Mon, Sep

LA WATCHDOG--In 368 days, we will be voting for the next President of the United States.  In very blue California, the outcome is not in doubt.  Nor is the party of our next US Senator.  

On the other hand, the statewide ballot measures will be a donnybrook as special interests with wads of campaign cash are looking to raid our wallets and to prevent citizens from authorizing the issuance of billions in debt on major public works projects. 

The educational establishment, the teachers’ unions, and the building industry have placed a $9 billion general obligation school bond measure on the ballot.  This will end up costing taxpayers an average of $500 million a year for the next 35 years, a total of $17.6 billion, including $8.6 billion in interest.  The proceeds from these bonds will be used for new construction ($3 billion), modernization of K-12 public school facilities ($3 billion), charter schools ($1 billion), and California Community Colleges ($1 billion). 

The “No Blank Checks Initiative” has also qualified for the ballot.  This measure would require a public vote to approve any revenue bonds on state projects that exceed $2 billion.  Unlike general obligation bonds that are serviced with our tax dollars, revenue bonds rely on the cash flow of the particular project which, in turn, relies on the fees paid by the citizens using the services of the particular project.  

The provisions of this constitutional amendment would apply to Governor Brown’s two legacy pet projects, the $68 billion High Speed Rail boondoggle connecting Los Angeles and San Francisco and the $15 billion Twin Tunnels that will convey hundreds of billions of gallons of water every year from the Sacramento River to the California Aqueduct that serves Southern California and to farms in the Central Valley.     

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While No Blank Checks only qualified for the ballot on November 2, the political establishment and business and labor groups are already trashing this initiative that will limit their ability to pick the pockets of the citizens of California unless they have our approval. The opposition to this citizen empowering amendment will no doubt devote huge resources to defeat this measure sponsored by Dean Cortopassi, a Stockton based farmer who opposes the Twin Tunnels. 

We can also expect several other tax measures on the ballot, including efforts by the public sector unions to extend or make permanent the temporary tax increases imposed by Proposition 30 that was approved by 55% of the voters in November of 2012.  This measure increased our sales tax by a quarter of a cent until December 31, 2018 and the marginal tax rate on higher incomes ($250,00 and up) until December 31, 2016.  

Alternatively, State Senator Bob Hertzberg (D-Van Nuys) is considering a proposal to extend the sales tax to include services in order to smooth out the revenue swings of our boom or bust tax system that relies heavily on upper income residents and a good stock market.  But under the guise of reform, Hertzberg wants to raise $10 billion in additional revenue for the State.  Otherwise, to use the $10 Billion Man’s own words, “it’s not worth the effort.”  

But that’s not all folks!!!! 

There is also an effort to increase our gas tax to fund the $59 billion repair bill for our highways as designated funds were diverted by our free spending Legislature to pay for ever increasing personnel costs, including ballooning pension contributions. 

Other political insiders and union leaders are pushing for a “Split Roll” ballot measure where Proposition 13 would not apply to commercial properties, raising an estimated $9 billion for local governments. Of course, these proponents will fail to mention that these additional taxes will be passed along to us through higher prices for goods and services.  

In Los Angeles County, Metro and the Board of Supervisors are preparing to place on the ballot yet another half cent increase in our sales tax to pay for transportation projects.  Mayor Garcetti has endorsed this tax increase, in large part because the Local Return provision will kick back 25% of the tax revenue to our profligate City which, despite huge increases in tax revenues, still has not eliminated its Structural Deficit or made an effort to Live Within Its Means. 

Prepare for barrage of propaganda and a heavily financed assault on our wallets by the fiscally irresponsible politicians, the public sector unions, self-serving special interests, and their ring kissing cronies.  But until the City, County, and State reform their finances and inefficient operations, we need to reject their efforts to pick our pockets.  

After all, we are already one the highest taxed states in the nation, right up there with financial basket cases like New York, New Jersey, and Connecticut.  

We are not striving to be Number One.  Just Say No.  


