Sat08012015

Last updateThu, 30 Jul 2015 7pm

LOS ANGELES Saturday, August 1st 2015 9:16

 IF IT'S BROKEN...FIX IT

Getting Serious about LA’s Sidewalk Repairs: A Five-Point ‘Let’s-Get-On-with-It’ Plan

Ken Alpern
FIXING LA-Last Tuesday night's City Council Board of Public Works and Budget Committees met and allowed a lot of good public input to a series of concerned and available Councilmembers and City officials. The attendance and input were both outstanding--I want to thank Councilmember Mike Bonin, in particular, for allowing the outreach and advice to…

Latino Politicians Putting Climate Change Ahead of Constituents

Joel Kotkin
POLITICS-Racial and economic inequality may be key issues facing America today, but the steps often pushed by progressives, including minority politicians, seem more likely to exacerbate these divisions than repair them. In a broad arc of policies affecting everything from housing to employment, the agenda being adopted serves to stunt upward…

Worlds Apart on Kathryn Steinle: When Political Opportunism Reigns Supreme

John Mirisch
MUSING WITH MIRISCH-The small Swedish Jewish Museum in Stockholm is tucked away on a side street. Discreet signage instructs would-be visitors to push a button which activates a camera, so they can be screened before they are granted entry. The museum's permanent exhibition fills one fairly small room. Most of the objects on display are Jewish…

Garcetti Passes, Wesson Fails

Jack Humphreville
LA WATCHDOG-Our Los Angeles Times has issued midterm letter grades for Controller Ron Galperin (B-) and City Attorney Mike Feuer (B+) and will be posting grades for City Council President Herb Wesson this Sunday and Mayor Eric Garcetti the following Sunday. Our City is facing many difficult issues, ranging from a lagging economy, relatively high…

What LA Really Needs: A Part-time City Council and a Part-time Mayor!

Dennis Zine
JUST THE FACTS-There are so many serious and pressing problems facing the City of Los Angeles and few if any real solutions are being proposed or implemented by our elected and appointed leaders at City Hall. I will start with the current city budget. Former Mayor Antonio Villaraigosa had a $7.7 billion total budget in the 2013-2014 fiscal year.…

Why Don’t the City’s Women Managers Hire More Women?

Denyse Selesnick
MY TURN-Perusing the web is a little like the soap operas of yesteryear. You get suckered in! One link leads to another link and then one is exposed to a barrage both facts and idiocy. The reason for this discussion was my attending a July Valley Alliance of Neighborhood Councils (VANC) meeting with the Department of Water and Power. General…

Cleaning Up LA City Hall: ‘It’s What’s Legal That’s the Problem’

Bob Gelfand
GELFAND’S WORLD-Everyone understands that developers own our city government. Sure, there are some officials here and there who are upright and independent, but recent history shows that the developers typically get their way in spite of public opposition. Whether it is a zoning change for an office tower or the required permits for a new mall,…

Not So Fast LA! Let’s Consider the Real Costs of Hosting the Olympics before We Jump In

Greg Nelson
SPORTS POLITICS-On Monday, Boston withdrew from its offer to be the nation’s bidder for the 2024 Summer Olympic Games. In January, Los Angeles finished second to Boston when the U.S. Olympic Committee made its decision. After Boston was selected to polish up its bid before submitting it to the International Olympic Committee for a final decision,…

Party Crashing for Political Access: Schwarzenegger and My Pantsuit

Charlotte Laws
CALIFORNIA ACCESS POLITICS-Party crashing—or gate-crashing, as it is sometimes called—is an art form that I stumbled upon as a teen. I taught myself how to finagle into any event, anywhere, anytime. It required being part private eye, part actress and part chutzpah machine. I had to think outside of the box, throw myself into the role, and whip my…

 

Reynolds Rap Video: Joey has hope for the pope in Philly.





Art or Ad? LA’s mural law written in gray ink

Escape the Room-Conan goes for the record … and the laffs


LADWP Rates Overview

 

 

  

 

 

 

Secret Discussions: Is DWP for Sale?

LA WATCHDOG - The finances of our once great City are so desperate that selected movers and shakers in City Hall are secretly discussing the sale of our Department of Water and Power.  The billions and billions in expected proceeds would be used to reduce the $10 billion unfunded pension liability of the City’s two pension plans; fix our roads, sidewalks, and the rest of our deteriorating infrastructure; and, without doubt, fund numerous pet projects of our Elected Elite.

