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LA City Council Can’t Handle the Truth

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LA WATCHDOG-The last thing that the professional politicians on the City Council wanted to discuss on Friday was the City’s dismal finances that were outlined in “A Time for Truth,” the “lacerating” report that was a “stark reality check” on the City’s finances and economy that was issued by The Los Angeles 2020 Commission headed by former Secretary of Commerce Mickey Kantor and former Deputy Mayor Austin Beutner. 

That is understandable as the City is facing a $250 million deficit next year despite record revenues.  This deficit is understated by “at least $400 million” according the Truth Report because the City is cooking the books by relying on an overly optimistic investment return of 7.75% on its investment portfolio.  This compares to a more realistic return of 6% as recommended by Warren Buffett of Berkshire Hathaway fame and fortune. 

 

This projected deficit of $650 million, representing a staggering 13% of projected revenues, is further understated in that it fails to provide adequate funding to repair and maintain our streets, sidewalks, curbs, parks, and the rest of our deteriorating infrastructure. 

For over an hour, the Council Members bloviated and failed to mention that the City should focus its efforts on providing basic services such as public safety, adequate transportation, and well-functioning parks and libraries.  Many members discussed areas where the City has little control, whether it was education that is under the purview control of the dysfunctional Los Angeles Unified School District or the economic and investment environment that is adversely impacted by the State’s overly burdensome regulations and the highest taxes in the country. 

Budget and Finance Chair Paul Krekorian was rather testy because the Truth Report did not give the City credit for its heroic efforts in reducing this year’s $1 billion deficit that was projected back in the dark days of 2010. 

Yet Krekorian failed to mention that this budget gap was the direct result of policies adopted by City Hall that led to a $1 billion increase in salaries, benefits, and pension contributions. 

Krekorian also failed to mention that this shortfall was financed in part by dumping over $300 million in payroll and benefits onto our Department of Water and Power, the Port of Los Angeles, and Los Angeles International Airport.  

Nor did he mention that the City raided the Los Angeles City Employees Retirement System for $350 million in conjunction with the City’s Early Retirement Incentive Program.  

Nor did he mention that the City short changed its two pension plans by gaming the assumptions that determined the annual required contributions.    

Nor did he mention that they City slashed services, including short changing the Police and Fire Departments, endangering public safety by increasing emergency response times. 

The City Council was also insulted that the Truth Report indicated that “Los Angeles suffers from a crisis in leadership and direction.”  Jose Huizar informed us that this was one of the best councils ever and that it had been strengthened by the experience, wisdom, and innovation of the new members who served in the Sacramento State House.  

Of course, none of these State House veterans had anything to do with the State’s financial crisis, including Council President Herb Wesson who was Speaker of the Assembly when Governor Gray Davis was recalled in 2003.    

Council President Wesson has also informed us that the City Council has a “track record of dealing with tough issues,” has “never ducked an issue,” and has a “track record of doing things we need to do.”  

But these kernels of knowledge seem to have slipped by the LA 2020 Commission and the voters who less than a year ago rejected Proposition A, the permanent half cent increase in our sales tax to 9½%. 

Rather than trying to discredit the Truth Report, the Wesson-led City Council and Krekorian’s Budget and Finance Committee should begin to earn our trust by recognizing the City’s financial shortcomings and develop its own set of recommendations that address the upcoming budget deficit of $250 million, the four year cumulative deficit of over $700 million, the Structural Deficit where the increase in personnel costs exceeds the growth in revenues, the City’s inefficient operations, the $10 billion unfunded pension liability and the overly optimistic investment rate assumption, and the need to repair and maintain our streets and the rest of our deteriorating infrastructure. 

Now is the time for the City Council and the Mayor to handle the truth. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee,  The Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  [email protected]. Hear Jack every Tuesday morning at 6:20 on McIntyre in the Morning, KABC Radio 790.) 
-cw

 

 

 

CityWatch

Vol 12 Issue 4

Pub: Jan 14, 2014

 

 

 

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