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LOS ANGELES Tuesday, July 7th 2015 1:53

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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LA Transpo Slowed to a Crawl by Outdated and Ignored Laws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its hype about being for "sustainable living" and being "environmentally-friendly" … is burdened by a host of either outdated laws (which encourage inappropriate overdevelopment) or ignored laws (which are…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

 

 

 

 

  

 

 

 

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

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