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Wed, Apr

LA Watchdog

Controller Ron Galperin: The Skunk at the City Hall Garden Party

LA WATCHDOG--The City of Los Angeles is considering the issuance of $60 million in Judgment Obligation Bonds to replenish the City’s Reserve Fund.  This rainy-day fund has been depleted to pay for legal settlements that were significantly more than the budgeted liability of $68 million, a level considerably below the amount recommended by the City Administrative Officer last year.  

Per the CAO, the Reserve Fund is slightly below the targeted policy level of $279 million, an amount equal to 5% of the budgeted General Fund revenue. The infusion of $60 million would increase the balance in this account to over 6% of the General Fund, giving the Reserve Fund additional flexibility to meet unexpected expenditures or emergencies. 

Of course, the issuance of Judgment Obligations Bonds would not have been necessary if the Mayor and the Budget and Finance Committee led by Paul Krekorian had not siphoned off $213 million over the last three up-revenue years from this emergency fund to pay for every day operating expenses. If these funds had not been diverted, we would have had a very healthy Reserve Fund with a balance of $490 million, or 8.8% of General Fund revenue. 

On March 2, the City Administrative Officer recommended that the City Council, subject to approval by the Mayor, authorize the issuance of up to $60 million in bonds.  

You can almost see the City Hall gang rubbing their hands together in anticipation of this infusion of cash. 

But on March 23, Controller Ron Galperin threw a wet blanket on the City Council’s plans as he delivered a two-page letter where he recommended that the City NOT proceed with the Judgment Obligation Bond at this time. 

His logic was very simple.  Galperin stated that “debt financing of liability claims should only be used in extraordinary circumstances and in times of great need.  This year does not meet those criteria, and the City should live within its means instead of borrowing unnecessarily.” He also added that the City should “avoid short term solutions to long term problems.” 

Bravo! 

In addition, the City would avoid paying $20 million in interest expense over the next ten years by not issuing the bonds.  

Galperin also stated that the Reserve Fund will benefit from unspent departmental funds at year end that will be swept into the fund, allowing it to exceed its minimum policy levels by $10 million. 

More than likely, the City will NOT follow Galperin’s recommendation as the infusion of new cash is just too tempting for our politicians.    

The City Administrative Officer will support the issuance of the bonds to bolster the depleted Reserve Fund, especially if this year’s revenues are lower than budgeted (which may well be the case).  This is a reasonable request and strategy.  

However, we cannot trust Garcetti and the City Council as once they smell the cash, they will want to raid the Reserve Fund, once again, to pay for every day operating expenses.  

The City Council will consider the issuance of the Judgment Obligation Bonds on Tuesday, April 4.  We will need to be prepared for the members of the City Council to demonstrate their financial acumen as they tell us how they are willing to make the tough decision to issue the bonds, recognizing that the bonds are a necessary evil.  But do not expect the City Council to put any restrictions on its ability to tap into this new honey pot of cash.    

Bring your hip boots as the sewer known as City Hall will be overflowing.  

And a genuine thank you to Controller Ron Galperin for his willingness to speak the truth and be … the skunk at the garden party. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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LA’s Leaky Rainy Day Fund

LA WATCHDOG--The City Administrative Officer’s Third Financial Status Report dated March 16 paints a bleak picture of the City’s finances, including the previous sacrosanct Reserve Fund.  

For the current year, the City is looking at a $57 million deficit.  But this does not take into consideration the strong probability of lower revenues from property and sales taxes, taxes on DWP Ratepayers (the 10% Utility Users’ Tax and the illegal 8% Transfer Tax), departmental fees from the City’s proprietary departments and special funds, parking fines, and franchise fees.  These dings more than offset the growth in the hotel tax and the documentary transfer tax. 

The Report also indicates that next year’s budget gap is anticipated to be $224 million.  But even this projection for the fiscal year beginning on July 1 may be understated because of lower than anticipated revenues and the demand for increased services.  

One of the culprits in this year’s deficit is the explosion in legal liabilities as the City is anticipating spending $147 million in settlements and judgments, almost $80 million more than the budgeted liability of $68 million.  To cover these higher than anticipated losses, the City is hitting up the Reserve Fund for over $60 million. 

Unfortunately, the Reserve Fund no longer has a surplus that can be tapped unless it is a true emergency.  As of January 31, the Reserve Fund had dipped slightly below the minimum threshold of $279 million, an amount equal to 5% of General Fund revenues of $5.576 billion. 

To replenish the Reserve Fund, the City is pursuing the issuance of $70 million of Judgment Obligation Bonds.  But ev en with this infusion, the Reserve Fund may not be able to absorb this year’s losses, especially if revenues are lower than budgeted.  

This will also preclude the Mayor and the City Council from raiding the Reserve Fund.  

Over the last three years, the Mayor and the City Council have siphoned off $213 million from the Reserve Fund without blinking an eye.  

But were these financial transactions necessary given that City revenues have increased by $900 million over the last four years? 

Why did the Budget and Finance Committee chaired by Paul Krekorian permit this transfer from the Reserve Fund?  

Why did the Budget and Finance Committee allocate only $68 million for legal liabilities when the City Administrative Officer recommended a significantly higher amount? 

If the Reserve Fund had the $213 million that was drained from its accounts, the balance of our rainy-day fund would be almost $500 million, or 8.8% of the General Fund revenues. 

And if you toss in the Budget Stabilization Fund of $94 million, total reserves increase to $585 million, or a very healthy 10.5% of General Fund revenues, exceeding the 10% level recommended by Miguel Santana, our previous CAO.  

This is another case where the politically motivated spending policies of our Elected Elite trumped the long-term interests of the City.  This is reminiscent of their failure to fund the repair and maintenance of our lunar cratered streets, our broken sidewalks, and the rest of our deteriorating infrastructure; their unwillingness to engage in real pension reform; and their approval of budget busting labor contracts. 

We cannot trust Mayor Garcetti, the City Council, and the Budget and Finance Committee with our money.  

We need an independent Office of Transparency and Accountability to oversee the City’s finances and protect us from the Mayor and the City Council pursuing short term political goals that are not in the best long-term interests of the City and all Angelenos.

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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To Hell with the Photo-Ops and Promises Mr. Mayor … Fix LA’s Streets!

LA WATCHDOG--Mayor Eric Garcetti is proposing to close part of the City’s $250 million budget gap for next year by using an estimated $50 million of Local Return money from Measure M, the permanent half cent increase in our sales tax that was approved by 71% of voters in November

While the bulk of the proceeds of this new tax are to be used to finance Metro’s ambitious capital expenditure program and its money losing operations, 17% of the proceeds are designated for “Local Return.” Under this program, funds are returned to the cities based on their population for the communities’ “eligible transportation related uses.”  These transportation needs include “transit, streets and roads, storm drains, Green Streets, Active Transportation Projects, Complete Streets, public transit access to recreational facilities, Transit Oriented Community Investments, and other unmet transit needs.” 

Importantly, these Local Return funds are meant to supplement existing programs and not to free up money for the General Fund and other programs. In other words, they are not to be used for deficit reduction. 

In recent interviews and during the campaign to pass Measure M, Garcetti said that these Measure M Local Return funds were to be used to fix, pave, or repair our streets.  

In the upcoming year, the Local Return from Measure M is expected to be about $50 million.  And over the next 40 years, the total haul is projected to be in the range of $5 billion based on Metro’s projections. 

The infusion of these Local Return funds represents an excellent opportunity to jump start the development and implementation of a comprehensive plan to repair and maintain our 28,000 lane miles of streets, considered to some of the worst in the country, and 900 miles of alleys.  A well-conceived long term plan will also go a long way in relieving congestion, the worst in the developed world per a recent article in The New York Times. 

The City’s current street repair program, dubbed the pothole patrol plan, is not working.  While City Hall tells us that the status of our streets has improved slightly because Street Services is budgeted to pave or repair 2,400 miles of roads this year, most Angelenos believe, based on experience, especially after the rains, that our streets have continued to deteriorate.  Furthermore, the pothole patrol plan neglects the more than one third of our streets that are rated D and F, meaning that they need to be either resurfaced or reconstructed, all at great expense. 

If the City combines the resources of the Local Return funds with the current expenditures of the Street Services and Transportation devoted to our roads, it can develop and implement a street repair program that over the next twenty years will make our streets some of the best in the nation.  

Now that is Back to Basics. Forget the photo-ops. Keep your promises. Fix LA’s streets!

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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LA’s Future Clouded by Budget Unknowns

LA WATCHDOG--The City of Los Angeles is confronting a budget gap next year of “at least $250 million” based on Mayor Eric Garcetti’s comment to Larry Mantle, the host of KPCC’s (89.3) AirTalk.  

But this not very well publicized shortfall of at least $250 million may be optimistic. The City believes that the $245 million Power Revenue Transfer Tax (previously known as the 8% Transfer Fee) from the Department of Water and Power, which is the subject of a class action lawsuit, is legal and does not require voter approval pursuant to Proposition 26 (the Supermajority Vote to Pass New Fees and Taxes) that was approved by California voters in 2010.    

Garcetti did not offer any reasons for this staggering $250 million shortfall that exceeds the previously projected budget gap of $85 million.  Nor did he discuss any specific plans to reduce this gap other than to say that the City will rely on several new sources of revenue. 

