Will We Continue to be City Hall’s ATM?
- 21 Oct 2011
- Written by Jack Humphreville
LA WATCHDOG - On Wednesday morning, the City Council approved a ten year, 77% rate increase in our Sewer Service Charge. Over the next five years, our rates will increase by 30%, or about $175 million.
At the same time, our Department of Water and Power is proposing a three year rate increase of 22% and 25% in our water and power rates. Over a five year period, rates are anticipated to increase by almost $2.2 billion, including the impact of the incremental 10% City Utility Tax.
In five years, the City’s General Fund will receive approximately $775 million a year from Ratepayers, consisting of the 8% Power System Transfer Fee ($330 million) and the 10% City Utility Tax ($445 million). This is an increase of 41% from the current level of approximately $550 million.
But these increases of almost $2.4 billion per year are just the beginning.
On Wednesday afternoon, there was a Special Joint Meeting of the Public Works and Budget and Finance Committees to discuss how the City is going to offload its $1.5 billion obligation to fix our sidewalks onto the City’s property owners.
And last week, the Ad Hoc Committee on Waste Reduction and Recycling started the process to establish Trash Hauler Franchises for businesses and apartment buildings, a payback to the Teamsters and other unions for their financial support of the Mayor’s political agenda. This will cost Angelenos an estimated $100 million extra per year.
We are also going to be on the hook for the $8 billion Stormwater Program that was last discussed back in 2009 in connection with a proposed parcel tax. However, this program has now been dumped on the County of Los Angeles when our Elected Elite realized that any ballot measure was doomed.
But we will still be hit with increased assessments for this massive infrastructure project that, like sewers, sidewalks, and trash collection, is also the responsibility of the five politically appointed, highly compensated members of the Board of Public Works.
The Board of Public Works has also failed to maintain and repair our streets. They are now in such a state of disrepair that it is going to cost more than $3 billion over the next ten years just to bring our third world roads up to a passing grade.
Nor has the Board of Public Works addressed the City’s 386 “structurally deficient” bridges that will more than likely cost a billion or more to repair. Unfortunately, this appears to be news to Mayor Villaraigosa and Controller Greuel as they were forced to comment on a new report by Transportation for America, a Washington, DC based nonprofit advocacy organization.
The City has also not addressed the costs associated with maintaining and repairing our street lights, our parks, our trees, or our buildings and other facilities. Rather, they have been the subject of continuing neglect as City Hall continues to ignore our basic infrastructure and quality of life.
The City will also need to update its management information, information technology, and accounting systems at a cost that has been estimated by City officials to be around $2 billion, and that is before cost overruns.
Of course, we cannot ignore the $11.7 billion unfunded pension liability for the two major pension plans that require ever increasing budget busting contributions from the City’s General Fund. And this amount is understated by several billion since the City continues to rely on the overly optimistic Investment Rate Assumption of 8% as opposed to a more realistic rate of 6.5% recommended by Wilshire Associates and Warren Buffet of Berkshire Hathaway.
Needless to say, City Hall will try to pick our pockets to fund all these liabilities, claiming they have taken drastic measures to balance the budget, such as the elimination of 4,500 employees.
In fact, there have been no more than 500 layoffs, as 2,400 employees were essentially paid $150,000 to retire as part of the Early Retirement Incentive Program and another 1,600 were transferred to the three proprietary departments (DWP, LAX, and the Port of Los Angeles) and special revenue departments.
It is not like we have had a free ride.
Since the arrival of the Mayor Who Broke LA, the Solid Resources tax on our DWP bill has more than tripled, increasing from $11 a month to more than $36 a month, a $300 a year hit to homeowners. This has resulted in increased City revenues of around $175 million.
And Measure R, which authorized the half cent increase in the sales tax to fund selected transportation projects, will cost City residents about $12 billion over the next 30 years, an average of $400 million a year.
Unfortunately, there is not much that we can do in the short term.
We can suggest that the members of the Board of Public Works have a level of experience and expertise that is currently lacking. We can demand that the Mayor, the Controller, and the City Council develop a long term operational and financial plan.
But more than likely, nothing meaningful will happen as our herd-like Elected Elite will not make the hard decisions to balance the budget and eliminate the long term structural deficit for fear of alienating the campaign funding municipal unions.
But there will be opportunities for Angelenos to express their rage at the Occupiers of City Hall.
If the City wants to increase taxes (and now fees thanks to Proposition 26 - the Supermajority Vote to Pass New Taxes and Fees Act), we have the right to vote for or against any of these ballot measures. And after the rejection of the flawed Measure B in March of 2009, the Elected Elite are very wary of the voting public, especially when it comes to our wallets. That is why they ceded control over the Stormwater Program to the County. But they still need our vote!
We also have City wide elections in March of 2013.
As part of the election cycle, we must demand that each candidate for Mayor, Controller, and City Council present the public with a detailed four year operational and financial plan on how they intend to balance the budget, focus on core services, fund the pension plans, and repair and maintain our infrastructure. And at the same time, these candidates must be prepared to defend their plans and the underlying assumptions.
The old standby of eliminating “Waste, Fraud, and Abuse” will not pass muster. We need facts and hard data, not more hot air.
The financial and political pressure on the City will continue to mount as the Mayor and the City Council refuse to address the City’s inefficient and bloated operations. Already, the City is facing a $200 million budget gap for the fiscal year beginning July 1, 2011 that is causing considerable political tensions as the City is being forced to focus on its core services.
Hopefully, some of our Elected Elite will get the message before the City implodes. But don’t bet the ranch on it. Their self interest knows no bounds.
But rest assured, we will not continue to be City Hall’s ATM.
Tags: City Hall, ATM, taxes, fees, storm water, infrastructure, DWP, General Fund, Waste Reduction and Recycling, Public Works, sidewalks, Mayor, elections, pensions
Vol 9 Issue 84
Pub: Oct 21, 2011