LA WATCHDOG--On January 22, Councilman Felipe Fuentes introduced a motion calling for a 2016 ballot measure to reform and to restructure our Department of Water and Power by creating a full time, professional Board of Commissioners, eliminating civil service for the Department, and placing a cap on the Transfer Fee at the pre Proposition 26 level of $221 million.  

LA WATCHDOG--NIMBY is a pejorative label used by real estate speculators when they are having a hissy fit about local residents fighting their oversized, out of character, luxury developments that will create even more traffic congestion and gridlock, adversely impacting small mom and pop businesses, affordable housing, and the quality of life of the renters and homeowners in the surrounding communities.  

LA WATCHDOG--Our Department of Water and Power cannot get out of the spotlight these days as it has proposed to raise our rates by more than $1 billion over the next five years.  This estimated 22% bump in our rates will also be accompanied by about a $175 to $200 million tax increase based on the less than transparent 8% Transfer Fee and the City Utility Tax. 

There have also been calls to reform and restructure the Department by Council Felipe Fuentes, Mayor Eric Garcetti, and others, including Mickey Kantor and Austin Beutner, the co-chairman of the LA 2020 Commission which called for an independent Los Angeles Utility Rate Commission almost two years ago to oversee the Department and its rates, finances, operations, and management. 

There are three areas of reform.  

The first calls for a more independent Board of Commissioners, free - for the most part - from the counterproductive political meddling by the City Council and Mayor.  This Board would be supported by a more robust Ratepayer Advocate.  However, there are some significant differences between the Fuentes and Garcetti proposals that need to be reconciled by June 17 so that this reform may be placed on the November ballot. 

The second reform would establish an independent DWP Personnel Department, free from the stifling City Hall bureaucracy and its restrictive civil service rules.  It may also allow for a more flexible contracting process.  

The third and most controversial reform involves the taxes that are paid by the Ratepayers.  The two taxes consist of the City Utility Tax and the 8% Transfer Fee that together are expected to contribute about $640 million to the City’s coffers this year.  However, there is a high probability that the 8% Transfer Fee will be tossed out by the courts.  As a result, Fuentes is proposing lowering the Transfer Fee to $220 million from its current level of $267 million, subject to the approval of the voters. 

On the other hand, Kantor and Beutner are proposing to freeze the payments to City Hall at its current level of $640 million which would essentially result in a lowering of the Transfer Fee over time. 

But the rate increase and the three reforms are on a very slow boat as Felipe Fuentes has refused to place these individual matters on the agenda of the Energy and Environment Committee.  Rather, it appears that he wants to delay the process by lumping them all together in a big bundle and hold the rate increases, deemed reasonable by the Ratepayers Advocate, and the two non-monetary reforms hostage to voter approval of the $220 million Transfer Tax.  

However, at a meeting of the Rules Committee last Friday, City Council President Herb Wesson took control of the process and pledged to have “an open and public conversation about making the City’s utility run more efficiently and effectively while ensuring accountability.” But it remains to be seen if this “outreach” will be a dog and pony show, with the City Council trying to sell us on its already drafted ballot measure that was created behind closed doors by Fuentes with help from IBEW Union Bo$$ d’Arcy.  Or will the City Council and the Mayor enter into a real give and take dialogue with the Ratepayers, the Neighborhood Councils, and other interested parties?  

While the increases in our water and power rates are not our idea of a good time, DWP has been open and transparent throughout the process and has made significant concessions, including lowering its rate request and agreeing to measureable goals that are subject to review and analysis by a more robust Ratepayers Advocate.  

As such, the Energy and Environment Committee and the City Council should move to approve the rate increases separate and apart from the proposed reforms.  Furthermore, each of the three reforms should be considered separate and distinct and allowed to stand on its own merits. 

Holding the rate increases and the non-monetary reforms hostage to the tax increase will backfire, resulting a lose-lose situation, where already skeptical voters will reject these reforms and tax increase because of their contempt for City Hall.

(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:  [email protected])

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LA WATCHDOG--The primary goal of the ballot measure to reform and restructure the governance of our Department of Water and Power is to have the voters of the City of Los Angeles approve a new $221 million DWP Transfer Tax on Ratepayers in the November Presidential election.  

LA WATCHDOG--At the Tuesday morning meeting of the City Council’s Public Safety Committee, Police Chief Charlie Beck told Mitch Englander and his fellow committee members that our Police Department needed to beef up its ranks to 12,500 officers by 2020 to “most effectively protect the City and keep crime down.” 

But there was no discussion about the cost of adding 2,500 officers, not an insignificant issue since the City is anticipating years of red ink as a result of the budget busting contract with the City’s civilian workers. 

Over the next four years, the City is expected to have a cumulative deficit of over $400 million.  This does not include any additional funds to fund the proposed homeless initiative, the hiring of 5,000 new civilian workers as outlined in the new labor contract with the civilian workers (some of which will replace retiring employees), or the repair and maintenance of our lunar cratered streets.  

Assuming that the LAPD could increase the size of the department to 12,500 officers and an all in cost (including pension contributions and healthcare benefits) of $100,000 a year for the new hires, the four year budget deficit would increase by over $600 million, resulting in a $1 billion shortfall over the next four years. 

However, it is highly unlikely that the LAPD will be able to hit the 12,500 officer target by 2020 as many experienced veterans will be retiring.  This is compounded by the LAPD’s difficulty in attracting qualified recruits given its poor reputation relative to other law enforcement agencies.  

The LAPD has the difficult mission of maintaining public safety.  It also has to report to the Police Commission and the City Council who often second guess the Department, relying on their 20-20 hindsight, especially now the crime rate has spiked and there have been some unfortunate killings of civilians. 

The Police Department is also a large, complex organization with almost 14,000 sworn and civilian employees and a budget, including all related costs, of almost $2.6 billion, an amount that may be understated because of all the recent liability claims that have contributed to this year’s budget deficit of almost $100 million.  The department also needs almost $300 million over the next five years to replace old equipment.  

As with any large, complex organization, the most important factor is management and its ability to develop and implement a strategy and communicate with its constituency.  But that seems to be lacking at our Police Department as Chief Charlie Beck is under fire by the Department’s union and many members of the minority communities.  

That includes many voters who remember his threat that a “minimum of 500 officers that patrol our neighborhoods will be laid off and our historically low crime rates may be in danger” unless the voters approved Proposition A, the proposed permanent half cent increase in our sales tax.  Of course, shortly after Proposition A was rejected by 55% of the voters in March of 2013, Mayor Villaraigosa announced that there would be no layoffs. 

The Police Department cannot afford to increase the size of the police force to 12,500 officers unless there is a sizeable tax increase that will most likely be in the range of $500 million.  This equates to a 10% increase in our real estate taxes or a 1% increase in our sales tax.  But Chief Charlie Beck does not have the necessarily credibility with the voters which would result in another failed ballot measure. 

Maybe it is time for Chief Charlie Beck to retire. 