But these new revenues are not for deficit reduction.  Rather, they are intended to augment existing programs.  This is certainly true for the $50 million of new “Local Return” money from Metro that is designated for the repair and maintenance of our lunar cratered streets. These kickback funds are the result of the passage of Measure M, the permanent half cent increase in our sales tax to fund Metro’s ambitious expansion plans and its ever-increasing operating deficits. 

He also said that he would not institute any new spending polices other than for the homeless, public safety, and the restoration of services.  But these new initiatives will cost north of $100 million.  So much for austerity.  

Underlying the $250 million budget gap is a significant increase in City’s legal liabilities and even greater shortfall in revenues.  Property and sales taxes are anticipated to be $50 million lower than expected while revenue from taxes on the DWP Ratepayers are off by approximately $75 million. 

There is something very fishy going on with the Power Revenue Transfer Tax because of the class action lawsuits that were filed in 2015. 

This year, the Power Revenue Transfer Tax was budgeted to be $291 million.  However, because DWP overestimated the Power System revenue by 10%, or $300 million, the Transfer Tax was only $264 million, a $27 million shortfall.  

For the upcoming year, the Transfer is projected to be $245 million (6.5% of Power System revenues), down from the previous projection of $300 million (8% of revenues).  This dip, despite DWP’s increase in revenues, gives credence to the scuttlebutt that City Hall has cut itself a sweet deal with the lawyers representing the plaintiffs in the class action lawsuit (Patrick Eck v. City of Los Angeles).    

Of course, the lawyers will make out like bandits. 

And the Ratepayers, rather than being reimbursed for over $1.5 billion in illegally collected taxes (not including interest) and abolishing the illegal Power Revenue Transfer Tax, will once again get the shaft as we will end up paying $245 million a year to the pay-to-play politicians who occupy City Hall. 

But this backroom settlement that was cut over two months ago may not pass legal muster.  Under Proposition 26, this so-called fee that is really a tax must be approved by the voters, a rumble that City Hall wants to avoid.  This may be the reason why the City has not announced this deal because they cannot figure out how to disenfranchise us by not placing this tax on the ballot for our rejection or approval. 

If this crooked deal does not pass the smell test, our friends that occupy City Hall will go ballistic as the projected budget deficit will balloon to $500 million.  

But this sea of red ink is not our fault as the Mayor and the City Council have racked up a $250 million budget gap despite an increase in General Fund revenues of $1 billion.  City Hall has also been on notice for years that the Power Revenue Transfer Tax is illegal, but failed to address the issue in a rational manner. 

City Hall will no doubt ask us to approve this tax.  But what do we get in return?  Maybe it is our turn to ask that in return for approving this new tax, the City will agree to place on the ballot a charter amendment that will finally require our City to go Back to Basics and Live Within Its Means. 

Hold on as we are in for a wild ride.  Budget Madness begins on April 20 when the Mayor presents his new budget to Angelenos. 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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Citizen Advocates Demand Balanced, Transparent City Budget

LA WATCHDOG--One of the Priority Outcomes of Mayor Eric Garcetti s Back to Basics agenda was that the City of Los Angeles would “live within its financial means.” 

But this is not the case. 

The City is grappling with a potential deficit of $245 million for this fiscal year that ends on June 30 and a budget gap of at least $250 million for the fiscal year that begins on July 1.  This is despite revenues being up over $1 billion since Garcetti became Mayor. 

These deficits are understated.  They do not include adequate funds to repair and maintain our streets, sidewalks, parks, and the rest of our deteriorating infrastructure.  They lowball the pension contributions that are determined using an overly optimistic investment rate assumption that “save” the City an estimated $500 million a year.  

The impact of these deferrals is to dump an even larger financial burden on the next generation of Angelenos.  

Projections for the next four years do take into consideration future salary increases for the police, civilian employees, and the firefighters. 

It is not a pretty picture.  

On March 8, the Budget Advocates, a volunteer group of citizens representing the charter authorized Neighborhood Councils, met with Mayor Garcetti and members of his budget team to discuss their annual White Paper and their “Back to Basics” Plan which includes the following recommendations. 

  • Develop and implement a seven-year operating and financial plan for the City.  This is standard operating procedure for an enterprise with revenues of over $8 billion a year and 32,000 civilian and sworn employees. 
  • Address the Structural Deficit (where expenditures increase faster than revenues) by refraining from entering into any labor agreement or approving any new programs or initiatives that will result in future budget deficits. 
  • Require that ALL projects take into account the costs and savings over the entire life of the project, including ancillary costs and savings incurred by other City entities and stakeholders. 
  • Develop and implement a long-term plan to fix our streets along the lines of the Save Our Streets LA Measure that was proposed in April 2014. 
  • Implement a long-range plan to grow the City’s economy by developing new business friendly policies that encourage employers to move to LA or to remain and invest in LA. 
  • Benchmark the efficiency of the City’s departments and services and consider outsourcing projects to independent contractors. 
  • Appoint an experienced Chief Operating Officer/City Manager to oversee and coordinate the management of the City’s many departments and to improve their operating efficiency.    

In addition, the Budget Advocates once again urged the Mayor and the City Council to implement the following excellent budget recommendations of the LA 2020 Commission that were endorsed by City Council President Herb Wesson at a well-attended press conference on April 9, 2014 at the California Endowment. 

  • Create an independent “Office of Transparency and Accountability” to analyze and report on the City’s budget, evaluate new legislation, examine existing issues and service standards, and increase accountability. 
  • Adopt a “Truth in Budgeting” ordinance that requires the City to develop a three-year budget and a three-year baseline budget with the goal of understanding the longer-term consequences of its policies and legislation.  
  • Establish a “Commission for Retirement Security” to review the City's retirement obligations to promote an accurate understanding of the facts and develop concrete recommendations on how to achieve equilibrium on retirement costs within five years.  This Commission will also address the Buffett Rule and the investment rate assumptions of the pension plans. 

Unfortunately, these recommendations that were designed to shine the sun on the City’s finances and operations have never seen the light of day. 

In addition, the Budget Advocates have developed a list of revenue producing ideas for the General Fund.  This resulted in a discussion about the specific suggestions and the City’s need for additional revenue to address our infrastructure, service levels, affordable housing, and services to the homeless.  

The Budget Advocates also submitted reports on 26 of the City’s departments.  They were based on numerous in person meetings with department heads that allowed the Budget Advocates to gain a better understanding of the departments and the overall operations of the City.  These reports also contain recommendations specific to the departments. 

The Mayor, recognizing the time, effort, and dedication of the Budget Advocates, will ask the City Administrative Officer and his budget team to report back on the White Paper and its findings and recommendations.  Hopefully, this response will be shortly after the release of next year’s budget on April 20 so that Budget Advocates have ample time to prepare for the Budget and Finance Committee hearings on the budget.  

The development of and the adherence to a long term operating and financial plan, the implementation of a Back to Basics Plan, the adoption of the recommendations of the LA 2020 Commission, the develop of new sources of revenue, and an improved business and investment environment will result in increased revenues for the City that will allow it to eliminate the Structural Deficit, to address its infrastructure needs, and to begin the proper funding of its pensions. 

By increasing the transparency onto the City’s complex operations and finances and by implementing policies that require the City to “live within its means,” City Hall will begin the process of restoring Angelenos’ trust and confidence in its elected officials.

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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S & H: It’s All About the Benjamins

LA WATCHDOG--Money is the life blood of politics, especially for the politicians that occupy Los Angeles City Hall and the County Hall of Administration. 

So when our Elected Elite support or oppose a ballot measure, we need to follow the cash to determine their true motivations. This is especially true for Measure S, the Neighborhood Integrity Initiative, and Measure H, the quarter of a cent increase in our sales tax that will fund services to the homeless. 

Measure S requires that the City update the General Plan and its 35 Community Plans and assume the responsibility to oversee the development of Environmental Impact Reports and Traffic Studies.  Measure S also eliminates “spot zoning” and places a 24 month moratorium ONLY on “up zoned” projects that would have received lucrative zoning changes, courtesy of the City Council and Mayor Eric Garcetti. 

The delusional opponents claim that Measure S will make it impossible to build the affordable housing that LA desperately needs.  But the truth is that City Hall does not have a plan to build affordable housing or the necessary billions to fund such a plan.  

And now that the voters have approved JJJ, the Build Better LA ballot initiative, the cost of affordable units will increase by 46% according to Beacon Economics, the firm retained by the Los Angeles Chamber of Commerce, an ardent foe of Measure S. This massive cost increase will kill all residential development that needs a zoning change, whether it is luxury, market rate, or affordable.  

The real reason for the opposition of Garcetti and the City Council is that if Measure S passes, the gravy train that has resulted in more than $10 million in campaign contributions from real estate developers will come to a stretching halt as City Hall will no longer be able to grant lucrative zoning changes to billionaire developers who have no respect for our neighborhoods and our quality of life. 

With the passage of Measure S, the days where the real estate developers make billions, the City Hall politicians collect millions, and we get the shaft are over. 

We will finally get a say in the destiny and density of our City and our neighborhoods as Measure S will require the City Planning Department to hold hearings on weeknights and weekends in our neighborhoods.  No more schlepping downtown to City Hall during the day and only getting a minute to speak. 

