necessary transparency, guidance and direction for the franchise and for Dodgers fans everywhere."

And you can bet the banks that own the Dodgers defaulted loans are none too pleased with the shenanigans at Dodger Stadium.  If attendance is off 25% this year, that is a $35 million hit to revenue, resulting in a situation where the Dodgers financials would be covered with red ink.  The Dodgers would be hard pressed to make their cash interest payments.

One of the consequences of the Commissioner’s action to control the Dodgers and its cash is that it may accelerate the collapse of Frank’s house of cards.

With the Commissioner and the banks controlling the cash, Frank will not have adequate resources to meet his other obligations, such as alimony, upkeep of his multiple estates (including real estate taxes and mortgage payments), personal loans, and his and her legal bills. This will result in other creditors surfacing, filing claims and heading to the courthouse to protect their interests.

Frank’s life is further complicated by the interest of the Internal Revenue Service and the California Board of Equalization in his tax returns, his aggressive tax strategies, the personal use of over $100 million of Dodger funds, and the no show jobs for his sons. 

The Boston Parking Lot Attendant will not give up without a fight. However, unlike his shenanigans back in Boston, he is battling with adversaries that have significantly more resources than the cash constrained McCourt who will not be able to rely on the Dodgers cash flow to pay high priced lawyers, tax accountants, and the other costs of litigation.

More than likely, Frank will have to file for personal bankruptcy to protect the value of his assets and give him time to rearrange his affairs in an orderly manner that respects all of his creditors.

But fortunately, the bold and proper actions of Commissioner Bud Selig to “protect the best interests of the Club, its great fans, and all of Major League Baseball” will separate the daily operations of the Dodgers from the meddling of Frank and Jamie McCourt and their financial demands.

Commissioner Bud Selig also has the power to force the sale of the Dodgers (and their related assets such as the Stadium and parking lots), an event that would be welcomed by Dodger fans, the players, the Dodger organization and all of its employees, and all Angelenos.

This Bud is for you, the true Blue Dodger fans.  Thank you.

You Might Also Like

● Dodger Boos-Frank’s Real Problem: Nobody Trusts the Bum-Humphreville (link

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



CityWatch
Vol 9 Issue 32
Pub: Apr 22, 2011


TICKETGATE - No sooner than the ink was dry on the April 1 Settlement Agreement where Mayor Antonio Villaraigosa essentially pleaded guilty to corruption in connection with his illegal use of over $200,000 of free tickets to prime time events such as the Lakers, Oscars and Emmys, he and his political operatives were hitting up the usual suspects of City Hall supplicants and ring kissers to fund the slap-on-the-wrist fine of $42,000 and the related legal expenses.

To facilitate the fund raising effort, our Ever So Clever Mayor has established three Legal Defense Funds: one for the City Ethics Commission and another for the California Fair Practices Political Commission.  However, the third Legal Defense Fund relates to the inquiry by the District Attorney who does not appear to be a party to the Settlement Agreement.

And not one to miss an opportunity to tap those ring kissers who can benefit from a well placed friend at City Hall, the Mayor is also soliciting “donations” to his Officeholder Account, essentially his personal slush fund.

For those of you who are interested, contributions are limited to $4,000 per person, $1,000 for each of the four accounts, or $8,000 per couple.

As we all know, lobbyists, lobbying firms, and MTA contractors are unable to make donations.  However, as is blatantly evident in the solicitation letter below, our ethically challenged Mayor and his cronies have no shame.  They are asking the lobbying and contractor communities to be “bundlers” by raising funds from “other sources.” 

The whole ticket scandal is a disgrace, beginning in late May when John Schwada of Fox 11 and Phil Willon of The Los Angeles Times blew the whistle on the Mayor’s ticket escapade. Initially, our ubiquitous Mayor said his attendance at these high profile events was part of his official duties.  But this lame excuse did not stand the light of day as it was apparent that the Mayor and his office devised ways to skirt the law and its intent.