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





Vol 13 Issue 90

Pub: Nov 6, 2015

LA WATCHDOG--During the last year’s budget hearings, Los Angeles City Council Members Paul Krekorian, the Chair of the Budget and Finance Committee, and Paul Koretz, the Chair of the Personnel Committee, were pushing to increase the investment rate assumption for the City’s two underfunded pension plans to 8%, up from the current level of 7.5%.  

This would have the dual effect of lowering the then $8 billion unfunded pension liability and decreasing the City’s Annual Required Contribution by an estimated $200 million.  This additional cash would allow the City Council to fund the new budget busting labor contract for the City’s 20,000 civilian workers, begin the repair of our lunar crated streets, or pay for new initiatives or pet projects.    

Both Krekorian and Koretz felt that this increase was reasonable since the five year average return was over 13% for both the Los Angeles City Employees’ Retirement System (“LACERS”) and the Los Angeles Fire & Police Pension Plans (“FPP”). In addition, the rate of return for the fiscal year ending June 30, 2014 was a bonkers 18%.

Unfortunately, the following year’s rate of return for the two plans averaged 3.3%, resulting in a $400 million increase in the unfunded pension liability.   

But rather than increasing the investment rate assumption, many well respected investors believe that the investment rate assumption should be lowered to 6.5% (or lower).  This would include the legendary Warren Buffett (photo above) of Berkshire Hathaway whose investment returns over the last 40 years are double those of the Standard & Poor’s 500.

For comparison, corporate pension plans rely on a 4% investment rate assumption according to a recent article by Melody Petersen in our Los Angeles Times. 

The Times also disclosed that the $300 billion California Public Employees’ Retirement System (otherwise known as CalPERS) is reducing its investment rate assumption to 6.5% from 7.5% over the next 20 years, granted more slowly than the more aggressive schedule advocated by Governor Jerry Brown. 

If the investment rate assumption for City’s two pension plans was 6.5%, the unfunded pension liability at June 30, 2015 would increase to $13.5 billion, up from $8 billion, while the funded ratio would decrease to 71% from 80%. 

(On a relatively positive note, LACERS and FPP have been funding their Other Post-Employment Benefits (read medical) since the late 1980’s.  The County and the State have not funded any of these obligations, resulting in unfunded liabilities of $27 billion and $71 billion, respectively).   

The lower rate would also increase the Annual Required Contribution by an estimated 33% to $1.45 billion, a $350 million increase from the current level of $1.1 billion.  The increased contribution would chew up 27% of the General Fund, up from the current level of 20%.  This compares to 10% in 2005 when Antonio Villaraigosa became our mayor. 

The City’s pension plans have generated considerable controversy over the last decade as they have devoured an ever increasing share of the budget, crowding out other pressing needs such as increased public safety; the repair of our streets, sidewalks, and parks; and affordable housing and homelessness.  And even with the new tiers that were established for recently hired sworn and civilian workers, the pension plans will continue to consume a disproportionate chunk of the City’s budget as they rely on the overly optimistic rate of return of 7.5%.  

One of the key recommendations of the LA 2020 Commission was to “establish a Commission on Retirement Security to review the City’s retirement obligations in order to promote an accurate understanding of the facts.”  But this call for action has not seen the light of day as City Council President Herb Wesson, an original sponsor of the LA 2020 Commission and a smiling participant in the press conferences, has buried it deep in the bowels of City Hall. 

Governor Brown, CalPERS, and the $188 billion California State Teachers Retirement System have taken meaningful steps to address the State’s underfunded pension plans and the ever increasing contributions required by state and local governments.  Now is time for the City of Los Angeles to come clean about the facts surrounding its severely underfunded pension plans and develop “concrete recommendations to achieve equilibrium on retirement costs by 2020.”