Measure H, the County ballot initiative to increase our sales tax by one quarter of cent, will raise $350 million to fund services for the homeless.  While nobody denies that there is a homeless crisis, the County Supervisors have not made homelessness a budget priority, even after billions in new revenues swelled its total budget to $30 billion.  Instead, the Supervisors approved new budget busting labor contracts and funneled money to their pet projects. 

Homelessness only became a budget priority when they decided to pick our pockets for $4 billion over the next ten years. 

The Supervisors and Mayor Eric Garcetti have been telling us that without this $4 billion tax increase, the County will not be able to provide the necessary services to the homeless population.  But this sounds like the threats made in 2013 when Mayor Villaraigosa and LAPD Chief Charlie Beck told us that LA would be overrun by the Huns and Visigoths if we did not approve Proposition A, the half cent increase in our sales tax that was to be used to hire and retain more cops.    

But shortly after Proposition A was rejected by 55% of the voters, Mayor Villaraigosa miraculously discovered the necessary money to fund the Police Department. 

There is also the issue of trust.  

In November, voters approved Measure M, a permanent half cent increase in our sales tax to fund Metro’s ambitious expansion program and its money losing operations.  But the Supervisors and Mayor Garcetti were less than honest with us.  They waited until after the election to disclose the massive cost overruns involving the widening of the 405 through the Sepulveda Pass, the Downtown Regional Connector, and the Gold Line Foothill Extension.  And they failed to tell us about the decline in ridership. 

The City, County, and State are also hatching more schemes to increase our taxes.  In addition to Measure H, the County is preparing another Rain Tax to fund its storm water capture plan.  The City is considering a multibillion street repair bond and a linkage fee on new developments.  The South Coast AQMD is talking about a Vehicle License Fee.  The State is considering a substantial bump in the gas tax and expanding the sales tax to cover services.  And billions in bonds are being contemplated for the UC system and the State’s deteriorating parks. 

The 2016 tax increases and the above contemplated taxes will cost the residents of the City of Los Angeles over $3 billion, the equivalent of raising our real estate taxes by over 60% or our sales tax by over 5%. 

Enough is enough.  

By voting YES on Measure S, the City will be required to update its General Plan and its 35 Community Plans in an open and transparent manner where we have a say in the future of our City.  And at the same time, put a stop to the corrupt pay-to-play culture that permeates City Hall. 

And by voting NO on Measure H, we can send to message to the pols that we are not their ATM. 

It is time for us to take control of our City and our County.

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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Throw the Bums Out

LA WATCHDOG--We have numerous reasons to vote against all the fat cat incumbents running for reelection to the Los Angeles City Council.  And they all add up to a City that does not work for us Angelenos, the folks footing the bill so that the 1% who occupies City Hall and their cronies can feast at our expense. 

Our City’s finances are a mess.  

The City is projecting a budget deficit next year of at least $250 million.  Union leaders want more money that will only add to the deficit.  The City’s two pension plans are a train wreck, underfunded by $22 billion and threaten the City’s ability to deliver services.  And our lunar cratered streets, our broken sidewalks, and the rest of deteriorating infrastructure are in need of at least $10 billion of repairs. 

But the City’s viability is not an issue for six members of our City Council who are seeking reelection.  After all, they have raised over $5.5 million from their cronies and special interests to buy their reelection. 

But hopefully Angelenos will wake up and send these politicians packing. 

At the top of the list is Paul Koretz, a professional politician who has never met a tax hike, a rate increase, a union contract, or campaign contribution from a real estate developer he didn’t like.   

Koretz is a member of the Executive Employee Relations Committee that negotiates the City’s labor agreements.  This includes the budget busting contract with the City’s civilian unions that took a $68 million surplus to a $101 million deficit in 2020.  That may explain why the unions have contributed $217,000 to an “independent” expenditure committee to support his reelection to augment the $440,000 war chest that he raised from the usual favor seeking suspects.  

His key opponent is Jesse Creed, a young talented lawyer who received excellent reviews for his work on behalf of veterans involving the West LA property.  While Creed lacks experience, he is independent, his own person who is not owned by the unions and real estate developers.    

Mitch O’Farrell should also be shown the door as he betrayed his constituents by selling out to real estate developers who view Hollywood, Silver Lake, Atwater Village, Echo Park, and Elysian Valley as areas primed for highly profitable development, the neighborhoods be damned.  

O’Farrell has raised over $400,000, where almost half of the usual favor seeking suspects maxed out.  He is also the beneficiary of a $102,000 “independent” expenditure committee funded by real estate interests, unions, and Chevron Corporation, one of the world’s largest oil companies. 

In the effort to Ditch Mitch, the goal is to force a runoff with one of the other viable candidates.  This includes Doug Haines who has been endorsed by Mayor Richard Riordan because of his real estate expertise and his efforts in overturning the Hollywood Community Plan that was based on flawed assumptions.  He also was instrumental in halting other illegal developments that had the support of developer owned O’Farrell. 

Gil Cedillo should also be sent packing as he has supported the development of luxury housing that is inappropriate for many of the District’s neighborhoods.  This has accelerated residential and commercial gentrification and dislocated long-time residents.  He has also reneged on several campaign promises. 

Cedillo was expecting to steamroll his opponents as he has raised $375,000 from the usual favor seeking suspects, 75% of which maxed out, and has the support of an “independent” expenditure committee that has also been funded primarily by Chevron. 

However, much to Cedillo’s surprise and chagrin, the Los Angeles Times endorsed Joe Ali-Bray, a small businessman and bike enthusiast who, according to The Times, has an impressive understanding of land use policies.  

Curren Price was also surprised by The Times endorsement of Jorge Nuno.  Yet Price has the benefit of a $422,000 war chest and an “independent” expenditure committee that is ready to drop almost $150,000 to support his reelection. But will Price, an African-American, be able to buy the election in a district that is almost 80% Latino? 

Joe Buscaino has raised $369,000 and faces limited competition.  But he does not deserve to be reelected given the scandal where he took $94,500 of laundered campaign contributions and then approved the up zoning of the Sea Breeze residential development despite its rejection by the both the Area and City Planning Commissions. 

Mike Bonin appears to be headed towards reelection and is supported by a war chest of $432,000 raised from the usual favor seeking suspects and a $61,000 “independent’ expenditure committee funded by primarily by the unions representing the police and firefighters. But Bonin has been weak on fiscal responsibility and has approved mega real estate developments that will further clog the Westside. 

It is too much to expect all of the incumbents to lose, but success will be measured by ousting incumbents or forcing Council members into runoff elections on May 16, 2017.  If so, this will send a message to City Hall that we are not happy campers and it is time to address the serious economic problems facing our City. 

It is time for a change.

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

-cw

The City Deficit Approaches $250 Million! How Can LA’s Mayor Get Anything Short of a Failing Grade?

LA WATCHDOG--The City of Los Angeles is drowning a sea of red ink. 

Its budget deficit for the upcoming fiscal year beginning July 1, 2017 is projected to be in the range of $200 to $250 million.  This is up from the $85 million shortfall that Mayor Eric Garcetti outlined in his “Fiscal Year 2017-18 Budget Policy and Goals” memo in September.  

There is also the real possibility that the cumulative budget gap for the next four years may soar to well over $750 million, up from the current estimate of $300 million.  

But Eric, how is this possible if City revenues are $1 billion higher than they were four years ago and collections are projected to increase by $600 million over the next four years? 

In January, the City Administrative Officer indicated that the City was looking at a potential budget deficit of $245 million for this fiscal year (2016-17).  This contrasts with the “balanced” budget only six months earlier.  

Expenditures rose by an unexpected $80 million over budget, primarily because of runaway legal settlements that will be in the range of $140 million (or more) this year.  This is more than double the budgeted liability of $68 million.  

Revenues were off by $165 million.  This shortfall included $90 million in lower collections from property taxes, sales taxes, and taxes on the revenues of our Department of Water and Power.  

These expenditure and revenue trends are expected to impact next year’s budget, increasing the September deficit of $85 million to $200 to $250 million. 

The deficit for the following year (2018-19) is expected to grow as new labor contracts for the police and civilian workers will go into effect, probably adding $50 to $100 million to the projected deficit.  

As if these deficits were not bad enough, the budget outlook does not include adequate funding to repair our lunar cratered streets and cracked sidewalks, despite an infusion of almost $50 million from the Local Return provisions of Measure M, the half cent increase in our sales tax that was approved by 71% of the voters in November.  

Nor do the projections include sufficient monies to offset the deferred maintenance on the City’s infrastructure, including our run down parks, our urban forest, its Stone Age management systems, and its aging buildings and facilities.  

The City’s Budget Outlook does not take into consideration higher pension contributions mandated by lower than anticipated returns on the investment portfolios of its two seriously underfunded pension plans and the impact of a lower investment rate assumption from the overly optimistic discount rate of 7½%.    

And what will happen if we hit another economic downturn that results in lower City revenues?  

With all this red ink and another budget crisis looming, why haven’t Mayor Garcetti and the Herb Wesson City Council adopted the four excellent budget recommendations of the LA 2020 Commission that were reiterated by the Neighborhood Council Budget Advocates in October? 

In 2014, one of pillars of Eric’s “Back to Basics” Priority Outcomes was that LA would “live within its financial means.”  But that is certainly not the case given the sea of red ink. 