Then the Mayor and his staff, aided by high priced outside lawyers and advisors that probably cost more than $100,000, spent 10 long months negotiating a well crafted Settlement Agreement which praised the Mayor for his cooperation and candor. Please!  He had no choice.  He was caught with both his hands in the cookie jar.  

And finally, the Settlement Agreement imposed a nickel dime fine relative to the value of the tickets, and then compounded that slap on the wrist by not having Villaraigosa pay the fine personally.  

Importantly, neither the City Ethics Commission nor the California Fair Practices Political Commission investigated how Mayor Villaraigosa manages to support his millionaire lifestyle on a mere $225,000 a year, despite ample anecdotal evidence that he is living way beyond his means.  Perhaps a visit by the Internal Revenue System would be appropriate.  

The failure of the politically appointed City Ethics Commission to vigorously enforce the law, compounded by its turning a blind eye to Villaraigosa’s finances and man about town life style, confirms that our insolvent City is for sale to those that are willing to grease the Mayor’s palm.

And if you have any doubts, read the following e mail that was sent out by one of the Mayor’s lobbyist buddies.

●●●


April 5, 2011

Dear [Jack],

Last week, the Fair Political Practices Commission released a copy of an agreement between that agency, the Los Angeles City Ethics Commission, and Major Villaraigosa resolving an investigation into the Mayor’s acceptance of free tickets to important entertainment industry events such as the Oscars, Emmy’s, and Grammy’s, sporting events, and concerts.  The agreement acknowledges that the Mayor attended these events in his “official capacity” to serve “an official purpose,” and that the Mayor had a “good faith and reasonable belief that he had no obligation to report his attendance” at these events on his annual gift reporting form “because he believed they fell within the exceptions” to the reporting requirements.

Nevertheless, the agencies determined that 34 of the 3,000 events attended by the Mayor did not fall within the exceptions, and imposed a combined agreed upon administrative penalty of approximately $42,000.  The agencies explained that the penalty is quite modest when compared to the possible maximum for a number of reasons, including the fact that the violation was “unintentional,” and caused by the Mayor’s “mistaken understanding” of his reporting requirements.  The Mayor’s “full cooperation,” “candor,” and lack of prior violations also helped lower the penalties.

We opened legal defense funds on behalf of the Mayor to pay the penalties and his legal bills.  Of course, we cannot accept donations from lobbyists or lobbying firms registered with the City, or from MTA contractors.  But I was hoping that you might help us raise funds from other sources.  The maximum contribution for an individual or entity is $4,000 (that breaks down to $3,000 for the legal defense funds and $1,000 for the Mayor’s “Officeholder Account.”)  A couple with a joint account can double that an amount if both people sign the form.

Here’s the hard part: we need to raise the $42,000 by the end of the week.

Contribution forms and additional information are attached.

Thank you and all the best.  Let’s talk soon.

●●●


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





CityWatch
Vol 9 Issue 33
Pub: Apr 26, 2011



LA WATCHDOG - Standard & Poor’s, one of the major bond rating companies, cut its outlook for US Treasury paper to “negative” from “stable” because of Washington’s mounting budget deficits.  There is a 1-in-3 chance that Government will lose its AAA (Triple A) credit rating.

This potential downgrading of the credit of the US Treasury will impact the City of Los Angeles, its credit rating, and the maturity and interest rate of any offerings, including the June offering of Tax and Revenue Anticipation Notes that are needed to fund the City’s operations for the first half of the fiscal year.

As a result, investors are going to be focused on credit quality, and that is not good for the City.

While the Los Angeles’ credit rating is a AA- (Double A minus), the Mayor’s proposed 2011-12 Budget financials would indicate a credit rating approaching junk (non investment grade) status.

The Mayor’s new budget is projecting to cure a budget deficit of $463 million.  But this is based on numerous one time gimmicks and fails to make few, if any, structural changes to address the chronic budget deficits related to out of control employee costs.

This year, The Major Who Broke LA and his crack financial staff propose to “balance” the budget by extracting $151 million from the notoriously obstinate LAPD and LAFD and $115 million of furloughs yet to be negotiated from Coalition and other Civilian employees. 