(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:  [email protected])

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LA WATCHDOG--While the Ratepayers Advocate opined that the five year, 25% increase in our power rates proposed by our Department of Water and Power is “just and reasonable,” the accompanying $160 million increase in our utility taxes that flow to City Hall is not just and reasonable.  Rather, it is continuation of a pattern where Mayor Eric Garcetti, City Council President Herb Wesson, and the rest of City Council treat Ratepayers as an ATM to finance their pet projects and to pay for the $125 million a year in higher labor costs as a result of the new union contract for the City’s civilian employees. 

LA WATCHDOG--On Tuesday, the Los Angeles Unified School District’s Board of Education engaged in some last minute grandstanding by issuing a press release calling for LAUSD to engage in discussions with the Los Angeles City Council because its DWP bill will be increasing by 27%, or $22.4 million, over the next five years.  

LAUSD is also overreaching by requesting that the City provide it with $11 million of services, financed with a portion of the $267 million Transfer Fee from DWP’s Power System to the City’s General Fund.  These services would include paying for street crossing guards near elementary schools, providing free refuse removal, and performing tree trimming services. 

While LAUSD is a very important governmental entity, the Department of Water and Power and its Ratepayers are not allowed to subsidize its operations, a point that was hammered home by a recent court decision involving the City of San Juan Capistrano and its tiered water rates.   

Nevertheless, the Department has worked with LAUSD, explaining on multiple occasions the reasons for the rate increases.  The Department even agreed in September to invest a staggering $43 million of our money in energy efficiency and water conservation projects which are intended to offset the proposed increases in its power and water rates. 

The Energy and Environment Committee can also expect to hear from Recreation and Parks whose utility bill is expected to double over the next five years to $30 million because of the recent court ruling involving San Juan Capistrano, Proposition 218, the cost of service, and why subsidized rates are illegal.  But again, the Department has been working cooperatively with this large customer, investing millions of Ratepayer money in water conservation and energy efficiency projects.  

The Department also has to contend with lame duck Councilman Felipe Fuentes, the Chair of the Energy and Environment Committee.  He is rumored to be considering limiting the rate increase to only three years since the five year proposal will involve rate hearings in 2020, an election year. 

But why is he considering a last minute change when he has known about the five year plan for over a year, especially since he will be leaving the Council in 2017 after only one term? 

Fuentes is also considering holding the much needed rate increases hostage to his plan to reform the governance of the Department.  This would involve the creation of a full time paid Board of Commissioners, a new personnel department free from the City’s civil service rules, and a lower Transfer Fee that would need to be approved by the voters.  

Based on the details in the four page motion (most are only one page), it is probably safe to assume that Fuentes’ proposed ballot measure and the supporting documentation have already been written, most likely ghostwritten under the watchful eye of IBEW Union Bo$$ d’Arcy.  This is a stunt that Fuentes mastered in Sacramento where he was considered “The Worst Legislator in California.” 

But why is Fuentes rushing this already controversial DWP reform plan to the ballot without engaging in a robust and transparent discussion and debate that involves Ratepayer participation?  After all, he needs our votes to approve the necessary charter amendments and $221 million Transfer Fee. 

According to speculation by City Hall insiders, Fuentes is either angling to be a full time, paid Commissioner (would you call that reform!) or a high ranking executive in IBEW Local 18, the DWP’s domineering union, so that he is in line to succeed Union Bo$$ d’Arcy as the union’s highly compensated  Business Manager.  

The issues involving the five year rate increase, deemed “reasonable” by the Ratepayers Advocate in light of the need to repair DWP’s infrastructure and meet unfunded environmental mandates, and its impact on LAUSD, Recreation and Parks, and single family residences deserves a full airing, separate and distinct from Fuentes controversial plan to reform our Department of Water and Power.  

Reform of our Department of Water and Power and its long term implications are too important to be rushed to the ballot. 

(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:  [email protected])

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LA WATCHDOG--On Saturday, the Neighborhood Council DWP Memorandum of Understanding Oversight Committee unanimously approved the following resolution: 

The DWP Oversight Committee calls on the City Council to follow the recommendation of the charter mandated Industrial, Economic, and Administrative Survey to form “a committee to examine governance reforms for the Department with the explicit task of reporting its findings and recommending a measure for the 2017 ballot.” 

LA WATCHDOG--The City of Los Angeles is embarking on an ambitious, $470 million plan to modernize and expand the Convention Center so that it can compete with other first tier, West Coast cities such as San Francisco, San Diego, and Anaheim in attracting large scale conventions. This undertaking is expected to be completed by 2020 and is designed to promote tourism, one of the main drivers of our economy, and to stimulate the private development of hotels, restaurants, residences, and office and retail space in the South Park neighborhood and the rest of DTLA. 

This expansion will increase the Convention Center offering to almost 1.25 million square feet, up 43% from the current level of 870,000 square feet.  At the same time, the new and improved Convention Center campus is designed to be an integral part of the community, linking seamlessly with the neighborhood, LA Live, and Staples. 

The City will also encourage the development of several thousand new hotel rooms in DTLA to accommodate highly desired, big spending, out of town conventioneers who will not only stimulate our economy, but will also contribute generously to the City’s coffers through the 14% Transit Occupancy Tax on their hotel bill.  

This also includes a privately financed, upscale Convention Headquarters Hotel of at least 1,000 rooms that will be strategically located on City owned property, most likely near Staples and LA Live on the north end of the campus.    

The City intends to finance this $470 million expansion with debt, which, when combined with existing Convention Center debt of almost $300 million, will total a staggering $770 million. This debt will be serviced by the Convention Center’s 25% share of the Transit Occupancy Tax which is expected to yield the Convention Center $54 million this fiscal year.  By 2020, this tax is projected to increase by over 20% to $261.8 million, resulting in $65 million to service Convention Center debt. 

However, our cash strapped City does not have the financial flexibility to finance this expansion and other immediate worthwhile projects, including the $1 billion to replace its aging and neglected equipment (including police cars, fire engines, and ambulances) without blowing a gaping hole in its Debt Management Policy which limits debt service for Non-Voted Indebtedness to less than 6% of General Fund revenues.  This violation would send the wrong message to the investment community, resulting in a downgrading of the City’s credit rating and higher interest rates.  

The City Administrative Officer has recommended that the City enter into a Public Private Partnership (a “P3”) where the City would select a turnkey development partner to design, build, finance, operate and maintain the expansion of the Convention Center and the development of the surrounding real estate.  Under this recommended alternative, the 44 year old West Hall would be demolished and rebuilt (not retrofitted as currently envisioned).  The partner would also develop 9 to 14 acres of the 54 acre campus by creating “an integrated mixed-use real estate development” that would help to offset the costs of associated with the Convention Center, a loss leader that cannot even begin to pay the interest on $770 million of debt.  Needless to say, any development plans need to be consistent with the Community Plan.  

A P3 also protects the City from any cost overruns associated with the expansion of the Convention Center and the construction of the Headquarters Hotel and isolates it from any operating losses.  The partner is also responsible for maintaining the campus in excellent condition, a task that the City has demonstrated that it is incapable of doing on a sustained basis. 