The Neighborhood Council Budget Advocates are developing its own “Back to Basics” Plan that calls for, among other recommendations, long range planning; developing a plan to repair and maintain our streets, sidewalks and the rest of our infrastructure; refraining from entering into any labor contract that will result in future deficits; limiting the hiring of any new employees unless there is adequate funding; implementing pension reform; benchmarking the efficiency of the City’s workforce; and developing business friendly policies that will encourage employers to remain and invest in LA. 

The City’s impending financial fiasco has been kept under wraps so as not to endanger the reelection of Mayor Garcetti and seven members of the City Council.  Nevertheless, this mess will not go away, nor will the efforts to treat us like mushrooms, keeping us in the dark and dumping tons of ripe manure on our heads. 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

-cw

We Are Not Mushrooms: Learn More about LA’s Budget Mess Then … Do Something about It

 

LA WATCHDOG--Our City’s budget and finances are a mess.  But City Hall is less than transparent, treating us like mushrooms, keeping us in the dark and dumping tons of ripe manure on our heads. 

But on Saturday, you will have the opportunity to learn more about the City’s budget and finances by attending one of the six Regional Budget Day meetings throughout the City that are being hosted by the Neighborhood Council Budget Advocates.  These meetings begin at 9:30 in the morning and will last for about two to three hours.  Refreshments will be served.  See below for the location nearest you or click here. 

Importantly, the Neighborhood Council Budget Advocates are interested in your ideas about how to make the City more efficient and transparent and to increase revenues. 

While the Advocates have produced many recommendations over the years that have saved the City considerable sums and increased revenues, City Hall has been resistant to implement common sense suggestions that would make the City’s finances and operations more transparent and curb its out of control spending. 

On October 4, 2106, the Neighborhood Council Budget Advocates urged the City Council and Mayor Eric Garcetti to implement the following four excellent budget related recommendations of the LA 2020 Commission.  

  • Create an independent “Office of Transparency and Accountability” to analyze and report on the City’s budget, evaluate new legislation, examine existing issues and service standards, and increase accountability. 
  • Adopt a “Truth in Budgeting” ordinance that requires the City develop a three-year budget and a three-year baseline budget with the goal to understand the longer-term consequences of its policies and legislation. (Council File 14-1184-S2)  
  • Be honest about the cost of future promises by adopting a discount rate and pension earnings assumptions similar to those used by Warren Buffett.   
  • Establish a “Commission for Retirement Security” to review the City's retirement obligations in order to promote an accurate understanding of the facts. 

For more information on this recommendation, see the October 6, 2016 CityWatch article, NC Budget Advocates Argue for Transparency Office and Truth in Budgeting Law. 

But the City Council and the Mayor have done nothing to implement these recommendations despite the fact that they were enthusiastically endorsed by City Council President Herb Wesson at a press conference on April 9, 2014.  Interestingly, Wesson was also the moving force behind the formation of the blue ribbon LA 2020 Commission headed by former Secretary of Commerce Mickey Kantor and Austin Beutner.  

The City’s budget is out of control. 

In January, the City Administrative Officer said that the City is looking at a potential budget deficit of $245 million this year (it was “balanced” on July 1, 2016) and that the Reserve Fund is in danger of dipping below mandated levels. As a result, the City’s credit rating is in jeopardy.  

The City is projecting a river of red ink over the next four years despite revenues being up $1 billion over the last four years and another $600 million over the next four years.  Our lunar cratered streets have continued to worsen, so much so that our gridlock is the worst in the developed world according to The New York Times. And our unfunded pension liability of more than $20 billion (according to Moody’s Investor Services) is a weapon of mass financial destruction aimed at the heart of all Angelenos.  

In March, the Neighborhood Council Budget Advocates will issue its annual “White Paper” that will propose a “Back to Basics” Plan.  This will include a call for long range planning, a policy of not entering into budget busting labor contracts, a plan to repair and maintain our streets and the rest of our infrastructure, and the development of a business friendly environment which encourages employers to remain and invest in our City. 

The Neighborhood Council Budget Advocates look forward to your input.  After all, it is our City.  

See you on Saturday morning at 9:30 at the one of the following locations where coffee will be on the house.  

  • ACTION INFO 

Regional Budget Day Locations 

Marvin Braude Center

6262 Van Nuys Boulevard

Van Nuys 91401

 

Los Angeles Zoo and Botanical Gardens

Griffith Park Drive

Los Angeles 90027

 

Glassell Park Community Center

3650 Verdugo Road

Glassell Park 90065

 

Ridley Thomas Constituent Center

8475 S. Vermont Avenue

Los Angeles

 

West LA Municipal Building

1645 Corinth Avenue

Los Angeles 90049

 

Croatian Cultural Center

510 W. 7th Street

San Pedro 90731

 

More info here.

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

-cw

Measure H: Good Intentions, Bad Policy

LA WATCHDOG--The County Board of Supervisors has placed Measure H on the March 7 ballot, which, if approved by the two-thirds of the voters, will increase our sales tax by a quarter of a cent to 9 ½%.  This ten year tax increase will generate $350 million a year which will be earmarked to finance services for the homeless.  

Measure H is expected to be approved by County voters based on the results of the November election.   

Measure HHH was approved by 77% of the voters.  This measure authorizes the City to issue $1.2 billion in general obligation bonds to fund permanent supportive housing for the homeless.  The County will be responsible for providing the necessary services as outlined in the ballot measure. 

Measure M, approved by 71% of the County’s voters, authorizes a permanent half cent increase in our sales tax to finance Metro’s ambitious capital expenditure program and its money losing operations. 

And 75% of the County’s voters approved Measure A, a $100 million tax to fund its Department of Parks and Recreation. 

The proponents of Measure H have also raised over $1.5 million from the usual suspects, including our old friend, Frank McCourt of Dodger infamy, and other real estate developers as well as many other City and County ring kissers looking for future paybacks.   

However, voter turnout in March is expected to be considerably lower than in November.  While 3.4 million votes were cast in the County for the Presidential candidates, turnout in March is expected to be in the range of 1 million voters (30%), representing a very different voter profile.  

In addition, County voters outside of the City have tended to be more fiscally prudent than City voters.  And they outnumber City voters by 50%. 

Voters in March may also be in a foul mood as a result of being hit with so many new taxes in 2016 and the prospect of even more taxes over the next two years.  

In 2016, Angelenos were hit with a $150 million tax increase in connection with the massive DWP rate increase of over $1 billion. 

Measure HHH, the $1.2 billion homeless bond, will cost City property owners an average of $65 million a year over the next 30 years. 

The Los Angeles Community College District’s issuance of $3.2 billion in bonds will cost an average of around $200 million a year for the next 30 years. 

County property owners will be tagged for another $100 million to fund its parks. 

The Metro half cent sales tax increase will cost County residents an additional $750 million a year. 

And this does not include state taxes associated with the new $2 a pack cigarette tax, the $9 billion K-12 school construction bond, or the Soak the Rich income tax surcharge. 

There are more taxes that are in the pipeline. 

The County Board of Supervisors is actively considering a Stormwater Tax that will raise between $300 and $500 million a year from property owners. 

The City is still considering a multibillion Street Repair Bond that will tag taxpayers for $100 to $200 million a year.  

The South Coast Air Quality Management District is contemplating raising $300 million through a new Vehicle Licensing Fee. 

And the State is considering a $3 billion increase in our gas tax, a $10 billion expansion of the current sales tax (thank you, Bob Hertzberg), a multibillion bond to repair its neglected parks, and a $2 billion bond to finance University of California facilities.  

There is also the issue of trust. 

During the last election, the County Supervisors, Mayor Garcetti, and the management of Metro withheld information about significant cost overruns on the widening of the Sepulveda Pass and Downton Regional Connection until after the election. 

And then you have the City’s budget and the tsunami of red ink, the County’s massively underfunded retirement plans, our failing infrastructure, the unwillingness of our elected officials to say no to unaffordable union demands, and the corrupt pay-to-play culture that permeates City Hall and the County Hall of Administration.  

The Supervisors, Mayor Garcetti, and the City Council have told us that homelessness is their number one priority.  If so, then the Supervisors need to find $350 million in the County’s $30 billion budget rather than hitting us up with yet another increase in our regressive sales tax. 

By voting NO on H, we can send a message to Eric, the City Council, and the Board of Supervisors that they need to use our tax dollars more efficiently and that we are not their ATM.   

+++++++++

 

Measure H: Los Angeles County Plan to Prevent and Combat Homelessness. 

To fund mental health, substance abuse treatment, health care, education, job training, rental subsidies, emergency and affordable housing, transportation, outreach, prevention, and supportive services for homeless children, families, foster youth, veterans, battered women, seniors, disabled individuals, and other homeless adults; shall voters authorize Ordinance No. 2017-0001 to levy a ¼ cent sales tax for ten years, with independent annual audits and citizens’ oversight?

 

+++++++++

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

-cw

Exposed: Eric’s Fake Facts

LA WATCHDOG--Mayor Eric Garcetti and the Herb Wesson led City Council are opposed to Measure S, the Neighborhood Integrity Initiative, that is on the March 7 ballot.  Instead, they support the status quo where real estate developers make billions, the politicians receive millions, and we get the shaft. 