An additional $101 million comes from the elimination of positions and the consolidations of departments. 

Another $40 million of savings is from dumping unfunded mandates onto special revenue departments and another $44 million is from fishy financial engineering related to the Convention Center and Early Retirement Incentive Plan.

Finally, the Mayor proposes to defer $48 million of necessary capital expenditures.

But the Mayor’s “non budget” does not address the $281 million deficit for the next fiscal year (2012-13), the result of the $296 million increase in employee related costs (compensation, pensions, health, and workmen’s compensation).

Nor does the Mayor’s “non budget” address the failure to fund the repair and maintenance of our lunar cratered streets, our sidewalks, street lamps, and parks despite claims to the contrary in his budget message. 

Nor does the Mayor’s “non budget” address the proper funding of the $11.7 billion unfunded pension liabilities associated with the Los Angeles City Employee Retirement System and the Fire and Police Pension Plans.

Overall, the City has a budget deficit north of $1 billion before the smoke and mirror savings and unspecified reductions in City services.

A key component to City’s financial plan is the offering of Tax and Revenue Anticipation Notes to finance the operations of the City prior to the December and January receipt of real estate taxes.  The last offering of these short term notes are scheduled to be outstanding for 357 days compared to 314 days in the previous year.  This allows the City to roll over the previous year’s deficit. 

The City is also playing the “float.” To use Wall Street lingo, the average life of the current offering of notes is about 10.5 months (there are four repayments at the end of March, April, May, and June) compared to 5.5 months if the notes were amortized based on the receipt of the real estate taxes in December and January and the amortization of the pension payments over a 12 month period.

But there is little that the Citizens of Los Angeles can do to force the City to truly balance the budget.  Our Elected Elite, led by the Little Three (Villaraigosa, Greuel, and Garcetti), have not even developed a long term solvency plan.  Nor are The Little Three willing to address the necessary structural changes in the City’s operations because of the fear of offending their campaign funding Partners in Labor and the City Family.

The only way that The Little Three will adopt a truly balanced budget and develop and implement a long term solvency plan is that they are required to by the investors, not dissimilar to what happened in New York City in 1975.

This will require the bond rating companies (S & P, Moody’s, and Fitch) to open their eyes to the financial shenanigans at City Hall and downgrade the City’s credit rating.  And investors also need to do their homework, not only with regards to the junk status of the City’s notes, but the risks associated with buying paper with maturities in April, May and June.

Even if the City is able to sell the Notes, the yield hogs will demand substantially higher rates than last year to compensate for the increased risk.

Of course, this assumes that the City is able to come up with $316 million at the end of May and almost $300 million at the end of June to pay off the outstanding Notes.

If S & P is willing take the political heat from President Obama and Treasury Secretary Geithner when they lowered the outlook for credit rating of the United States to “negative,” then the rating agencies should not have any problem taking on the fiscally irresponsible Little Three and the other City Hall politicians who are willing to ignore the best interests of the Citizens of Los Angeles to further their own political careers.

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





CityWatch
Vol 9 Issue 34
Pub: Apr 29, 2011

LA WATCHDOG - It is Budget Season.  And surprise, surprise, we have another budget crisis.

This year, the newly announced budget gap is $463 million, up from $350 million just a month ago.

But as we go through the theatre of balancing the budget, ask yourself the following two questions.

Do you trust Mayor Antonio Villaraigosa, Controller Wendy Greuel, and City Council President Eric Garcetti (the “Little Three”) to do what is in the best interests of the Citizens of Los Angeles?

Or do think that Villaraigosa, Greuel, and Garcetti have sold out to their campaign funding Partners in Labor to protect the City Family to the detriment of the Citizens of Los Angeles?

Unfortunately, the Little Three have yet to develop a long term solvency plan, despite the fact that former Mayor Riordan and Alex Rubalcava stated in a widely read Wall Street Journal opinion piece said the City would be bankrupt in 2014.