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





Vol 13 Issue 94

Pub: Nov 20, 2015

LA WATCHDOG - (Editor’s Note: In light of the online Bloomberg news report on Tuesday, it seemed appropriate to revisit this Jack Humphreville LA Watchdog column from 2009 on the same subject … proving Jack is ahead of his time.)

Why is the City Council hell bent on approving the huge five year wage package for IBEW workers at the Department of Water and Power without adequate hearings and transparency?

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LA WATCHDOG--City Council President Herb Wesson likens the Los Angeles’ bid to be the Host City for the 2024 Summer Olympics as the “engagement.  It is not the wedding.  And now it’s time to work on the pre-nup.” 

But it is also reminiscent of the family that decides to have their daughter’s wedding at home to save money, but ends up taking out a third mortgage to finance the wedding and the sprucing up of their house. 

The Los Angeles 2024 Bid Committee and its supporters in City Hall tell us that the Olympics will generate a profit of over $150 million on revenue of almost $5 billion. 

This “conservative” profit projection also includes a contingency fee of $400 million as well as a payment to the City of $200 million to reimburse it for expenses such as police, fire, and traffic control. 

But this projection does not include any funds for over $2 billion of capital expenditures needed to construct the Olympic Village and the International Media Center and to renovate the Memorial Coliseum and other sporting venues. This amount may be short by a $1 to $2 billion as the cost for the Olympic Village may be seriously understated according to Zev Yaroslavsky, the former County Supervisor and City Councilman who is respected for his long record of fiscal responsibility. 

The City will also use the Olympics as a reason to “accelerate” spending on selected infrastructure projects, including extending the Purple Line to Century City and UCLA by 2024 and completing the revitalization of the Los Angeles River, Mayor Garcetti’s pet project. 

While this multibillion dollar construction boom will fuel our local economy, at least temporarily, the City may be on the hook for billions as a result of its agreement to indemnify the International Olympic Committee against any losses. 

For example, if the City was responsible for a $1 billion shortfall, Angelenos would be tagged for $130 million a year for the next ten years.  This would require about a 3% increase in our real estate taxes ($130 for the average home valued at $500,000).  Alternatively, the City could propose to slap us with a parcel tax ($160) or a quarter of a cent increase in our sales tax. 

But why should the Angelenos absorb 100% of the potential losses while 6 million other County residents derive significant benefits from the Olympics?  And why should Angelenos absorb 100% of the risk when any profits would benefit the State’s eight southernmost counties as is the case with LA84 Foundation? And why should the City take on this financial obligation when it cannot eliminate its Structural Deficit, balance its budget, or repair and maintain our lunar cratered streets?  

If the County of Los Angeles were to protect the IOC from a $1 billion loss, Angelenos tax liability would drop by 60%, where the average homeowner’s liability would be decreased to $50, down from $130 a year. 

Mayor Eric Garcetti and City Council President Herb Wesson are eloquent in promoting the City’s bid to be the Host City for the 2024 Summer Olympics. Unfortunately, the City’s track record does not inspire confidence.  

Rather than going it alone, the City should team up with the more efficient and fiscally responsible County.  And while that may limit Eric and Herb’s bragging rights, Angelenos will sleep better knowing that the County is working with the City to oversee the finances and operations of the 2024 Summer Olympics. 

And even though 80% of Angelenos support hosting the Olympics, we still have our doubts when it comes to footing the bill for potential losses. 


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





Vol 13 Issue 92

Pub: Nov 13, 2015

LA WATCHDOG--“The power to rezone is the power to create great wealth and using that power wrongfully is just as bad as stealing public money.” 

This comment by Superior Court Judge Pearce Young in the 1969 sentencing of Los Angeles City Councilman Thomas Shepard on his conviction for bribery in connection with rezoning of land in the San Fernando Valley still appears to be the operative as members of the City Council have no problem granting special favors in return for campaign contributions and other monetary favors. 