In a slick mailer paid for by real estate developers and the County Federation of Labor, Garcetti said, “Measure S will cause major job losses, will cost taxpayers millions, and will make our housing and homelessness even worse.” 

But the “facts” (see below) supporting Garcetti’s comments are based on the flawed Economic Policy Analysis by Beacon Economics, a local consulting firm that has close financial ties to opponents of Measure S, the Los Angeles Chamber of Commerce and Los Angeles City Hall.  

This not so independent analysis has not been peer reviewed.  Nor has it been the subject of an open and transparent discussion by the City Council, the City Administrative Officer, or the Chief Legislative Analyst as the business-as-usual Council Members are not willing to subject this report to rigorous scrutiny.  

The fatal flaw in this analysis is that it compares the impact of Measure S with the market prior to the approval by the voters on November 7 of Initiative Ordinance JJJ, the Affordable Housing and Labor Standards Related to City Planning Initiative.    

This overly complex ordinance that is over 10,000 words of confusing legal mumbo jumbo is a real deal and job killer.  

According to a previous Beacon analysis prepared to support the Los Angeles Chamber of Commerce’s opposition to JJJ, this measure’s “potential to drastically reduce residential construction would further accelerate increases in home prices and rents in Los Angeles.” 

[Note: The Los Angeles Times also opposed JJJ as it “could make LA’s housing crisis even worse.”] 

JJJ would require a developer of a residential project of 10 or more units who seeks a zoning change to essentially enter into a “project labor agreement” that requires construction workers be paid the “prevailing wage,” a rate that is significantly higher than market rates.  This will drive up project costs by 46% according to Beacon. 

At the same time, developers will have to set aside up to 25% of a project’s units for low and moderate income tenants, thereby lowering the projected rental income. 

The combination of Higher costs and lower rents is good reason not to build in LA, a reality that must be considered when analyzing the relative impact of Measure S. 

Garcetti is also claiming that Measure S will stymie the development of affordable housing and permanent supportive housing.  But this claim does not take into consideration that developers can build “as of right” without having to get zoning changes from City Hall.  And with 785,000 parcels of property in the City, there are ample opportunities for the development of market rate, affordable, and permanent supportive housing under the Measure S 24-month moratorium.  

Garcetti and the City Council claim they are beginning to reform the planning process.  They are developing ordinances to update the city’s General Plan and its 35 Community Plans and to have the City (not the real estate developers) oversee the Environmental Impact Statements and Traffic Studies.  They have introduced motions to limit campaign contributions from real estate developers. 

But if the voters reject Measure S, will we ever get an objective analysis of the impact of JJJ, the union inspired initiative that will make the building of multifamily buildings uneconomic?  Will the City continue to update on an accelerated basis the City’s General Plan and its 35 Community Plans in an open and transparent manner as required by Measure S?  Will the City provide the Planning Department with the necessary resources, especially after July 1, 2018 when the new labor contracts kick in and result in a tsunami of red ink?  Will the Garcetti and the City Council cut off the hand that feeds them and limit campaign contributions from real estate developers?  

The answer is obviously NO since we cannot trust Garcetti and the Council Members when it comes to their ultimate aphrodisiac, campaign cash. 

Vote Yes on S and end the status quo of a corrupt pay-to-play culture where real estate developers make billions, politicians receive millions, and we get the shaft.  

+++++++

Fake Facts 

  • Costs taxpayers over $70 million each year.
  • Destroys 12,000 jobs each year.
  • Cost $640 million in lost wages each year.
  • Results in losses of $1.9 billion to our City every year it is in effect
  • What is the impact of JJJ and how does that compare to Measure S?  

+++++++

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

-cw

The LA Charter That Keeps on Giving … to the LA Council Members That Is

LA WATCHDOG--Section 245 (see below) of the Los Angeles City Charter allows the City Council to assert jurisdiction over any action by the Board of Commissioners of a City Commission by a two-thirds vote of the Council.  There are certain exceptions for the Ethics Commission, pension plans, and personnel matters.  

While the City Council has the ability to veto the action by a two-thirds vote, it does not have the ability to “amend, or take any action with respect to the Board’s action.”   

However, there is an exception for City Planning that allows the City Council to amend the action of the City Planning Commission or the local Area Planning Commissions.  

And my oh my, have the members of the City Council taken advantage of this loophole.   They have extracted millions in campaign contributions and other favors from real estate speculators and developers, regardless of the impact on our neighborhoods and the increase in traffic.  

The Los Angeles Times had a well-researched, front-page expose of the $600,000 in pay to play campaign contributions involving the approval of the $72 million Sea Breeze residential development in the Harbor area of the City.   In this case, the City Council reversed the decision of the Area Planning Commission and the City Planning Commission, both of which had turned down the developer’s request for a zoning change for this industrial zoned property.  

This City Council granted variance resulted in an increase in the value of the land of $25 million according to a CityWatch article by Austin Beutner.  Of course, the beneficiaries of these laundered campaign contributions (Council members Joe Buscaino, Jose Huizar, Mitch Englander, and Nury Martinez as well as Supervisor Janice Hahn and Mayor Eric Garcetti) claim with a straight face and a touch of indignation that these overly generous cash contributions from people they had never met before did not influence their decision to grant the developer’s request. 

There is also the recent action of the City Council that permitted a Beverly Hills developer to erect a 27 story residential skyscraper in a low-rise neighborhood in Koreatown.  In this case, $1.25 million in contributions to two slush funds bought the cooperation of Mayor Eric Garcetti and City Council President Herb Wesson.   

The list of developments where money talks goes on and on, including, but certainly not limited to, the Palladium in Hollywood, the Reef in South LA, the Cumulus at Jefferson and Rodeo, as well as many other mega-developments throughout the City that will cause increased congestion and stress on our already overtaxed infrastructure. 

The net is that real estate speculators and developers make billions, our local politicians collect millions, and we and our neighborhoods get the shaft.  

One of the major benefits of Measure S is that it will put the brakes on the corrupt pay to play culture at City Hall as “up zoned” developments will be prohibited under the two year moratorium.  This will protect our neighborhoods and our quality of life while the City engages in real planning in an open and transparent manner. 

So NO to pay-to-play corruption.  Say YES to real planning.  And Vote YES on Measure S. 

+++++++++ 

Sec. 245.  City Council Veto of Board Actions. 

Actions of boards of commissioners shall become final at the expiration of the next five meeting days of the Council during which the Council has convened in regular session, unless the Council acts within that time by two-thirds vote to bring the action before it or to waive review of the action, except that as to any action of the Board of Police Commissioners regarding the removal of the Chief of Police, the time period within which the Council may act before the action of the Board shall become final shall be ten meeting days during which the Council has convened in regular session. 

   (a)   Action by Council.  If the Council timely asserts jurisdiction over the action, the Council may, by two-thirds vote, veto the action of the board within 21 calendar days of voting to bring the matter before it, or the action of the board shall become final. Except as provided in subsection (e), the Council may not amend, or take any other action with respect to the board’s action. 

   (b)   Waiver.  The Council may, by ordinance, waive review of classes or categories of actions, or, by resolution, waive review of an individual anticipated action of a board.  The Council may also, by resolution, waive review of a board action after the board has acted.  Actions for which review has been waived are final upon the waiver, or action of the board, as applicable. 

   (c)   Effect of Veto.  An action vetoed by the Council shall be remanded to the originating board, which board shall have the authority it originally held to take action on the matter. 

   (d)   Exempt Actions.  The following actions are exempt from Council review under this section: 

   (1)   actions of the Ethics Commission; 

   (2)   actions of the Board of Fire and Police Pension Commissioners; 

   (3)   actions of the Board of Administration for Los Angeles City Employees Retirement System; 

   (4)   actions of the Board of Administration of Water and Power Employees Retirement Plan; 

   (5)   quasi-judicial personnel decisions of the Board of Civil Service Commissioners; 

   (6)   actions of a board organized under authority of the Meyers-Milias Brown Act for administration of employer-employee relations; 

   (7)   individual personnel decisions of boards of commissioners other than the Board of Police Commissioners; and 

   (8)   actions which are subject to appeal or review by the Council pursuant to other provisions of the Charter, ordinance or other applicable law. 

   (e)   Exceptions for Actions of City Planning Commission and Area Planning Commissions.  The Council shall not be limited to veto of actions of the City Planning Commission or Area Planning Commissions, but, subject to the time limits and other limitations of this section, after voting to bring the matter before it, shall have the same authority to act on a matter as that originally held by the City Planning Commission or Area Planning Commission.

+++++++++

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

-cw

La Kretz Innovation Center: A Pay to Play Pet Project

LA WATCHDOG-The La Kretz Innovation Campus is a welcome addition to the City’s economic development infrastructure.  Located on 3.2 acres in the Arts District, this one story, renovated warehouse consists of 60,000 square feet of “modern, creative office and laboratory spaces” that will serve as an “incubator of startups and early stage businesses focused on the commercialization of clean technologies.”   

Importantly, this tasteful, LEED certified development respects the character of the neighborhood, a rare feat in modern day Los Angeles. 

There is also an attractive 25,000 square foot neighborhood park that will be leased to and operated by the Department of Recreation and Parks. 

This $43 million development was named after Morton La Kretz, a philanthropist and real estate speculator who made a tax deductible contribution of $3 million in return for the naming rights to the Campus.   