The City is projecting a budget deficit of $216 million for next year and $1.1 billion over the next four years. These amounts are seriously understated because the City is relying on an overly optimistic investment rate assumption (7.75%) for its pension plans and failing to provide adequate funding for the repair and maintenance of our streets, sidewalks, parks, and the rest of LA’s infrastructure, including our Stone Age management information systems and computer hardware. Over the next four years, the understatement of pension, infrastructure, and other miscellaneous expenses easily exceeds $1 billion and may even approach $2 billion or more.

Compounding the river of red ink is an unfunded pension liability of $10 billion and a deferred maintenance bill of at least another $10 billion.  

And once again, the pension liability may be understated by $3 to $4 billion because of the reliance on faulty investment assumptions as well as other short sighted decisions designed to defer contributions to the two plans.

If the City is going to sell DWP to help alleviate the over $25 billion ocean of debt and off balance sheet liabilities, an amount equal to more than five times General Fund revenues, what is the largest municipal utility in the nation worth?

DWP has annual revenues exceeding $4 billion and an operating profit before interest, depreciation, and amortization of over $1 billion.  Total assets exceed of $18 billion and are supported by a stated net worth north of $7 billion and long term debt of almost $10 billion.

While there are strategic buyers who would pay a premium price for DWP, there are a number of issues that would need to be addressed, especially with regard to increases in our already escalating water and power rates.

To support a premium price, the buyer would have to have the flexibility to raise rates to earn an adequate return on its investment and to pay hefty, newly instituted real estate taxes and franchise fees.  

Interest expense would also increase as the buyer would have to refinance DWP’s tax exempt debt with taxable debt.  

This would require a significant bump in rates, in excess of those already higher rates being contemplated to fund environmental mandates and regulations as well as the reliability program involving the repair and maintenance of the water and power infrastructure.

There is also the issue of DWP’s pension plan that is underfunded by almost $2 billion, a low ball number since it is based on overly optimistic investment rate assumptions.

There are other impediments to completing a deal at a premium price on a timely basis, including overcoming the numerous, mind numbing regulatory hurdles involving the State of California, Washington, DC, and numerous other governmental entities that would be impacted by this transaction.

Furthermore, the sale of this or any proprietary department may also require the affirmative vote of Angelenos who, for the most part, would not be overly receptive to another massive increase in their water and power rates.

But the real “poison pill” for any strategic buyer (most likely another utility) who is willing to pay a premium price is DWP’s union and its leadership, its burdensome work rules which limit operational flexibility and efficiency, and its excessive compensation and benefits package that exceed other regional utilities by at least 30% according the recent report by PA Consulting.

This is a cancer that no sane buyer would want to inject into its current operations.

The sale of DWP is no silver bullet.  

This deal will take years to complete, given the numerous regulatory issues, the renegotiation of numerous union contracts and pension arrangements, the massive financing requirements that will most likely exceed $20 billion, and the possible approval by Angelenos.   

Rather, the proposed sale of our heritage demonstrates the utter failure of City Hall and its leadership, especially that of Villaraigosa, Garcetti, Greuel, and Zine, the members of the Executive Employee Relations Committee (the “EERC”), who gave away the store in 2007 labor negotiations rather than addressing the Structural Deficit and our infrastructure, all in an effort to advance their political careers and not alienate the campaign funding union leadership.

The sale of DWP (and, for that matter, the Port of Los Angeles, LAX, our parking garages, or any other capital asset) is poor financial policy as the proceeds will be used to finance operating expenses, a sure sign of a bankrupt city.

The proposed sale of DWP is just another example of the City Hall “kicking the can down the road,” hoping to avoid a crisis that drives the City to insolvency.

Unfortunately, the wizards that occupy City Hall do not have the will power or the guts to address the Structural Deficit, where over the next four years labor costs will increase by over $750 million, outstripping the growth in revenues by $300 million.

That is why we need a charter amendment that requires the City to “Live Within Its Means.”

This common sense amendment would require the City to develop and adhere to a Five Year Financial Plan, approve two year balanced budgets based on Generally Accepted Accounting Principles, and, over the next ten years, provide adequate funding for the elimination of the City’s unfunded $10 billion pension liability and the repair and maintenance of our streets, parks, sidewalks, and the rest of our crumbling infrastructure.

We need to say NO to the sale of our Department of Water and Power, not only because the City is selling our heritage, but it is poor fiscal policy.  Plus our water and power rates will increase significantly more than large increases that are already in the pipeline.

And finally, would you trust City Hall and all their cronies with $10 billion in cash from the sale of our Department of Water and Power?

No way.

(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) –cw



CityWatch
Vol 10 Issue 86
Pub: Oct 26, 2012

Share