While the terms of the P3 need to be worked out, including any “availability service payments” by the City to service the debt, the net result will result in more cash for our City’s deficit prone budget by creating a more vibrant Convention Center, more out of town visitors resulting in higher increased Transit Occupancy Tax revenue, and lower contributions to the Convention Center. 

The expansion of the Convention Center in conjunction with a well-capitalized partner is a win-win for our financially challenged City.  Don’t blow it. 

(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:  [email protected])

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LA WATCHDOG--According to a December 31 Facebook posting by Mayor Eric Garcetti, “2015 was a big year. We laughed together, cried together and worked together to make our city better. Just in time for the New Year, check out this short video we made to celebrate all that Los Angeles has accomplished over the last 12 months. Can't wait to see how we'll outdo ourselves in 2016!” 

But rather than go through the 21 modest accomplishments (see below) presented in “Looking Back at the Past Year in LA,” we should review what was not highlighted in this professionally produced two minute video. 

There was no substantive discussion about our Department of Water and Power and the massive $1.4 billion, 30% increase in our utility rates over the next five years.   

There was no mention of reforming DWP’s chaotic governance despite Garcetti’s 2013 campaign pledge and the recommendations of both the LA 2020 Commission and the charter mandated Industrial, Economic, and Industrial Survey.  

Nor was our cash strapped City’s budget a topic of conversation even though the City is expected to have a budget deficit of more than $400 million over the next four years.  

Nor was the budget busting new labor contract for the City’s civilian workforce mentioned even though it will add over $125 million in annual costs and roll back pension reform.  It will also make it more difficult for the City to outsource work (such as road repairs) to more efficient, better managed private contractors. 

Nor was the $13.5 billion unfunded pension liability (71% funded) of the City’s two pension plans discussed or that pension contributions are devouring over 20% of the General Fund budget.  

Nor was the state of our lunar cratered streets, our broken sidewalks, and the rest of our deteriorating infrastructure mentioned.  

But rather than dwelling on 2015, we need a better understanding of what Garcetti is planning for 2016 and beyond.  And this does not mean platitudes and aspirations, but definitive policies and goals so that we can render a judgment on his leadership when he is up for reelection in 2017. 

Will Garcetti pursue the recommendation of the LA 2020 Commission to establish an Office of Transparency and Accountability to oversee our City’s strained finances and its budget shenanigans? 

Will Garcetti follow the blue ribbon Commission’s advice to form a Committee for Retirement Security to review the City’s retirement obligations and to make “concrete recommendations on how to achieve equilibrium on retirement costs by 2020?” 

Will Garcetti lead the reform the governance of our Department of Water and Power as was recommended by both the LA 2020 Commission and the Industrial, Economic, and Administrative Survey? 

Will Garcetti follow up on the LA 2020 Commission’s recommendation to update the City’s Community Plans “to enhance neighborhood input and establish a thoughtful growth strategy?”  

Will Garcetti develop an operational and financial plan to repair and maintain our lunar cratered streets, our broken sidewalks, and the rest of our failing infrastructure? 

There are many other issues that need to be addressed, including, but certainly not limited to, balancing the budget without raiding the Reserve Fund, fixing the City’s poorly managed and inefficient work force, updating its management information systems, and funding the Los Angeles River and the 2024 Summer Olympics. 

Eric, Angelenos elected you to lead the City, not to kick the can down the road.  And to judge your leadership, we need results and not a lot of political hot air.  Otherwise, how can you expect us to vote for you when you are up for reelection in March of 2017 or when you run for higher office in 2018?

●●●●●

Looking Back at the Past Year in LA

1.  Mayor Garcetti signs LA’s first-ever Sustainability City pLAn.

2.  Angelenos work together to Save a Drop and conserve water.

3.  Shadeballs help conserve and preserve water quality in our reservoirs.

4.  CicLAvia turns 5.

5.  LA commits to acquiring the largest Electric Vehicle Fleet in the country.

6.  The US Army Corps of Engineers signs off on a plan to restore the Los Angeles River.

7.  Los Angeles hosts first-ever US-China Climate Leaders Summit.

8.  Mayor Garcetti represents Angelenos and Climate Mayors at UN Climate Conference in Paris.

9.  Los Angeles becomes the host city for the 2015 Special Olympics World Games.

10. Los Angeles becomes the official US bid City to host the 2024 Summer Olympics.

11. Mayor Garcetti signs historic minimum wage increase into law.

12. An $8.5 billion modernization and a record number of passengers at LAX.

13. California new Film Tax generates an estimated $1.07 billion in economic activity.

14. LA makes new investments in smart infrastructure, including ultra-high speed internet, smart poles, and solar powered small benches and bus stops.

15. City and County leaders begin an unprecedented collaboration to combat homelessness in Los Angeles.

16. #HomesforHeroes helps house homeless veterans and their families.

17. Mayor Garcetti signs a groundbreaking seismic retrofit bill into law.

18. Los Angeles prepares for El Nino.

19. LA first responders adopt new tactics to reduce emergency response time.

20. Metro’s Silver Line Express expands to San Pedro.

21. Construction on the new Crenshaw line and expansion of Metro’s Gold and Expo lines will transform LA’s transportation network in the coming year.

(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:  [email protected])

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CityWatch

Vol 14 Issue 2

Pub: Jan 5, 2016

LA WATCHDOG--On Friday, Councilmember Felipe Fuentes “introduced a motion calling for a 2016 ballot measure to reform and restructure” our Department of Water and Power.  

LA WATCHDOG--On Tuesday, the Board of Water and Power Commissioners approved a five year, 21% increase in our power rates that were appropriately deemed “just and reasonable” by the Ratepayers Advocate.  This represents a bump of 4% a year, considerably lower than the 8% that was tossed around a year ago. 

But there was no discussion about how DWP Ratepayers would be hit with $150 million in new taxes as a result of the $770 million increase in revenues over the next five years.  Overall, the City’s haul from the Ratepayers is projected to increase to over $800 million, up from the current level of around $650 million. 

There are two taxes on power system revenues, the City Utility Tax and the 8% Transfer Fee. 

The City Utility Tax is equal to 10% of residential revenues and 12½% of commercial revenues with a blended rate of about 11½%.  Based on projected revenues of $4.22 billion for the fiscal year ending June 30, 2020, this tax will generate around $485 million for our friends that occupy City Hall. 

The 8% Transfer Fee is equal to 8% of the prior year’s revenue and according to DWP’s projections, it is scheduled to increase to $327 million in 2020, up from $266 million last year.  

But this fee is the subject of a class action lawsuit (Eck v. City of Los Angeles) that alleges that this “fee” is a violation of Proposition 26 (The Supermajority Vote to Pass New Taxes and Fees Act), a ballot measure that was passed by voters of California in November of 2010 that prohibits the collection of “disguised taxes” in the form of fees or rates. 