He is also one of the forces behind the controversial 1.4 million square foot, Crossroads of the World development that is located near Sunset and Highland, right in the middle of already traffic congested Hollywood. This massive mixed use development does not respect the character of this low rise neighborhood as it will have buildings that are 400 feet tall, will house 1,250 residential and hotel units, and will have 280,000 square feet of office, retail, and commercial space.      

Needless to say, this massive project will require the approval of local Council Member Mitch O’Farrell, the Planning and Land Use Management Committee chaired by Jose Huizar, the Herb Wesson led City Council, and Mayor Eric Garcetti who represented this part of Hollywood when he was a member of the City Council.  

In September, Jose Huizar made a motion (Council File 16-1109) calling for the Chief Legislative Analyst and the Economic and Workforce Development Department to report on the progress of the Campus, including incubating early stage green businesses and supporting energy and water conservation through research and education.  

But no report would be complete unless it analyzed the adequacy of the economic returns to our Department of Water and Power which was forced to “invest” $20 million in this pet project of Eric Garcetti and Jose Huizar and to absorb the operating costs of $895,000 a year.  The report should also include an analysis of whether the bargain rents from “green” tenants are consistent with the market and the high cost of the Campus. 

This report should also address La Kretz’s use of philanthropy for his own personal gain.  This would include not only the Crossroads of the World development in Hollywood, but his two controversial projects on the Los Angeles River, one in Atwater Village and the other across the river in Elysian Village.  

La Kretz should be complimented for his generosity in helping to fund the Campus.  And while he has not taken the well-travelled road of contributing to the campaign coffers of the Mayor and the members of the City Council, he has achieved a level of influence through his charitable gifts that may result in the approval of this massive, out of character development in Hollywood.  More than likely, this will result in estimated profits in excess of $100 million. 

Not a bad return on a tax deductible $3 million investment. 

The pay to play culture surrounding the Crossroads of the World development is just another example of why we should VOTE YES ON MEASURE S on March 7 so we can help stem the corruption that has infected City Hall to the detriment of our neighborhoods. 

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

-cw

The Price is Right for the Ninth! Say What?

LA WATCHDOG--You can’t make this stuff up. 

Council District Nine Incumbent Curren Price’s campaign slogan, The Price is Right for the Ninth, is spot on given the pay to play culture permeating the cesspool of corruption known as City Hall. 

This begs the question to Price, “What is the price that the deep pocketed real estate developers paid you to support the out of context, $1.2 billion high rise development of The Reef in South Central that has the very real potential to displace tens of thousands local residents?” 

But Price is not alone.  

We should demand that Mayor Garcetti and all of the members of the Herb Wesson led City Council come clean about all their shady dealings with real estate developers, starting with Garcetti, Buscaino, Englander, Huizar, and Martinez and their involvement with the $600,000 of laundered campaign contributions involving the $72 million Sea Breeze development that was disclosed in a well-researched front page story of the Los Angeles Times.  

And the list of neighborhood destroying developments are too many to enumerate, but involves billions of congestion causing, “up zoned” developments approved by the Mayor Garcetti, the Herb Wesson City Council, and the Jose Huizar led Planning and Land Use Management committee.      

As of December 31, the Mayor and the seven City Council incumbents have been showered with over $5 million in campaign contributions with millions more expected prior to the March 7 election.  And this does not include millions in self-serving contributions to “independent” expenditure committees to support individual candidates and politically favored ballot measures.  

While the price of admission to the cesspool of corruption known as City Hall is chump change relative to the value of favors granted to City Hall’s generous real estate development cronies, what is the price that we Angelenos will have to pay?  

Trust me, it ain’t chump change.  

Vote Yes on S, the Neighborhood Integrity Initiative.

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

-cw

Los Angeles: Clean Elections and How to Pay for Them

LA WATCHDOG--As a result of Angelenos' accurate perception that our corrupt City Council and Mayor are unduly influenced by the campaign contributions of real estate developers, the leaders of the City’s public sector unions, and other special interests, Councilmember Mike Bonin introduced his “Clean Money Elections for Los Angeles” motion on January 17.  

Under his proposal that “gets money out of politics,” the City would establish a system of publically financed municipal elections where candidates would “agree to forgo corporate donations, special interest money, further donations from individuals, or significant self-financing” in return for “a statutorily established amount of money sufficient to run an aggressive and well-financed campaign.”   

This voluntary program would be fully funded by a dedicated revenue stream.  According to Bonin’s motion, specific sources of financing would include fees on development and a severance tax for all oil and gas produced within the City of Los Angeles. 

But rather than levying new taxes on the business community which will be passed onto all Angelenos, the City Council should investigate the use of their less than transparent discretionary slush funds that are reputed to haul in $20 to $25 million a year.  

Sources of cash for these slush funds include the Street Furniture Fund (advertising revenues from bus shelters), Oil Pipeline Franchise Fees, the Real Property Trust Fund (50% of the proceeds of the sale of surplus property), and AB 1290 Funds (tax increment funds from the dissolution of the corrupt Community Redevelopment Agency).  

There are also lucrative fees from the Lopez Canyon Landfill, the Sunshine Canyon Landfill, and the Central LA Recycling and Transfer Station that never see the light of day.  

Unfortunately, these slush funds are shrouded in mystery as the City Council refuses to allow a detailed audit that is available to the public.  Rather, our Elected Elite’s idea of transparency is a data dump of more than 100 pages of computer printouts which require an experienced forensic accountant to decipher.  

And when asked by Mayor Villaraigosa in 2010 to “lend” $40 million to shore up the City’s Reserve Fund in the face of a projected $485 million deficit, the answer was a self-serving and resounding NO.  

Despite this lack of transparency, each Councilmember has detailed information on their own discretionary slush fund.  

Another source of cash would be to tap the combined $100 million annual budgets of the Mayor and City Council.  But like the slush funds, this might be hitting too close to home and limit the ability of our Elected Elite to finance their pet projects and reward their friends, cronies, family, and contributors to their election campaigns.  

Bonin requested that the Chief Legislative Analyst and the City Administrative Officer develop cost estimates and revenue sources for the Clean Money Public Campaign Financing System.  He also moved that the Ethics Department to prepare a ballot measure for our rejection or acceptance in 2018. 

Any reform will also need to address Independent Expenditure committees that are funded by real estate developers, the leaders of the City’s public unions, and other special interests.  These committees are designed to support individual candidates, ballot measures, or tax increases where the Mayor and other elected officials put the arm on well healed donors who are looking for special treatment at City Hall.  

Of course, any reform will require the cooperation of our 18 elected officials and any candidate for office.  And this will be near impossible as campaign cash is the ultimate aphrodisiac for the money grubbing occupiers of City Hall and their cronies.  

+++++++ 

Note: The recent flurry of Council motions endorsing campaign reform, including a Ban on Developer Campaign Contributions, are an effort to blunt wide spread voter support of Measure S, the Neighborhood Integrity Initiative, and to offset voter outrage over the pay to play corruption involving real estate developers.  

Recent articles and editorials in the Los Angeles Times and CityWatch have detailed the corruption involving the Sea Breeze development where $600,000 in suspicious money laundering campaign contributions to Supervisor Janice Hahn, Mayor Garcetti, and Councilmembers Buscaino, Jose Huizar, Mitch Englander, and Nury Martinez resulted in the approval of a $72 million development that was rejected by both the Area and City Planning Commissions.

The Los Angeles Times, CityWatch, and other LA area publications have also had a field day commenting on the pay to play corruption at the over height development of billionaire Rick Caruso near the already congested Beverly Center, the oversized Cumulus development at Jefferson and La Cienega, the out of character Reef in South Central, and the 27 story development at Catalina and Eighth in Koreatown where Garcetti and Wesson extorted $1.25 million from the Beverly Hills developer in return for a variance valued at an estimated $20 million.

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

-cw

City Labor Deal will Bust the Budget, Electeds Hiding the Cost

LA WATCHDOG--In August of 2015, the City of Los Angeles announced what turned out to be a budget busting contract with the Coalition of City Unions that represents the City’s 20,000 civilian workers.  According to Mayor Eric Garcetti, this agreement “prioritizes service delivery and strengthens our long term fiscal health.” 

To the contrary, this back room deal contributed to the City’s never ending Structural Deficit (where personnel costs increase faster than revenues) and blew a gaping hole in the 2020 budget, turning a projected surplus of $68 million into $101 million deficit. 

But that’s not all, folks. 

The City also committed to a “goal” of hiring 5,000 civilian employees by June 30, 2018.  But in a December report prepared by the City’s Personnel Department that outlined the Targeted Local Hire Program, not one mention was made about the cost of this program or the impact on the City’s budget. Yet the City is looking at an $85 million deficit next year, but that was before the City Administrative Officer informed us on January 6 that this year’s breakeven budget is a pipedream as the shortfall may be as high as $245 million thanks to lower revenues and higher than budgeted litigation costs. 

While some of the new employees will replace higher cost retiring workers, the hit to the City’s budget has been rumored to be in the range of $250 million when considering the fully loaded costs of salaries, Cadillac healthcare plans, and very generous pensions. 

