Last updateThu, 21 May 2015 9pm

LOS ANGELES Friday, May 22nd 2015 4:37


  • WHO WE ARE-Women did it again. The annual Memorial Day tradition of placing flowers on graves of fallen soldiers was begun by women in the South after the Civil War. Who knew? Who now remembers that it was originally Decoration Day? Or that it is a day to decorate the graves of soldiers who fought for a better future. Memorial Day is a great deal…
  • 453 Days Later...

    Tom Rubin
    OFFENSIVE BUT PROTECTED SPEECH-Welcome news this week from the U.S. Court of Appeals for the 9th Circuit. By a vote of 11 to 1, the court overturned its injunction against the controversial video called "Innocence of Muslims" that it had ordered off YouTube back in February 2014. Here's the background. Actress Cindy Lee Garcia (photo below) was…
  • What LA Educators Should Learn From Bell Gardens High School’s Shocking Turnaround

    Jay Mathews
    VOICES FROM THE SQUARE-Bell Gardens High School in east Los Angeles County was a sorry mess when science teacher Liz Lowe arrived in 1989. It was overflowing with trailer classrooms and graffiti. More than 3,000 students crowded into school buildings surrounding a concrete quadrangle with patches of grass and some trees. Expectations were low. Not…
  • The Clean Sweep Election Finally Happened

    Bob Gelfand
    GELFAND’S WORLD- A few years ago, a group calling itself Clean Sweep argued that the voters of Los Angeles should defeat all the incumbents and replace them with fresh blood. On Tuesday, the results came close. There are two distinct lessons, one of which is quite ominous for elected officials. This election demonstrated the end of voter patience…
  • What Did Tuesday’s LAUSD Election Results Prove?

    Paul Hatfield
    PERSPECTIVE-Did the LAUSD election results signal a change for charter schools? Perhaps. Possibly. Maybe. You can make a decent case that Ref Rodriguez’s victory in District 5 points to strong support for charters. It was a battle between two well-funded candidates with diametrically opposed views on the issue. The effectiveness and fairness of…
  • (Train)ing Ourselves to Confront Modern Mass Transit

    Ken Alpern
    GETTING THERE FROM HERE-It's great to learn that Metro has an excellent new CEO with the hiring of Phillip A. Washington who comes to us from Denver. Following in the footsteps of his predecessors, Roger Snoble and Art Leahy, Mr. Washington has a first-rate reputation to maintain--but his first job will be to pass Measure R-2. Measure R-2 (perhaps…
  • City Controller’s Grandstanding DWP Audit is the Real Waste of Ratepayer Dollars

    Dennis Zine
    JUST THE FACTS-City Controller Ron Galperin’s Grandstanding DWP Audit results were finally released. Unfortunately, the conclusion and political spin that came afterwards from the controller was misleading. Here are the FACTS: The DWP’s Joint Training Institute and Joint Safety Institute are administered by DWP managers and representatives of the…
  • A Place Where ‘Special Interest’ is NOT a Dirty Word

    Denyse Selesnick
    MY TURN-We need to have a new word to differentiate the villainous “Special Interest” that everyone is always complaining about and the “Special Interest” that almost all of politicians and civic and social activists have adopted as a cause. It is impossible to have passion about multiple issues. I know I have mentioned this before, but it seems…
  • Alert! America’s Small Businesses are Being Screwed by Big Business

    Robert Reich
    THE ECONOMY-Can it be that America’s small businesses are finally waking up to the fact they’re being screwed by big businesses? For years, small-business groups such as the National Federation of Independent Businesses have lined up behind big businesses lobbies. (Photo: small businesses in Studio City) They’ve contributed to the same Republican…


  • Can Strawberries Help Fight Cancer?

    Christian Cristiano
    WELLNESS-There have been a number of studies over the years that could show evidence of strawberries fighting off cancer. Tong Chen lead a study…
  • Study: The Best Way to Quit Smoking … Bet On It

    Francie Diep
    WELLNESS-Oftentimes, money speaks louder than words. Apparently, that aphorism applies to cigarettes too. A new study finds that money incentives…
  • Exercise Can Help Anxiety … Here’s How

    Christian Cristiano
    WELLNESS-Statistics show that over 3 million American adults suffer from anxiety and there is no evidence that number will be declining any time…

Memorial Day 2015- Freedom Isn’t Free

J. Cole raps on the Letterman show: “Be Free’

The Star Spangled Banner … like you’ve never heard it before









LA’s Insolvency Shell Games

LA WATCHDOG - The cash generated from the annual sale of the Tax and Revenue Anticipation Notes (the “Notes”) by our debt addicted City is the major lubricant that allows our profligate Mayor Villaraigosa, our don’t-rock-the-boat Controller Wendy Greuel, and the fiscally irresponsible members of the City Council to conceal operating deficits and continue to “kick the budget can down the road.” This borrowed cash allows our Elected Elite to avoid making the tough decisions that are absolutely necessary to avoid insolvency and to rein in the Structural Deficit, actions that will surely alienate the campaign funding union leadership in this election year.  