This issue was addressed in public comment at the Tuesday Board meeting by Walter McNeill, a Redding based attorney who successfully sued the City of Redding and its municipally owned utility in a similar case.  But that was the end of the discussion because the City (and not the Department of Water and Power) is opposing the class action lawsuit. 

But unlike the class action lawsuit involving the Telephone Users Tax (Ardon v. City of Los Angeles) where the City hoodwinked Superior Court Judge Amy Hogue and escaped a billion dollar liability owed to Angelenos for an estimated $25 million plus a very generous $18 million in legal fees, this litigation is higher profile and more clear cut as it concerns easily identifiable payments from DWP to the City and does not directly involve DWP’s 1.4 million Ratepayers. 

If the City were to lose this case, and there is a high likelihood that it will, the revenue stream from the 8% Transfer Tax would come to a screeching halt, blowing an even larger hole in the City’s already unbalanced budget.  Over the next four years, the City’s cumulative deficit will exceed $400 million as a result of the new labor contract with its 20,000 civilian workers.   

The City would also be liable for over $1.5 billion for past transfers.  This would cost the City $150 million a year to service the Judgement Obligation Bond that would be floated to pay this liability.  

Rather than play Russian Roulette with the City’s finances, where there are at least four bullets in the six shooter, the City needs to reach a negotiated settlement with the plaintiffs, the Ratepayers, and the City’s voters that requires the City to reimburse DWP and its Ratepayers, that places a new tax on the ballot to help the City balance its budget and repair its infrastructure, that truly reforms the governance of the DWP, and that requires the City to Live Within its Means. 

Otherwise, the City, true to form, will continue to “kick the can down the road” until the spaghetti and meatballs really hit the fan.

(Note: On Friday, Councilmember Felipe Fuentes will introduce a motion to the City Council that will have recommendations on how to reform the governance of our Department of Water and Power.  But any reform must include significant input and buy in from the Ratepayers who do not trust the Herb Wesson led City Council and Mayor Eric Garcetti who view Ratepayers as their dedicated ATM.  See “DWP Reform: Set for Yet Another Burial.”)  

(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:  [email protected])

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CityWatch

Vol 14 Issue 7

Pub: Jan 22, 2016

LA WATCHDOG--In April of 2014, the LA 2020 Commission recommended that our City establish the Los Angeles Utility Rate Commission to oversee the operations our Department of Water and Power, set policy, appoint the General Manager, and set utility rates. 

But City Council President Herb Wesson buried this constructive measure in the bowels of City Hall, never to be discussed again, including by Mayor Eric Garcetti who promised us that he would reform DWP.  

In December of 2015, the charter mandated Industrial, Economic, and Administrative Survey recommended reforming the governance of DWP to limit the political interference by City Hall in its operations, management, and finances.  But Navigant, the consulting firm that was retained by the Controller, the Mayor, and the Herb Wesson led City Council, did not outline any specific reforms other than to form a “committee to examine governance reforms for the LADWP, with the explicit task of reporting on its findings and recommending a measure for the 2017 ballot.” 

Unfortunately, this Governance Committee will consist of City Hall insiders, including “representatives from the Mayor’s office, City Council Energy & Environment Committee, CAO, CLA, Controller, City Attorney, Office of Public Accountability, Board of Water and Power Commissioners, the general manager of LADWP, and a representative from labor.”  

But who is representing the Ratepayers, the “working slobs” who are paying the bills and being fleeced for over $1 billion a year by City Hall and its cronies? 

While the Governance Committee that consists of City Hall insiders will claim to be working in the best interests of the Ratepayers, rest assured that our Elected Elite will try to game the new system of governance to their advantage at our expense, especially when it comes to using us as an ATM. 

However, Ratepayers need to be an integral part of this process if the findings of the Governance Committee are to have any credibility with Angelenos who do not trust the Department and the hot air know-it-alls at City Hall.  Furthermore, the Governance Committee needs to conduct its business in an open and transparent manner and not behind closed doors as is so often the case at City Hall, especially when it comes to issues involving our wallets. 

Any recommendation by the Governance Committee must also include a requirement that the Department provide Ratepayers with timely information that is consistent with investor owned utilities such as Southern California Edison.  This would include not only financial information and operating statistics, but a comprehensive letter written to Ratepayers discussing the Department’s operations and financials. 

Ratepayers must also insist on transparency on all discussions between City Hall and the Department.  This would require that all conversations and meetings be documented in writing and agreed to by both parties, subject to the penalty of perjury, and be made available to the public on the web within 48 hours.  These “ex parte” rules would also apply to any conversations between City Hall and the IBEW, the Department’s domineering union.  

The Governance Committee needs to allow the DWP to establish its own Personnel Department and rules, freeing it from the City and its overly restrictive civil service regulations that do not give this 9,000 person organization with almost $5 billion in annual revenues the necessary flexibility to operate in an efficient manner. 

The Governance Committee should support a more robust and independent Ratepayers Advocate that has the resources to analyze the operations and finances of the Department on a timely basis to make sure DWP is hitting its operating and financial metrics.  The Ratepayers Advocate must also have the resources to improve its outreach to the Ratepayers and other DWP stakeholders, including those who occupy City Hall. 

The Governance Committee should also consider direct Ratepayer participation.  This would include allowing Ratepayers to vote on any rate increase that exceeds the rate of inflation and/or permitting the Ratepayers to elect the Board of Directors as is the case with the Sacramento Municipal Utility District. 

One of City Hall’s major goals would be to legitimize the 8% Transfer Fee from the Power System that is currently the subject of a viable class action lawsuit.  This year, it is expected to be in the range of $275 million.  But rather than agree to continue this less than transparent tax, Ratepayers should approve its gradual phase out over a ten year period. 

Over the next five years, DWP is anticipating spending between $15 and $20 billion transforming the Department.  This includes getting off coal, developing sources of local water, meeting numerous unfunded environmental mandates, and repairing and maintaining its aging water and power infrastructure. 

The key to this successful transition is excellent management that is allowed to operate an efficient, well-funded, flexible organization without undue interference from City Hall. 

We cannot afford to have the politically ambitious duo of Eric Garcetti and Herb Wesson bury the reform of our Department of Water and Power in the bowels of City Hall yet again.

(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:  [email protected])

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CityWatch

Vol 14 Issue 4

Pub: Jan 12, 2016

LA WATCHDOG--At its December 10 meeting, the Garcetti appointed City Planning Commission unanimously approved the “up zoning” of the Palladium Residences (photo: proposed) to allow the development of two thirty story towers that will house 731 luxury rental apartments.  The doubling of this project’s density will result in additional profits of at least $50 million for Crescent Heights, the Miami based developer. 

This mixed use development will also include a mere 24,000 square feet of retail space and restaurants and also includes improvements to the 63,000 square foot Palladium, the 1940 Art Deco venue located in the heart of Hollywood, one block east of Sunset and Vine. 

The supporters of this $500 million project claim that it will help alleviate the City’s housing crisis.  But the rents in these luxury apartments are not affordable unless you are making north of $100,000 a year.  This is double the City’s median household income of less than $50,000 a year. 