The Targeted Local Hire Program appears to be more of a social welfare program as it is focused on hiring and retaining of local Angelenos from underserved communities.  Under the proposed system, over 80% of the positions would be allocated to the applicants from the designated underserved communities.    

But what about all the other Angelenos who have stayed out of trouble and done what was expected of them.  Don’t they deserve a fair shot at these high paying, guaranteed for life City jobs that have very generous benefits that far exceed those in the private sector?  And don’t the odds favor them doing a better job? 

This is not the time to be expanding the City’s workforce.  The City is looking at a river of red ink of almost $300 million over the next four years, and that was before the realization that this year’s unexpected deficit may be as high as $245 million.  The depleted Reserve Fund is under severe pressure to fund this shortfall.  And more than likely, the economy is going to be hitting some headwinds that will put additional pressure on the budget.  And as we know, it will be hard to lay off employees that are represented by the campaign funding leaders of the City’s self-serving public unions who consider us their ATM.  

Rather than hiring and training 5,000 new workers and adding to the City’s permanent overhead, why not hire independent third parties to complete specific tasks such as repairing our streets and sidewalks, trimming our trees, and maintaining our parks?  

Before proceeding with the Targeted Local Hire Program, Councilmember Paul Koretz, the Chair of the Personnel Committee and one of the main promoters of this less than transparent program, should conduct public hearings and outreach so that we have a better understanding of this very expensive initiative and its impact on the City’s already precarious finances. 

At the same time, Koretz, City Council President Herb Wesson, and Mayor Eric Garcetti would be wise to follow the advice of the Los Angeles Times to “commission and independent analysis of the impacts” of the program and “allow plenty of time for the public [and the Neighborhood Councils] to ask questions.” 

A year ago, Koretz wrote, “The City of Los Angeles has a mission to provide the highest quality public service to the residents of the City in the most efficient and cost effective manner.” 

Koretz must honor this pledge.  

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Strategic Workforce Development Taskforce / Personnel Department / Letter of Agreement / Hiring Civilian Employees Council File 16-0109

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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Shameful! LA May be Forced to Borrow Millions to Make Lawsuit Payments … Time to Throw the Bums Out

 

LA WATCHDOG--Despite General Fund revenues being up by over $1 billion since Eric Garcetti became our Mayor, the City Administrative Officer indicated in a January 6 memo that the “combined potential deficit [for the fiscal year ending June 30, 2017] currently stands at $245 million.” 

You have to be kidding.  A billion bucks and these jokers cannot balance the budget. 

The budget is being hammered by higher than anticipated expenditures and lower than expected revenues.  But there are not many real operational solutions since the Mayor, the Personnel Committee headed by Paul Koretz, and the City Council are not even willing to considering laying off or furloughing unionized employees who represent the bulk of City budget expenditures.   

Spending is anticipated to be $70 to $80 million over amounts approved by the City Council and Mayor Garcetti in June.  The primary culprit is legal settlements and verdicts against the City that are more than double the budgeted $67 million. But this budgeted amount was significantly less than the amount recommended by the City Administrative Officer (rumored to be $120 million) last April when Garcetti presented his budget to the City Council. 

The revenue shortfall (including those at risk) is projected to be $165 million, consisting of lower than expected reimbursements from the proprietary and special departments, lower taxes on DWP Ratepayers as Power System revenues are below projections, and lower collection of property and sales taxes. 

The CAO has proposed a number of nickel and dime solutions which, when taken as a whole, may help eliminate some of the budget deficit.  These include curtailing any new expenditures, limiting hiring, increasing revenues by collecting the hotel tax from short-term rental sites in addition to AirBnb, investigating the revenue potential of billboards on City property (subject to the approval of the City Council), and being reimbursed for services by major event venues. 

As expected, the CAO has proposed that the City proceed with a ten year Judgment Obligation Bond of up to $70 million. The proceeds from this offering would be used to replenish the Reserve Fund so that it would have the capacity to help close the budget deficit. 

But this financial strategy of using long term debt to finance operating losses highlights the financial follies that have been dumped on us by Garcetti, the Paul Krekorian Budget and Committee, the Personnel Committee chaired by Paul Koretz, and the Herb Wesson led City Council.  They have steadfastly refused to follow the many common sense recommendations of Miguel Santana, the City Administrative Officer who, unfortunately, is leaving to become the Chief Executive Officer of the troubled Los Angeles County Fair Association.    

The City will muddle through this financial mess by issuing Judgment Obligation Bonds, developing new sources of revenues, selected budget cuts, fewer hires, and/or raiding the Reserve Fund and maybe even the previous sacrosanct Budget Stabilization Fund.  But it will not be pretty, especially when we have to listen to all the excuses of the City Council and the Mayor.  

This financial fiasco demonstrates why the City Council and Garcetti need to place on the ballot a LIVE WTHIN ITS MEANS* charter amendment so that voters have the opportunity to either accept or reject budget reform. 

Finally, Garcetti and Personnel Chair Paul Koretz do not deserve to be re-elected in March because they have failed the citizens of Los Angeles by refusing to adopt realistic budget and personnel policies that will allow the City to balance its budget and provide basic services to all Angelenos. 

Time for a change.  Throw the bums out.  

*The “Live Within Its Means” charter amendment will require the City to develop and adhere to a Seven Year Financial Plan; to pass three year balanced budgets based on Generally Accepted Accounting Principles; to prohibit any labor contracts that result in future budget deficits; to benchmark the efficiency of its operations; to fully fund its pension plans within twenty years; to implement a twenty year plan to repair and maintain our streets, sidewalks, and the rest of our infrastructure; and to establish a fully funded independent Office of Transparency and Accountability to oversee the City’s finances and operations.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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Cha Ching!! Eric’s Pet LA River Project Balloons to $7 Billion …Time to Show Us the Money!

LA WATCHDOG--In 2013, Mayor Eric Garcetti told us that the revitalization of the 11 mile stretch of the Los Angeles River from Griffith Park to the Arts District was projected to cost $1.1 billion, of which the City’s share was $432 million.  

In 2015, the cost increased to $1.4 billion, but our share for the 11 mile revitalization ballooned to $1.2 billion as federal regulations limited the Army Corps of Engineers contribution to $200-$300 million.  While the City had no clue how it was going to come up with its share, the City Council authorized the City Administrative Officer to issue a letter to Army Corps of Engineers stating the City will have the financial capability to meet its cost sharing obligations.   

In late 2016, the revitalization plan was expanded to include the first 32 miles of the 51 mile long Los Angeles River that flow through the City, beginning in Canoga Park and ending at the Vernon line.  But once again, the cost ballooned, this time to an estimated $7 billion. The cost per mile also increased to $219 million, up 72% from the $127 million per mile for the 11 mile revitalization plan. 

Importantly, EIFDs are not permitted to fund operating expenses such as ongoing maintenance and repairs, adding another level of expense to the river revitalization plan that has not been considered.   

Consistent with past practice, Garcetti has not developed a plan to finance this aspirational, multi-decade project.  However, one alternative that is being considered by the City Council and the Economic and Workforce Development Department (“EWDD”) is Enhanced Infrastructure Financing Districts (“EIFD”), a new financing vehicle authorized by the State in 2015 that allows local governments to fund capital projects by diverting “incremental” property tax revenues from the City to an EIFD to finance the payment of interest and principal on long term bonds. 

In many ways, EIFDs are intended to replace the controversial and often corrupt Community Redevelopment Agencies by limiting their taxing authority to ‘consenting” entities (in this case the City and County, but not LAUSD) and requiring a 55% vote of the EIFD voters to approve the issuance of bonds. 

The recent report prepared at the request of EWDD recommends establishing nine EIFDs along the 32 miles of the river that would be entitled to collect 75% of the incremental property taxes from properties within one mile of the River due to the City and County (52% of the total as any incremental tax revenues due LAUSD would not be included) that exceed the existing assessed value.   This amount would then be reduced by interest payments, interest reserves, and delinquency reserves.  And then another 20% would be set aside for affordable housing. 

Over the next 30 years, the report indicated (but only after massaging the massive amounts of data) that over $7.6 million in incremental tax revenues would be available to the nine river EIFDs.  But after financing costs (interest, interest coverage, and reserves) and the affordable housing set aside, only $1.5 billion (20%) is available for investment in river related projects.  This is an unacceptable proposition that is dependent on issuing massive amounts of debt.  

The report also indicates that the EIFDs will not increase taxes of the properties in the district. While true, it will divert the incremental property tax revenue from the City’s General Fund, resulting in less money for services for those who live in the remaining 88% of the City based on the assessed value of all City property. Again, this is not an acceptable proposition since the City’s voters do not have a say in the matter. 

There are also issues of transparency and accountability that need to be addressed as the EFIDs may have a life span of up to 45 years and may have the ability to increase fees and assessments without the approval of the voters in the districts or the City. 

What is not to like about a revitalized Los Angeles River?  But does the river revitalization plan take priority over repairing our lunar cratered streets, our parks, and our urban forest; public safety (LAPD and LAFD); affordable housing and the homeless; and the restoration of City services.  And should the City develop a pay as you go revitalization plan instead of issuing billions in new debt?   