Nor have the Little Three made any concerted attempt to eliminate the “Structural Deficit” by addressing the ever escalating costs associated with payroll, benefits, and pensions, despite constructive suggestions by the City Administrative Officer, which included those of the Little Hoover Commission relating to reduction of current retirement benefits.

Once again, the Mayor has elected to “kick the can down the street” by relying on one time budget solutions and gimmicks to balance the budget.

The projected budget deficit is $463 million.  However, the major components of the increase from the $350 million deficit projection of last month have been known for months: the return to cash based over time for the police ($80 million) and the elimination of “rolling brownouts” for the Fire Department ($41.2 million). There is also a revenue reduction of $40 million due to the slow economy and lower telephone tax receipts. (Link)

While this implies a budget deficit of $511 million, the Mayor’s financial wizards have deferred $48 million related to the Capital Improvement Expenditure Program, calling it an expenditure reduction, not part of the solution.

Hence, we have a budget deficit of $463 million, but lower than the $492.4 million that we had a year ago.

The Mayor, his budget team, and his sound bite specialists have devised many one time “solutions” to close the budget gap, but few, if any, address the Structural Deficit.

The “solutions” include yet to be negotiated concessions of $51 million and $100 million respectively from the always cooperative Fire and Police Departments as well as “savings” of $115 million from Coalition and Civilian furloughs.  There is another $101 million of unspecified “savings” from “Reductions, Efficiencies & Other.”

There are $40 million in Special Fund Swaps where the City transfers responsibilities of the General Fund to a Special Revenue Fund.  For example, the responsibility for cleaning our 800 miles of alleys will be offloaded from the General Fund’s Bureau of Street Services to the Bureau of Sanitation, a special revenue department that is funded by our ever increasing trash tax.

There are also $40 million of one-time savings related to the refinancing at very favorable rates the obligations of the Convention Center and the Early Retirement Incentive Plan. ( link)

Conspicuously absent is any funding to repair and maintain our infrastructure, such as our lunar crater streets, crumbling sidewalks, and our deteriorating parks.  Nor is there any conversation about properly funding of the City’s two pension plans that are $11.7 billion underwater (64% funded).

In reality, our budget deficit is north of $1 billion.

On Wednesday, April 20, the Mayor will present his budget to the City which will reveal the details of the various “solutions.” But no doubt, they will be convoluted and difficult to understand, even if you are familiar with the City’s less than transparent accounting policies and antiquated management information systems.

And needless to say, there will be politics underlying every decision, many of which may not be in the best interests of all Angelenos.

The Mayor and his gang will no doubt discuss all the hard choices they have made over the years. 

The spinmeisters will discuss how they have reduced the work force by 4,000 positions.  However, 2,400 were the result of the Early Retirement Incentive Plan where participating senior employees were incented with over $150,000 extra in retirement benefits, burdening the already underfunded Los Angeles City Employee Retirement System with over $200 million in increased liabilities after counting higher employee contributions.

And a number of City employees were transferred to special revenue or the three proprietary departments.  The net is that less the 500 employees were laid off.

Or the Mayor and Eric Garcetti may tout the recent “pension reform” where employees contribute an additional 4% to fund their retirement healthcare benefits. Unfortunately, this plan is not actuarially sound, severely restricts the City’s operational and financial flexibility, provides the Coalition of Unions even more leverage in the renegotiation of their MOU, and extends the contract so that union wages and benefits will not become a hot button issue in the 2013 mayoral election. 

After considering the two questions of whether you trust the Little Three and whether they have sold out to the highest bidder, you will realize that they are not acting in the best interests of all Angelenos, but working to protect their campaign funding Partners in Labor, the City Family, and their own political ambitions. .

That is why we need an independent, well funded, and empowered CITIZENS ADVOCATE to oversee the operations and finances of the City and to help develop and implement solutions to eliminate the Structural Deficit, to repair and maintain our rapidly deteriorating infrastructure, and to insure that our pension plans are actuarially sound.

Otherwise, we will continue to be mushrooms in the dark with manure piled on top of us. 

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




CityWatch
Vol 9 Issue 31
Pub: Apr 19, 2011






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