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Pirates at the Port (of Los Angeles)

Jack Humphreville
LA WATCHDOG-The growth of the Port of Los Angeles and its ability to maintain and create good paying jobs and its market share of imported cargo are under siege by external market forces as well as the demand by the San Pedro and Wilmington communities to finance $400 million of public benefits over the next ten years. The Harbor Department, one…

Why I Support 'No Gays Allowed'

C.J. Prince
GUEST WORDS-Last week, a Tennessee retailer made headlines when he took the whole we-won't-bake-cakes-for-gay-weddings thing to the next level. In response to last week's Supreme Court marriage ruling, Jeff Amyx, owner of Amyx Hardware, taped a "No Gays Allowed" sign to his storefront window. Amyx, who is also a Baptist minister, explained to WATE…

Never on Sunday

Paul Hatfield
GREEK VOTE, A PERSPECTIVE-According to the lyrics from the memorable theme to Never on Sunday (enjoy the trailer), it is OK to kiss in Greece except for Sunday. However, on this past Sunday, July 5th, Greek voters invited the EU to kiss them. I need not mention the part of the anatomy, though. Contrary to some extreme views, this does not mean the…

LA Transpo Slowed to a Crawl by Outdated and Ignored Laws

Ken Alpern
GETTING THERE FROM HERE-Reform of the City Charter or its Bylaws is almost certainly in order, but it's no secret that the City of LA … for all its hype about being for "sustainable living" and being "environmentally-friendly" … is burdened by a host of either outdated laws (which encourage inappropriate overdevelopment) or ignored laws (which are…

You’ll Never Guess Why I love Los Angeles

Fred Mariscal
LATINO PERSPECTIVE-I remember the first time I went on a vacation outside of Mexico. We went to Los Angeles when I was 6 years old. I didn’t have to wonder why my dad choose Los Angeles, he knew I wanted to go to Disneyland and meet Mickey Mouse. That first trip we took that summer made me fell in love with this City. Los Angeles has everything a…

Unsolicited Advice for New LA Councilmember David Ryu

Joe Linton
GUEST COMMENTARY-Los Angeles City Councilmember David Ryu. Photo via ryuforcouncil.com It’s July. That means a new budget year for government agencies, where there is some turnover: some new faces, new officers, and new committees. LA County Supervisor Mark Ridley-Thomas is the new chair of the Metro Board of Directors, replacing LA Mayor Eric…

LA Working on Plan to Plaster the City with Digital Billboards

Adrian Glick Kudler
GUEST WORDS-People in Los Angeles love digital billboards!! We can't get enough of them! Give us more!!! Oh, thank god, the LA City Council is ON IT. Lawsuits have tragically darkened so many of those blinky, flashy ads, but yesterday the City Council's Planning and Land Use Management Committee voted to bring them back big time. They want to…

The Persuaders: California Hospital Association

Bill Raden
CAPITAL AND MAIN SPECIAL REPORT-The nurses who showed up at state Senator Richard Pan’s Capitol office in May were furious. They had been assured by Pan, a Democrat from Sacramento, that he would be on their side when it came time to vote on Senate Bill 346, a charity care measure aimed at providing transparency to the state’s currently murky…

Vacations are a Necessity…Not a Luxury

Denyse Selesnick
Since most of the readers of CityWatch are “high achievers” you have undoubtedly faced the situation where you feel you can’t afford to take a vacation right now because of a million different reasons. Many of these boil down to one…without your presence things will fall apart. Really, they are just excuses … not reasons! Getting away from your…


  • Costco: Free Range Liars!

    Christian Cristiano
    WELLNESS POLITICS-Eight years ago grocery retailer Costco (COST) pledged to transition out of using eggs from chickens in small cages to cage free…
  • 10 Things Over-Thinkers Are Tired Of Over-Thinking

    Lindsay Holmes
    WELLNESS-While writing this intro, I deleted the first paragraph approximately six times. My thoughts ranged from "Just get to the point already" to…
  • Can Procrastination Give You a Heart Attack?

    Christian Cristiano
    WELLNESS-A study posted in the journal of behavioral medicine linked procrastination with hypertension and cardiovascular disease. Specifically…

Thu Jul 16, 2015 @12:00AM
LA Equality Awards RSVP
Thu Jul 30, 2015 @ 6:00PM - 08:00PM
A Taste of Chatsworth

One More Time! Grateful Dead say goodbye.

USA World Cup Soccer win … sealed with a kiss









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 -- www.recycler.com. He can be reached at:   lajack@gmail.com)

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

Vol 10 Issue 46
Pub: June 8, 2012