LA’s Latest Sidewalk Fix: 30 Years and a Billion Short

PERSPECTIVE-At least a few City Council members are patting themselves on the back for the sidewalk repair settlement reached with groups representing the disabled. For sure, it was a landmark case, with the city pledging to spend $1.3 billion over the next thirty years to eliminate the growing backlog of deteriorated walkways.  

The amount includes an escalation in annual spending to adjust for increasing costs over time. The last estimate for eliminating the current sidewalk repair backlog was $1.5 billion.  

On paper, it looks like a pretty good match – only $200 million difference. But since the $1.3 billion commitment will be spread over 30 years, you have to apply inflation to the current $1.5 billion estimate over the same duration. Using 2% compounded over 30 years, the repair costs will grow to $2.7 billion, resulting in a gap of $1.4 billion. I also looked at it from a present value approach. 

Discounting the future cash flow of $1.3 billion at 2%, the result came to $963 million, well under the current estimated cost of $1.5 billion. Still quite a gap. 2% may be low considering the city authorized 46 new positions in the Department of Public Works to make repairs. I assume more will be needed. 

Public employees come with a high price tag, especially when you load in postretirement benefits. 

Regardless, the city still has to come up with the initial annual outlay of $30 million, and every year thereafter. It was a struggle just to come up with $27 million for this year. 

Serious consideration must be given to outsourcing much of the work in order to manage the costs. 

Certainly, we need to repair the sidewalks, but it is pure audacity the way certain Council Members are hailing this as a breakthrough deal, especially when it took a lawsuit to force them to do their jobs.

 

(Paul Hatfield is a CPA and serves as  President of the Valley Village Homeowners Association.  He blogs at Village to Village and contributes to CityWatch. He can be reached at: [email protected])

–cw

 

 

CityWatch

Vol 13 Issue 28

Pub: Apr 3, 2015

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