Before proceeding with the $7 billion river revitalization plan and the establishment of EIFDs, the City needs to reach out to the entire City and its Neighborhood Councils to determine the City’s priorities and educate the public on the revitalization plan and the intricacies of the Enhanced Infrastructure Financing Districts.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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How to Legalize the Illegal $264 Million DWP Transfer Tax

LA WATCHDOG--At its December 6 meeting, the politically appointed Board of Commissioners of our Department of Water and Power approved the transfer of $264 million of Ratepayer money from DWP’s Power System to the City coffers without any discussion, once again demonstrating their disregard for the Ratepayers and our hard earned cash.  But this is standard operating procedure as witnessed by the Board’s recent blessing of the above market $41 million lease for the City owned Figueroa Plaza and the uneconomic $12 million Rooftop Solar Program. 

The Commissioners also knew that the $264 million 8% Transfer Fee is the subject of a class action lawsuit that alleges that this fee is really a tax as it exceeds the cost of providing electrical service to the Ratepayers.  This violates the California constitution because the tax has not been approved by the City’s voters. 

But the Board does not bear the sole responsibility for its failure to stand up for the best interests of the Ratepayers.  Behind the scenes is Mayor Eric Garcetti, calling the shots, pulling the strings, and directing the Commissioners to approve actions that help satisfy City Hall’s addiction to our cash. 

But this $264 million transfer tax is $27 million less than budgeted $291 million, which, when combined with the projected budget deficit of $82 million for this year, will result in red ink of $110 million. And this does not include the projected $35 million shortfall in property tax revenues. 

To fund this deficit, the City is considering issuing a $70 million Judgment Obligation Bond and/or levying a special assessment on the Department of Water and Power.  

The City is desperate to settle the class action lawsuit in a way that will preserve all or most of the Transfer Tax without giving us the opportunity to vote on this tax.  Rumors from well-placed sources indicate that the City is close to settling the class action litigation where the City will cap the transfer at $250 million a year without giving the voters the opportunity to approve or reject this tax. 

This, however, will not be without a fight as taxpayers will protest any settlement that does not require a vote. 

The purpose of this pushback is not to break the City, but to reform the City’s budget process.  

As an incentive for voters to support the $250 million Transfer Tax (the equivalent of a half cent increase in our sales tax or a 5% bump in our property taxes), the City should also place a LIVE WITHIN ITS MEANS* charter amendment on the ballot.  Each measure would require voter approval of the other ballot measure. 

While we would all like to “save” $250 million a year, this is a fair price to pay for real budget reform, especially given that our fiscally irresponsible Mayor has been unwilling to confront the City’s Structural Deficit that continues to produce rivers of red ink, lunar cratered streets, and massive unfunded pension liabilities that will eventually overwhelm the City’s budget.  

Here’s to Real Reform and a Happy, Healthy, and Wet 2017.    

 

+++++++

 

*The “Live Within Its Means” charter amendment will require the City to develop and adhere to a Seven Year Financial Plan; to pass three year balanced budgets based on Generally Accepted Accounting Principles; to prohibit any labor contracts that result in future budget deficits; to benchmark the efficiency of its operations; to fully fund its pension plans within 20 years; to implement a 20 year plan to repair and maintain our streets, sidewalks, and the rest of our infrastructure; and to establish a fully funded independent Office of Transparency and Accountability to oversee the City’s finances and operations.

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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Runaway Legal Settlements Threaten City’s Budget

LA WATCHDOG--The City is looking at an $82 million year end deficit according the Second Financial Status Report prepared by the City Administrative Officer.  This gap does not include the possibility of lower revenues from the utility users’ tax, the sales tax, parking fines, and the 8% Transfer Tax from our Department of Water and Power.  

One of the major reasons for this shortfall is that payouts from the Liability Claims Account are expected to be “at least” $135.5 million, $67 million over $68.5 million in the City’s Adopted Budget that was blessed by the City Council in May. 

Included in these payouts is a jury verdict for an eye popping $23 million in a wrongful death suit against the deep pocketed City for its failure to repair a dangerous intersection in San Pedro. The City intends to finance this cash payout by raiding its Reserve Fund that can ill afford this hit. 

And on Tuesday, the City Council approved the payment of $8 million to settle lawsuits involving three men who were shot and killed by LAPD officers.  And once again, the Reserve Fund will end up footing the bill. 

According to City Hall sources, there are a number of other lawsuits involving the Police Department that could cost the City big bucks.  But rather than take the risk of being slammed by huge verdicts from runaway juries, the City, viewed as a deep pocket by the plaintiff ‘s bar, will elect to settle many of these cases for what appears to be outrageous amounts, but tiny compared to the potential exposure. 

The City is considering financing the $67 million of excess settlements by issuing up to $70 million of Judgment Obligation Bonds.  These bonds, which must be approved by the State and are payable over a maximum of ten years, would shore up the Reserve Fund’s liquidity, an important component in protecting the City’s high quality bond ratings. 

At the same time, the bonds are paying for what is realistically considered an operating expense, allowing the City to continue to “kick the can down the road,” dumping yesterday’s obligation on tomorrow’s taxpayers. 

A classic example is the $16 million judgment for the 2007 May Day demonstrations that was financed with a 2010 Judgment Obligation Bond that will not be paid off until 2020, 13 years after this incident involving the LAPD and 295 demonstrators in and around MacArthur Park. 

Unfortunately, this low ball budgeting scam is not an isolated event.  Last year, the City budgeted $54 million for Liability Claims, but ended up forking over $110 million in settlements.  

In the future, the City needs to develop a realistic budget for it Liability Claims Account instead of relying on the Reserve Fund and Judgment Obligation Bonds.  

At the same time, the City should make the Police Department and every other City department “own” its liabilities rather than relying on the General Fund and the Reserve Fund.  This would force the Police Chief, the Fire Chief, and all department heads to focus on preventing potential liabilities.  

Finally, the City should use its political clout in Sacramento to implement tort reform as California is considered one of the country’s top “Judicial Hellholes.”  

But maybe we asking too much of Mayor Eric Garcetti and the Herb Wesson led City Council.  After all, they have our wallets to raid.  And they would not want to alienate the campaign funding lawyers who make an excellent living by suing our cash strapped City. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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Shocker! DWP’s Pension Plan is $4.8 Billion Underfunded … Ratepayers Will Pay the Bill!

LA WATCHDOG--The Department of Water and Power’s pension plan and its plan to cover Other Post-Employment Benefits (“OPEB”) have unfunded liabilities of almost $4.8 billion, an obligation that the Ratepayers will be required to fund.  

The Department of Water and Power pension plan is only 84% funded as assets of $10.3 billion are about $2 billion short of its future obligations of $12.3 billion. 

At the same time, the OPEB obligations are only 75% funded as assets of $1.75 billion are about $600 million less that its future obligations of $2.3 billion. 

Combined, DWP retirement obligations are only 83% funded, representing an unfunded liability of $2.5 billion. 

That’s the good news. 

When DWP finishes cooking the books and marks the assets to their true market value and assumes a more realistic investment rate assumption of 6.25%, the unfunded liability soars to $4.8 billion, representing an unhealthy funded ratio of 71%. 

DWP’s retirement plans are also very expensive to maintain. This year, the Department is expected to contribute $550 million to the two plans, an amount equal to over 12.5% of Department revenues and equal to almost 60% of its payroll.  The City, on the other hand, contributes less than 30% of civilian workers’ salaries to the Los Angeles City Employees’ Retirement System. 

During the last year, the unfunded liability increased by 50% ($1.6 billion) to $4.8 billion, in large part because the return on invested assets was less than 1% (0.82%), a considerable shortfall from the overly optimistic investment rate assumption of 7.5%.  At the same time, the annual contribution will increase to 60% of projected payroll, up from less than 50% the previous year. 

DWP, to its credit, has been making some progress. 

Several years ago, the Department contributed $600 million to fund a portion of its OPEB obligations, unlike the County and the State who have failed to fund any of this ever increasing liability.  As an aside, the City has been funding a portion of this obligation for almost 20 years.  

In the past year, it lowered its investment rate assumption to 7.25% even though it resulted in a higher unfunded liability and increased contributions. 

The Department and IBEW 18 also agreed to establish a new pension tier with lower benefits for employees who were hired after January 1, 2014.  This resulted in lower annual contributions as a percentage of the payroll. 

But even with these changes, DWP’s retirement plans are not sustainable as the investment returns on the stock and bond portfolios are expected to be in the range of 6% to 6.5%, lower than the targeted rate of return of 7.25%.  Furthermore, the investment rate assumption does not provide for the funding of the $4.8 billion unfunded liability which will continue to compound.  At the same time, annual benefits of this mature pension plan will exceed contributions by the Department and its employees. 

This shortfall will eventually be funded by the hard pressed Ratepayers who are already being smacked with a five year, $1 billion rate increase.  

Rather than speculate about the status of DWP’s retirement plans, the Board of Commissioners should require the Department, with the assistance of the Ratepayers Advocate and the Neighborhood Councils, to follow the recommendation of the LA 2020 Commission to establish an independent and transparent Commission on Retirement Security to review the DWP’s retirement obligations in order to promote am accurate understanding of the facts, to report on employment costs in various categories, and to develop concrete recommendations on how to achieve equilibrium on retirement costs by 2020. 

Is this too much to ask of the Garcetti appointed Commissioners?

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  Jack is affiliated with Recycler Classifieds -- www.recycler.com.  He can be reached at:  [email protected].)

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