LA WATCHDOG--Our cash strapped City is eyeing new sources of revenue to offset the adverse impact of Covid-19 on the City’s seven economically sensitive taxes* that provide over 72% of the City’s General Fund revenue in a normal year.

LA WATCHDOG--The Mayor and the City Council have once again entered into an arrangement with the politically powerful leaders of the public sector unions that is not in the best interests of the City of Los Angeles and its four million residents. 

LA WATCHDOG--On Wednesday, the City Council agreed not to place the vacancy tax on the November ballot. 

LA WATCHDOG--On Tuesday morning, the FBI arrested Councilman Jose Huizar on “a federal racketeering charge that alleges he led a criminal enterprise that used his powerful position at City Hall to solicit and accept lucrative bribes and other financial benefits to enrich himself and his close associates in exchange for Huizar taking official actions favorable to the developers and others who financed and facilitated bribes.”  

LA WATCHDOG--The short term and long term financial outlook for the City of Los Angeles is only getting worse according to the City’s Preliminary Official Statement for the issuance of up to $1.85 billion of Tax and Revenue Anticipation Notes. 

LA WATCHDOG--Without any hearings, the City Council voted to ask the City Attorney to draft a ballot measure to place a vacancy tax on the November ballot.

LA WATCHDOG--There are sins of commission where politicians and their bagmen get caught with their hands in the cookie jar.  And then there are sins of omission where our politicians ignore corruption, fail to call out or investigate a fellow member of the Council for corruption, or refuse to place a measure on the ballot that would “limit opportunities for corruption.”  

LA WATCHDOG-According to the Los Angeles Times, “Mayor Eric Garcetti pledged that the city would ‘identify $250 million in cuts so we can invest in jobs, in health, in education, and in healing,’ especially in the city’s black community ‘as well as communities of color and women and people who have been left behind.’” 

LA WATCHDOG--If a California company and its management were engaged in bribery, money laundering, extortion, mail and wire fraud, obstruction of justice, witness tampering, and racketeering,

LA WATCHDOG--One of Mayor Eric Garcetti’s Back to Basic tenets was to “increase transparency and civic engagement.” 

LA WATCHDOG-Mayor Eric Garcetti and the Los Angeles City Council were shocked, shocked by the revelation that one of its members, Jose Huizar, (photo above) was the principal player in pay-to-play corruption schemes involving the up zoning of large real estate developments, creating hundreds of millions of dollars in extra profits for unscrupulous developers.

LA WATCHDOG--Mayor Eric Garcetti’s Proposed Budget that was submitted to the City Council on April 20 was essentially dead on arrival because the revenue assumptions assumed that his Safer at Home order would not be extended.

LA WATCHDOG--The Budget and Finance Committee met on Monday to receive input on the upcoming budget and the impact of the virus on City expenditures and its seven economically sensitive revenue streams.  As a result of this uncertainty, the upcoming budget will be a placeholder that will need to be updated on a periodic basis to reflect the changing economic environment. (Photo above: Budget and Finance committee Chair, Councilman Paul Krekorian.) 

But interestingly, the Committee and its members failed to acknowledge that the new labor agreements that were negotiated behind closed doors and that they approved blew a massive a $1.4 billion hole in the City’s budget over the next four years and required the City to raid its Reserve Fund.  The impact of the virus compounds the problem.    

Some of the members questioned the Mayor’s optimistic revenue projections, a valid concern. 

The City Council must respond by June 1.  

++++

The following are my remarks to the Committee. 

Prior to the virus, the City, despite record revenues, was projecting an annual deficit for the current fiscal year.  The Structural Deficit was expected to exceed $1.4 billion over the next four years as a result of the new labor agreements [that were approved after the adoption of this year’s budget.]. 

The impact of the virus on the City’s [revenues and] budget only compounds the problem of balancing the budget.  

The Budget Advocates developed ten recommendations in its White Paper to increase transparency into the City’s budget process that will, if implemented, begin the process of restoring Angelenos trust and confidence in City Hall. 

The key recommendations include: 

The establishment of an Office of Transparency and Accountability to oversee the City’s budget and finances on a real time basis. [Also, a recommendation of the LA 2020 Commission] 

All labor negotiations must be open and transparent and not result in any budget deficits, now and in the future.  

The creation of a Pension Commission to review and analyze the City’s two pension plans and develop recommendations to eliminate the $15 billion unfunded liability.  According to the City’s projections, the City’s contribution to the pension fund will consume about 25% of the General fund, up from the current level of 20%.  [A recommendation of the LA 2020 Commission] 

Develop a ten-year infrastructure plan that will begin to eliminate the $10 billion deferred maintenance budget. 

The Four-Year General Fund budget Outlook should include placeholders for future raises.  

Implement multiyear budgeting. [A recommendation of the LA 2020 Commission] 

Other recommendations include the Mayor submitting his Proposed Budget on February 1^st, benchmarking the efficiency of the City’s department and operations, developing a strong Reserve Fund, and developing solutions to eliminate the Structural Deficit. 

To earn the vote of Angelenos on future tax increases, including the Split Roll, the City will need to earn the trust and confidence of Angelenos.  Implementing these recommendations will begin that process.

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  He can be reached at:  [email protected])

 -cw

LA WATCHDOG--Governor Newsom’s advisors announced that the State faces a $54.3 billion deficit through June 30, 2021, of which $13.4 billion occurs in this fiscal year ending on June 30 and $40.9 billion is in the upcoming year beginning on July 1.

LA WATCHDOG--“I always say that budgets are a statement of our values. But this year, it is also a document of our pain.” Mayor Eric Garcetti, April 19, 2020 

LA WATCHDOG--The City’s Annual Required Contributions to its two pension funds have increased 56% ($475 million) since Eric Garcetti was elected mayor, from $848 million to $1.32 billion for the upcoming fiscal year beginning July 1, 2020.  

LA WATCHDOG--In a memo to All General Managers, Councilman Paul Krekorian, the Chair of the Budget and Finance Committee, indicated there will not be 40 hours of budget hearings as there have been in the past. 

LA WATCHDOG--Governor Gavin Newsom and Mayor Eric Garcetti have prioritized the lives of Californians and Angelenos over the premature opening of our economy unless there is adequate testing, tracking, and monitoring; proper social distancing; the protection of vulnerable communities; surge capacity at hospitals; continued research and development; and the development of adequate guidelines in the case there is a resurgence of the virus. 

LA WATCHDOG--The Mayor’s Proposed Budget anticipates General Fund revenues of almost $6.7 billion, an increase of $118 million (1.8%) from this year’s Adopted Budget, and a balanced budget. 

LA WATCHDOG--“Only when the tide goes out do you discover who's been swimming naked.”  Warren Buffett, Chairman and CEO of Berkshire Hathaway

LA WATCHDOG--Over the last month, Mayor Eric Garcetti has done an excellent job of communicating with Angelenos about the Virus and what we need to do to stay safe and healthy.