Nor are these apartments family friendly unless there is a household income in excess of $200,000 a year.  

The developer and its bought and paid for supporters in City Hall are touting that 5% of the apartments are being reserved for working class Angelenos who make no more than 120% of the median income. But that will result in a modest decrease in revenues of less than 2%, or $600,000 a year, a small price to pay for at least $50 million in additional profits.  

To put the 5% set aside in perspective, New York City is demanding that 25% of the units in an up zoned building be reserved for affordable housing. 

The Planning Commission was also impressed that this “elegant density” project was in an area served by the Metro Red Line and numerous bus routes.  But most of the residents in these two luxury high rises will not be schlepping to work on the subway or bus, but rather tooling to their offices in high powered BMWs.  

This will lead to increased gridlock at Sunset and Vine and Hollywood and Vine, two of the most dangerous intersections for pedestrians in the City.  And this does not include the impact of Millennium Hollywood and many of the other projects in the surrounding area that will add thousands of new residents and cars to the already stressed street and freeway infrastructure. 

Real estate speculators and developers and their cronies argue that this “up zoned” project is good for the economy.  While that can be argued, the need for high end apartments is questionable as the City’s Housing and Community Investment Department reported that there is a 12% vacancy rate for apartments built in the last ten years.  Furthermore, there are many other development opportunities in Hollywood and throughout the City that will not destroy our neighborhoods, be less stressful on the infrastructure and public safety, and most importantly, provide affordable housing to thousands of hard working Angelenos. 

The Palladium Residences is just another poster child in a long list of developments where City Hall has sold out to campaign funding real estate speculators and developers who could care less about ordinary Angelenos. 

So it is not surprising that former Mayor Richard Riordan has endorsed the Neighborhood Integrity Initiative that would eliminate “spot zoning” of mega projects if it is approved by the voters in November. 

While a recent poll indicated that 72% of the voters approved of the Initiative, Riordan’s game changing endorsement has put City Hall and Mayor Eric Garcetti on the defensive.  As Riordan said, Garcetti “isn’t doing anything for the poor but helping the rich get richer -- through these zoning deals on land development.”

(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:  [email protected])

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CityWatch

Vol 14 Issue 5

Pub: Jan 15, 2016

LA WATCHDOG--On April 9, 2014, the LA 2020 Commission endorsed a series of actionable recommendations designed to “enhance transparency and accountability in City Hall, put the City on a path to fiscal stability, and renew job creation in Los Angeles.”   

In January of 2015, City Council President Herb Wesson buried the Commission’s report, including the recommendations involving the our City’s finances, its pension plans, the governance of our Department of Water and Power, and the updating of the City’s Community Plans. 

LA 2020 called for the creation of the Office of Transparency and Accountability to oversee our cash strapped City’s finances.  But Paul Krekorian, the chair of the Budget and Finance Committee, tells us that the city’s budget is balanced, despite the fact that there is no plan or money to repair our lunar cratered streets and that the City raided its rainy day Reserve Fund for $150 million despite record tax revenues. 

The Commission also called for the establishment of a “Commission on Retirement Security” to “review the City’s retirement obligations in order to promote an accurate understanding of the facts” and to make “concrete recommendations on how to achieve equilibrium on retirement costs by 2020.”  This is a reasonable suggestion as the City’s two pension plans are underfunded by $13.5 billion (assuming a more realistic investment rate assumption of 6½%), representing a funded ratio of only 71%. 

The city is also underfunding its pension plans by at least $400 million a year by relying on the overly optimistic 7½% investment rate assumption, a rate that Paul Koretz, the chair of the Personnel Committee believes is too low since he is smarter than Warren Buffett who recommended a rate of 6½%. 

This twelve member blue ribbon commission, including IBEW Union Bo$$ Brian d’Arcy, called for the establishment of an independent, professionally staffed Los Angeles Utility Rate Commission that would appoint the General Manager and set rates with the intent of limiting the interference in the operations and finances of DWP by City Hall. To the surprise of no one, Felipe Fuentes, the chair of the Energy and Environment Committee, ignored this reform as the City continues to use DWP and its Ratepayers as an ATM. 

The LA 2020 Commission also called on the City to update its 35 Community Plans every five years.  This would allow residents, businesses, investors, and City Hall to have a clearer understanding of the zoning rules and regulations so that they are not “subject to the whims of special interests, nimbyism, and individual elected officials.”  However, reform has been rejected by Jose Huizar, the chair of the Planning and Land Use Management Committee, as the real estate speculators and developers, their lobbyists and lawyers, contractors, and their cronies has been a major source of campaign cash. 

While Mayor Eric Garcetti and the Herb Wesson (photo right) led City Council will close out 2015 with high fives knowing that they snookered us for yet another year, 2016 has the potential to be very different. 

The City’s finances are under pressure as this year’s budget is already $100 million in the red because of excessive legal settlements.  Next year, the City will have to finance its new labor agreement with the City’s civilian workers that will end up costing us over $100 million beginning in 2017.  Pension contributions will increase as the return on the pension plans’ investment portfolios are significantly below the overly optimistic investment rate assumption of 7½%. 

DWP will be front and center because of the five year, 30%, $1.4 billion increase in our utility rates.  And the pressure for reform has increased as the charter mandated Industrial, Economic, and Administrative - overseen by Controller Ron Galperin, Garcetti, and Wesson - has called for a change in the governance of the inefficient DWP because there are no clear lines of authority.  

Wesson and Garcetti may tell us to buzz off once again.  But the need for our votes in the November election will provide us mushrooms (in the dark covered with manure) with considerable leverage. 

In November, we will have the opportunity to approve the Neighborhood Integrity Initiative that will require the City to do “real planning,” eliminating the right of the local councilmember to “up-zone” gridlocking developments that are inconsistent with our neighborhoods.  This initiative will be opposed by our Elected Elite who are addicted to the campaign cash they receive from the real estate “gang.”    

There will also be several ballot measures to increase our taxes, despite the fact that we are one of the highest taxed states in the country with one of the lowest growth rates.  This includes a new half cent increase in our sales tax to finance transportation projects, of which 25% is returned to the City.  

In March of 2013, 55% of the voters rejected a half cent increase in our sales tax as we did not trust City Hall which refused to reform its finances and Live Within Its Means.  This was in spite of massive campaign contributions by the real estate community to Herb Wesson’s campaign slush fund in support of Proposition A.  

In November, we will be able to send a clear message by voting NO on the proposed tax increases and YES on the Neighborhood Integrity Initiative. 

In 2015, Garcetti, Wesson, and the City Hall gang kicked the can down the road.  In 2016, we can kick them in the can. 

(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:  [email protected])

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CityWatch

Vol 14 Issue 1

Pub: Jan 1, 2016

LA WATCHDOG-Comcast’s decision to terminate its $45 billion acquisition of Time Warner Cable may be good news for the 3.5 million Southern Californian households that have been deprived of the right to watch the Dodgers from the comfort of their own homes.  