But the scoundrels that occupy City Hill are aided and abetted in their financial chicanery by Moody’s, Standard & Poor’s, and Fitch, the three fee-hungry credit rating agencies who have turned a blind eye to the City’s budget shenanigans and gross financial mismanagement that are going to burden the next generation or two of Angelenos.  

In late June or early July, the City anticipates raising approximately $1.25 billion through an underwritten offering of Notes.

Of this amount, $400 million will be used to finance the City’s operations (primarily salaries) over the first seven months of the fiscal year as our financially strained City does not have the resources or liquidity to wait until the proceeds from our property taxes begin to roll in during December and January.

The remaining $850 million will be used to prepay the City’s contribution to its two massively underfunded pension plans.  This allows the City to “save” $10 to $20 million by taking advantage of the arbitrage between the overly optimistic assumed rate of return (7.75%) on its $25 billion investment portfolio and the low interest rate (0.25% last year) on the Notes.

However, once again, the City will pull another nifty financial sleight of hand by delaying the repayment of the Notes beyond the receipt of the property taxes in December and January and the monthly amortization of pension payment.

This stunt, by increasing the “average life” of the Notes by four months, from 6½ months to 10½ months, will allow the City to finance its working capital deficit until it receives the last installment of property tax payments, the bulk of the gross receipts tax from businesses, and the $250 million Transfer Fee from the Department of Water and Power.

And we are not talking chump change as the incremental difference in payment schedules is anticipated to approach $900 million in the third quarter of the fiscal year.

But the City’s depleted working capital does not seem to bother the three credit rating agencies who continue to provide the City with an unwarranted AA- (double A minus) credit rating, implying that our City has a “very strong capacity to meet its financial commitments” and is not “susceptible to adverse economic conditions and changes in circumstances.”

Furthermore, the City’s Budget is hardly balanced since it is based on the understatement of expenditures such as banked police overtime and deferred civilian raises and the overstatement of continuing revenues.

And this so called balanced Budget fails to provide adequate resources to repair and maintain our deteriorating infrastructure and to properly fund the pension plans that are $10 billion underwater.

As an aside, the City lowered its projected contribution to its two massively underfunded pension plans by almost $135 million based on increased employee contributions (financed by increases in salaries) and back room changes in selected underlying assumptions (such as healthcare inflation) that will decrease the City’s annual required contribution.  

And the credit rating agencies must have glossed over the fact that over the next four years, the Structural Deficit is projected to produce red ink of over $1 billion, an average of in excess of $250 million a year.

And what about the City’s $20 billion Black Hole, consisting of the Enron like off balance sheet liabilities related to the underfunded pension plans and the deferred maintenance associated with our lunar cratered streets and deteriorating infrastructure.

There are also a number of uncertainties that adversely impact the City’s credit rating, such as the legality of the $250 million Transfer Fee from DWP to the General Fund as a result of Proposition 26 (where is the City Attorney’s opinion?) and the outcome of the $750 million Ardon class action litigation involving the illegal levy of the Telephone Users Tax from 2005 to 2007.

And these financial problems are compounded by the City’s very limited ability to increase revenues because the voting public does not trust the Mayor, the Controller, the City Council, the union leadership, and all of their special interest cronies that occupy City Hall and have brought the City to its knees.  

Of course, all of this, and much more, will be required to be disclosed in the City’s Official Statement relating the offering of the 2012 Tax and Revenue Anticipation Notes.  

The Official Statement will be interesting reading, not only for what is said, but what is not said.  

But you cannot believe everything you read, especially when you consider the source.  And it does not mean you can trust the rating agencies, especially since they have attracted the attention of the Securities and Exchange Commission as a result of their gross negligence during the mortgage and credit crisis.  

So a word to the wise: this junk bond may be hazardous to your mental and physical health and is definitely not a prudent investment for your retirement account.

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- He can be reached at:

Tags: Jack Humphreville, LA Watchdog, insolvency, LA insolvency, budget, city budget, LA budget, TRANS, Los Angeles

Vol 10 Issue 46
Pub: June 8, 2012