Earlier this year, Mayor Eric Garcetti, the Planning and Land Use Management Committee led by Jose Huizar and Mitch Englander, and the Herb Wesson led City Council approved a 27 story luxury high rise in Koreatown.  This political action overturned the unanimous decision of the City Planning Commission to reject this oversized development because it was not compatible with this low rise, densely populated, lower income neighborhood that just happened to be located in Herb Wesson’s Council District. 

This zoning change will provide the Beverly Hills developer, Michael Hakim, with a windfall profit estimated to be in the range of $15 to $20 million.  In return, Hakim will “contribute” $1,000,000 to the City’s Affordable Housing Trust Fund and $250,000 to a Community Benefits Trust Fund, both of which are controlled by Council President Herb Wesson. 

In February of 2013, Wesson orchestrated a $1 a year lease with the Korean American Museum for a 24,540 square foot parking lot on the southwest corner of Vermont and 6th Street.  This property had been appraised for more than $8 million.  This coincided with several generous contributions to Wesson’s “Yes on Proposition A” slush fund that promoted the permanent half cent increase in our sales tax.  This measure was rejected by 55% of the voters in March of 2013. 

In June of 2015, Wesson introduced a motion that would authorize the Korean American Museum to expand its development from a three story, 45,000 square foot museum to a seven story, 85,000 square foot building consisting of a two story, 28,375 square foot museum and five stories consisting of over 100 market rate apartments. 

While Wesson hailed this as a “creative partnership,” there is an unpleasant aroma surrounding this deal involving a bargain basement long term lease for a very valuable City property to a nonprofit museum that is engaging in a for profit residential development. 

In 2011, just down the street at Vermont and Wilshire, Wesson arranged for $17.5 million in loans from the City and the Community Redevelopment Agency to J.H. Snyder Company, a well-heeled, successful developer, to help finance its $200 million apartment and retail complex.  In less than three years from the date of the loans, Snyder flipped the two towers, pocketing a profit in the range of $75 to $100 million.  This raises the question as to whether these loans were necessary, other to augment Snyder’s return on its equity investment that is estimated to be in excess of 100%.   

Snyder’s strong relationship with Wesson and his reputation as a successful developer allowed him to take over the failed development of the CRA controlled property at 1601 North Vine, strategically located between Sunset and Hollywood Boulevards.  This deal allows Snyder to buy this 18,208 square foot lot that is permitted for an eight story, 124,000 square foot office building for the bargain basement price of $825,000.  This is considerably less than the City’s cost of $6.5 million.  

Of course, it does not hurt Snyder was a generous contributor to the Wesson’s “Yes on Proposition A” slush fund as well as many other local campaigns. 

The power to rezone properties on a spot basis is poor public policy because residents and their neighborhoods are subject to the whims of the City Council who, despite their protests that they are representing our best interests, are heavily influenced by real estate developers, their lawyers and lobbyists, and their wads of cash.  All we need to do is look at the overdevelopment in Hollywood, DTLA, the Westside, and the Valley that is clogging our streets and making our lives miserable.  

The lack of trust in the Herb Wesson led City Council will result in voters approving “The Neighborhood Integrity Initiative,” a proposed ballot measure that will limit the powers of the City Council to spot zone for the benefit of the campaign funding real estate developers.  

More later on this long overdue ballot measure!  


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






Vol 13 Issue 93

Pub: Nov 17, 2015

LA WATCHDOG - Over the last six years, Los Angeles City payroll and related benefits have increased by $720 million, a 24% bump, as average salaries have increased to $82,000 a year, not including very generous benefits. And contributions to the City’s two pension plans have increased by $540 million (over 150%) as pension liabilities ballooned by almost $10 billion, a 40% increase.

So what is the source of all the cash that is needed to fund these out of control personnel costs?

One source of ready cash was the money needed to maintain and repair our infrastructure: our streets and bridges (ranked the worst in the nation), sidewalks, parks, stormwater drains, street lights, and buildings.  The City has also short changed its motor vehicle fleet such as police cars, fire engines, and garbage trucks and has neglected to modernize our Stone Age computer systems and hardware.

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