Underlying this blackout of 70% of the market is the unwillingness of DirecTV, Charter, Cox, and other cable companies to pass along the $5 a month subscriber fee associated with TWC’s over-the-top offer to pay the Dodgers $8.35 billion over the next 25 years to distribute SportsNet LA, the Dodgers regional sports network.  Assuming five million subscribers, the public would eventually be tagged for $600 million a year when you factor in the 100% markup that is needed to preserve the distributors’ 50% gross profit margin.  

TWC has been reluctant to lower its price per subscriber because it may trigger a substantial write-off of its investment, probably in the range of $500 million to $1 billion. But TWC has been concerned that this sizeable hit to its financials would have an adverse impact on the market’s perception of its proposed deal with Comcast. 

But now that the deal with Comcast is history due to the opposition of the Federal Government, TWC is in a position where it can write-off not only its costs associated with the failed merger (probably in excess of $100 million), but a portion of the Dodger contract associated with a lower subscriber fee, probably in the range of $1 to $2 per subscriber, or $500 million to $1 billion. 

This write-off, while substantial, represents at most 2% of TWC’s $45 billion market value.  Furthermore, sophisticated investors, including Charter Communications which is interested in buying TWC, will see through the smoke and value the Dodger contract based on more rational assumptions. 

Consequently, it would be in everyone’s best interest for TWC to lower its price to around $3 a subscriber.  Unfortunately, life has become more complicated since early in 2013 when TWC inked its deal with the Dodgers. 

According to several newspaper accounts, the independent distributors may be trying to offset some of the high costs and low ratings associated with the TWC’s 20 year, $3 billion contract with the Lakers by lowering the subscriber fees for the Dodgers.  There may also be efforts to tie the fees of both the Dodgers and Lakers to their performance, thereby increasing TWC’s risk profile. 

The cable and satellite companies are also experiencing the increasing loss of subscribers as consumers are “cutting the cord,” embracing streaming services such as Netflix and Amazon in an attempt to lower their overhead.  This is forcing the distributors to become more cost conscious as can be seen by their reluctance to overpay for the Dodgers.

There is also considerable pressure for distributors to “unbundle” their basic offering which would allow consumers to choose channels on an a la carte basis. This is particularly true of the sports related offerings which comprise an estimated 50% of the cost of the basic cable TV package, but are only viewed by only 25% of the subscribers. 

This effort to “slim” down the basic offering is playing out in a lawsuit as Verizon, the sixth largest pay TV provider, is attempting to offer a basic package without ESPN, contrary to its contractual arrangement with the channel.  As a matter of interest, ESPN, along with its affiliated offerings that are forced upon the distributors, is by far and away the most expensive network.  

TWC is in an interesting predicament of its own making.  

Does it continue to lose $100 to $200 million a year by holding out for a $5 subscriber fee or does it take the $1 billion hit to its financials, recognizing that in its exuberance that it overpaid big time for the Dodgers’ media rights, cut its losses, and lower the subscriber fee to $3? 

If it is worried about its reputation, it is time for Time Warner Cable to take the hit for the home team.  It is time for Dodger baseball. 

(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]) 
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CityWatch

Vol 13 Issue 35

Pub: Apr 28, 2015

LA WATCHDOG-“Public, Private Sector Wage Gap Heavily Favors Many LA Workers,” a front page article in Sunday’s Los Angeles Times, marks the beginning of the conversation involving the efficiency of the City’s operations and whether the City should “outsource” a portion of its operations, including the repair and maintenance of our deteriorating streets and broken sidewalks. 

In their 1,300 word article, Peter Jamison and Catherine Saillant detailed how many city workers earn considerably more than their private sector counterparts, with premiums ranging from 40% to over 100%.  

City workers are also entitled to very hefty benefits that far exceed those in the private sector, including a Cadillac healthcare plan, a generous defined benefit pension plan, ample vacation time, 13 paid holidays, and 12 sick days at full pay.   

The City’s operations also appear to be poorly managed, hindered by the lack of management information systems as was detailed in Controller Ron Galperin’s audit of the Bureau of Street Services.  As a result, the Bureau does not have a very good grasp of its performance metrics and overall operation.  

Galperin also revealed that the Bureau has very low direct labor utilization rates (57%) which results in the overstaffing of its work crews.    

The City’s cost structure is also burdened by a bloated, paper pushing bureaucracy which results in excessive department overheads.  This is compounded by unsupported allocations for centralized services and City Hall administrative expenses that are needed, in part, to handle the disruptive interference from members of the City Council, their staffs, and their favor seeking cronies. 

Our cash strapped City can no longer support these inefficient operations that are crowding out the City’s ability to provide basic core services such as the repair and maintenance of streets and sidewalks and the enforcement of traffic laws, planning and zoning rules, building and safety regulations, and local zoning ordinances, all of which impact our quality of life.     

As a first step, the City needs to determine the efficiency of its departments by benchmarking their operations against other governmental entities and private enterprise. While this may be a novel experience for the City, it is standard operating procedure in the private sector.  

The City should also implement a policy of “managed competition” where the City contracts with private contractors for a portion of the work and compares the results with those of City work crews.  

The Department of Water and Power had such a policy to replace selected water mains.  This resulted in a DWP construction work crew incurring 100% cost overruns while at the same time blowing its deadlines.  The private contractors were, for the most part, on time and on budget.  

The City should also consider implementing performance based evaluations of its employees while lessening the importance of seniority.  This would provide the City with considerably more operational flexibility to lower its costs and deliver a finished product on time and on budget.  

Together, these three reforms, benchmarking, managed competition, and performance based personnel evaluations, would result in significant savings, freeing up to $200 million (less than 10% of the civilian personnel costs) that would be devoted to eliminating the Structural Deficit, repairing and maintaining our streets and sidewalks, and restoring vital city services that are essential to our quality of life. 

Unfortunately, the Herb Wesson led City Council will reject these reforms because it does not have the courage to stand up to the campaign funding City unions.  Its solution is to continue to play games with the budget by raiding the Reserve Fund and deferring needed expenditures.  At the same time, they are concocting a plan to persuade the City’s skeptical voters to approve a massive increase in our taxes.  

But this rope-a-dope strategy of prioritizing their own personal political goals at our expense is not going to fly as the voters will demand work place and budget reform.  Maybe it is time that City Hall took the advice of former New York Governor Mario Cuomo: 

“It is not government’s obligation to provide services, but to see that they are provided.”

(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]) 
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CityWatch

Vol 13 Issue 36

Pub: May 1, 2015

LA WATCHDOG-We are entering the Silly Season of LA politics as the candidates for the open City Council seats are promising paved streets, level sidewalks, pension reform, a more efficient work force, restored services, development that is respectful of our neighborhoods, less traffic congestion, lower parking fines, affordable housing, housing for the homeless, a revitalized Los Angeles River, and the phase out of the gross receipts business tax, all without raising our taxes. 

These campaign pledges are nothing but hot air unless the City is able to fund its existing operations and these ambitious programs.  

However, this gives us the opportunity to ask the candidates a series of very simple questions about how they propose to eliminate the City’s projected budget deficits and its $25 to $30 billion mountain of unfunded pension liabilities, deferred maintenance, and existing long term debt. 

For openers, how do you intend to eliminate next year’s projected budget deficit of $165 million and the $425 million cumulative deficit over the next three years? 

The City Administrative Officer is projecting a budget surplus of $24 million for the 2018-19 fiscal year.  It assumes that there will be no raises or cost of living adjustments for City employees and that civilian workers will contribute 10% towards the cost of the City sponsored health plan.  Do you support these assumptions? 

Do you support the unanimous recommendation of the LA 2020 Commission to establish an Office of Transparency and Accountability to oversee the City’s finances? 

How do you propose to pay for the repair and maintenance of our streets and sidewalks? 

Do you support the LA 2020 Commission’s proposal to form a Committee on Retirement Security that will report its recommendations on how to “achieve equilibrium on retirement costs by 2020” within 120 days? 

Do you support the City’s creation of the new tier of pension benefits for new civilian employees even though the Employee Relations Board questioned its legality?  

What are your plans for pension reform?  

Do you believe that the City’s pension plans should be fully funded within 20 years?  

Do you support the proposal that would allow the City to amend future benefits for existing workers as was supported by San Jose Mayor Chuck Reed? 

Do you support the recent lowering of the investment rate assumption by the City’s two pension plans to 7½% even though it increased the City’s annual required contribution?  

Under what conditions would you support the lowering of the investment rate assumption to 6½%, a benchmark recommended by Warren Buffett of Berkshire Hathaway fame and fortune? 

How do you propose to finance the Mayor Garcetti’s plans for the Los Angeles River, Great Streets, and Sustainability? 

Mayor Garcetti pledged to phase out the $470 million gross receipts business tax? How would you replace the lost revenue? 

Do you support the “benchmarking” of City services to determine their effectiveness and efficiency?  And under what conditions would you support the contracting out of City services?  

Do you support transparent labor negotiations where all proposals and offers must be disclosed within 24 hours and that any proposed agreement be reviewed and analyzed by an independent third party prior to being approved by the City Council? 

Under what conditions would you support a half cent increase in our sales tax to fund the restoration of City services? 

Finally, do you support placing a measure on the ballot where voters would have the opportunity to accept or reject an amendment to reform our charter that would require the City to develop and adhere to a long term financial plan, pass two year balanced budgets based on Generally Accepted Accounting Principles, and, over the next twenty years, fully fund the City’s two pension plans and repair and maintain our streets, sidewalks, and the rest of our infrastructure? 

We deserve detailed written answers to all of these basic questions on how the candidates propose to eliminate the sea of red ink and reduce the $25 to $30 billion of liabilities that the current City Council is dumping on the next generation of Angelenos because of its inaction and its unwillingness to make tough decisions.  

Come to think of it, we should demand that Mayor Eric Garcetti, Council President Herb Wesson, Budget and Finance Chair Paul Krekorian, and all of the other members of the “kick the can down the road” City Council provide us with written answers to these questions. 

After all, it is not only our money they are squandering, but the future of our children and grandchildren. 

(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].) 
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CityWatch

Vol 13 Issue 2

Repub: Jan 6, 2015

LA WATCHDOG--The City is projecting a year-end budget deficit of almost $100 million according to the Second Financial Status Report dated December 4, 2015. 

This shortfall is primarily the result of the City Attorney’s projection that liability claims associated with legal judgements and settlements will soar to $138 million for the year ending June 30, 2016, an $84 million increase from the budgeted $54 million. 

While the specifics of this 155% increase have not been disclosed, “much of the shortfall is attributable to a small number of extremely significant cases arising from incidents or conduct which occurred many years ago.”  More than likely, however, the Los Angeles Police Department is responsible for a good chunk of this increase as the LAPD has been responsible for almost 60% of the $272 million in payouts over the last five years.

But how does the City intend to cover this projected $100 million budget deficit?

One alternative would be to raid the $375 million Reserve Fund.  But this would deplete this rainy day fund to a level of 5% of the $5.4 billion General Fund, an amount $50 million short of the 6% target recommended by the City Administrative Officer and $266 million below the 10% level suggested by many public finance experts.

Besides, in preparing the Budget eight months ago, Mayor Eric Garcetti, the Budget and Finance Committee chaired by Paul Krekorian, and the Herb Wesson led City Council already raided the Reserve Fund for $130 million.

The City also has the option to issue $100 million of Judgment Obligation Bonds to cover this projected deficit.  In City speak, this would “save” the City $100 million.  In reality, this bond offering would be dumping the sins of the past onto a future generation of Angelenos who would be burdened with annual debt service payments of $13 million for the next ten years.

The third (and preferred) alternative would be to allocate the $138 million in liability claims to the responsible departments who would then have to determine how to pay for the messes they created.  This would also have the added benefit of increasing the accountability of the Police Chief and other department managers as they would be responsible for the actions of their employees and the impact on their budgets.

Certain members of the City Council believe the City will be bailed out as revenues will exceed the budgeted General Fund receipts of $5.4 billion. But this opinion may be wishful thinking as budget revenues already represent a hefty 5% increase from the previous year.  Furthermore, revenues through the first four months of the fiscal year are off by $40 million because of lower property tax collections and lower revenues from the City Utility Tax levied on DWP Ratepayers.

This $100 million deficit does not include any real money for the City’s homeless initiatives or any appropriations or reserves related to the havoc from the El Nino storms that are expected to drench California this winter.

The Second Financial Status Report highlights the fact that the City, like many of its businesses and employers, is a victim of California’s legal system that is consistently ranked as the top “Judicial Hellhole” in the country.  This will result in cutbacks to an already tight City budget and should result in calls to reform our civil justice system, a move that will alienate the campaign funding plaintiff’s bar.   

For example, the $84 million hit for liability claims would fund the City’s homeless initiative, repair miles and miles of our lunar cratered streets, or allow the Planning Department to update the City’s outdated Community Plans. 

It also puts the Mayor and the Herb Wesson led City Council on notice that the City does not have the financial flexibility to introduce new initiatives unless it is willing to reallocate revenues, a painful process that will result in significant pushback from the targeted departments, or to outsource operations to more efficient service providers, a move that would cause the City’s unions to go ballistic. 

Over the next four months, the Mayor, the City Council, and the City’s budget mavens will be working on next year’s budget behind closed doors.  How will they cover the $100 million deficit and fund existing programs and new initiatives? How will they pay for higher pension contributions; the repair of streets, sidewalks, and parks; and its new labor contract?

Stay tuned.  2016 is already shaping up to be an interesting year.

(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:  [email protected])

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CityWatch

Vol 13 Issue 103

Pub: Dec 22, 2015

LA WATCHDOG--In April of 2014, the Los Angeles 2020 Commission recommended the establishment of the Los Angeles Utility Rate Commission to oversee the operations and finances of our Department of Water and Power, determine our utility rates in an objective manner, and appoint the General Manager. 

But this attempt to eliminate or minimize the “political interference” from City Hall, the Mayor, and their cronies never saw the light of day as City Council President Herb Wesson and Energy and Environment Chair Felipe Fuentes buried this recommendation deep in the bowels of City Hall.  

Two other excellent measures posed by Mickey Kantor’s LA 2020 Commission were also deep sixed by Wesson.  These included the formation of an Office of Transparency and Accountability to monitor the finances of our cash strapped City and the establishment of the Commission for Retirement Security to review the City’s seriously underfunded pension plans and to make “concrete recommendations on how to achieve equilibrium on retirement costs by 2020.” 

However, last week, Controller Ron Galperin, in collaboration with the Mayor and City Council, released the charter mandated Industrial, Economic, and Administrative Survey covering DWP that called for, among other things, the reform of the Department’s governance. According to this 581 page report, the current system is plagued by too many cooks in the kitchen, where no one entity is responsible for the Department’s operations and where our all-knowing Elected Elite are second guessing management, developing unrealistic policies and goals, and have no respect for the wallets of the Ratepayers.  This is compounded by the overall lack of transparency, flawed management information systems, unclear lines of authority, and a general distrust of the Department and the City’s meddling politicians.  

Navigant Consulting, the well regarded firm that prepared the IEA Survey, called for a hybrid committee of City Hall insiders to develop a consensus on a solution that would then be placed on the 2017 ballot.  

But this recommendation is flawed because it does not include input from the Ratepayers and the Neighborhood Councils.  

The Ratepayer Advocate and its consultant, Navigant, are also calling for “Performance Reporting” to be included in the ordinance authorizing the increase in our utility rates.  This would require management to provide the Ratepayers Advocate and the Board of Commissioners with periodic reports identifying performance metrics and goals and comparing them to actual results.  This would result in increased transparency, especially if this information was made available to the Ratepayers.  

The Ratepayers Advocate also indicated that the Water System’s proposed five year rate increase of 25% to 30%, or about 5% a year, was “reasonable.” Unfortunately, he found that the rate increase was less than what is needed to repair its aging pipes, valves, and water mains, but this was justifiable because DWP does not currently have the capacity to meet the desired long-run replacement cycle because of constraints on outsourcing and anticipated retirements. 

Navigant’s report indicated that the Department does a good job of keeping the water flowing and the lights on, but that to meet the future operational, organizational, and financial challenges, it is necessary to reform its current system of governance in order to be a dependable and efficient provider of water and power. 

And while this reform has met some resistance by Mayor Garcetti and certain members of the City Council who want to treat Ratepayers as mushrooms (in the dark and topped with manure) and as an ATM, now is the time to address change and bring the Department into the 21^st Century.  With, of course, input from the Ratepayers. 

(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:  [email protected])

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CityWatch

Vol 13 Issue 101

Pub: Dec 15, 2015

LA WATCHDOG--In early July, our Department of Water and Power proposed $1.4 billion increase in our utility rates over the next five years.  This bump of over 30% is subject to the review and analysis by the Ratepayers Advocate prior to the approval of the politically appointed DWP Board of Commissioners, the Energy and Environment Committee, the City Council, and the Mayor. 

But after five months, we still do not have any report, in large part because the Department has not provided the Ratepayers Advocate and its expert consultants with definitive financial information detailing the rate case.  The City Attorney has also not produced the final ordinance that spells out the very important (as the devil is in) details of this complex rate increase. 

Fred Pickel, the Ratepayers Advocate, and his staff expect to issue their reports on the water rate increase, the power rate increase, and the Department’s compensation polices within the next two weeks, assuming they receive the necessary information from DWP and the City Attorney.  This will begin the political process to approve this unprecedented rate hike which is expected to be finalized by April 1, 2016.  However, the rate increase will be backdated to July 1, 2015, meaning that Ratepayers will be hit with a two year increase during the first year. 

While the Ratepayers Advocate’s report will analyze the proposed rate increases, it will also need to address the transparency of DWP’s operations.  This would involve detailing the Department’s financial relationship with the City and all of its departments, including the Port, Los Angeles International Airport, and Public Works and its Bureau of Sanitation.  

For example, there has been some scuttlebutt from Port employees about the high cost of the power generated by solar panels installed by inefficient DWP work crews. There are also rumors that the Port has failed to pay its DWP bill on a timely basis, meaning that the Ratepayers will have to make up this unacceptable shortfall. 

The report will also need to analyze the DWP’s multibillion dollar utility built solar program and whether it makes sense to outsource this very ambitious endeavor to more efficient, independent contractors.     

The Ratepayers Advocate will also need to review the Department’s involvement with the City’s One Water LA 2040 Plan to ensure that DWP is not getting soaked for very expensive (as in billions) stormwater projects that are the responsibility of the Bureau of Sanitation and other City departments. 

There also needs to be full disclosure on all “pet projects” that are not related to the core mission of the Department as well as all below market leases of DWP property to other City departments and favored nonprofit organizations.  This disclosure also includes “Special City Services” and how these costs are determined, especially as it relates to the massive overhead charges imposed by the City on such services as the inspection of fire hydrants by the Los Angeles Fire Department.    

Interestingly, the Ratepayers Advocate has commissioned a study of DWP’s compensation arrangements, including benefits, compared to other regional utilities.  This analysis, along with the benchmarking efforts of the Department, will be very controversial.  

No study would be complete without the discussion of the legality of the $273 million, 8% Transfer Fee given the recent class action lawsuits.  One interesting suggestion by Richard Moss, a former DWP Commissioner, and Gregory Lippe, a former chairman of the Valley Industry and Commerce Association, is to freeze all payments, including the Transfer and the City Utility Tax, from DWP to the City at its current level of around $650 million and invest the five year, $500 million surplus in DWP’s operations.   

The Ratepayers Advocate and DWP’s management must also outline the Department’s goals over the next five years and determine a process to monitor its progress.  One idea would be for the General Manager to publish a quarterly report within 60 days of the quarter’s end similar to one that is required by a public company.     

Over the last three years, the Ratepayers Advocate has been an excellent investment.  Pickel and his understaffed office have produced strong analytical work.  He has also developed a working relationship with the Department and City Hall which has allowed him to temper the proposed rate increase.  

This positive review is in spite of the unfounded, self-serving claims by the publicity hungry Santa Monica based Consumer Watchdog regarding the settlement of the class action lawsuit involving the botched introduction of the Customer Information System.

The major complaint involving the Ratepayers Advocate is the lack of outreach and his failure to use his position as a bully pulpit to protect our wallets.  On the other hand, it was and is important to preserve his relationship with the Department’s management and the politicians and bureaucrats that occupy City Hall.  

But now is the time for Fred Pickel, the Ratepayers Advocate, and his staff to sound off as they go to bat for the us, the Ratepayers, and our wallets. 

(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:  [email protected])

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CityWatch

Vol 13 Issue 99

Pub: Dec 8, 2015