LA WATCHDOG

LA WATCHDOG--Our Mayor’s pet project is the revitalization of an 11 mile segment of the Los Angeles River, stretching from Griffith Park to Downtown Los Angeles.  And what is not to like about new open recreational space in the park poor City of Los Angeles other than the not so minor fact that our cash strapped City needs to pony up more than $1 billion over the next ten to twenty years to pay for its share of this $1.4 billion river revitalization project. 

This is considerably more than the $500 million that was originally advertised as our City’s share.  Unfortunately, a more detailed analysis showed the total cost ballooning from an estimated $1 billion to $1.4 billion at the same time that the US Army Corps of Engineers cut its contribution from $500 million to $200 to $300 million.

At this time, our City and its leaders do not have a plan to finance this the ambitious infrastructure project.  Rather, it is scrounging for money, financing bits and pieces from here and there.

For example, buried in the City’s 440 page budget, there is one mention – a line item - for the $60 million purchase of the Taylor Yard G2 parcel that is owned by the Union Pacific Railroad Company.  This river fronting, 40 acre rectangular parcel that lies between the River and the State’s Rio de Los Angeles Park in Cypress Park is considered vital to the rehabilitation of the River.

While this purchase will be financed with debt (and possibly with the proceeds of bond offerings or State grants), is this the best use of the City’s scarce financial resources or debt capacity?  Or should this money be used to finance the repair of our streets and sidewalks, the redo of Pershing Square, the expansion of the Convention Center, or housing for the homeless?

The City has also managed to convince the Metropolitan Transit Authority to set aside $425 million for a 51 mile bike path along the length of the River, from its headwaters in Canoga Park all the way to Long Beach.  But this $8 million a mile earmark for the Mayor’s pet project is over the top excessive, leading one to speculate how many other pet projects will be financed by Metro’s proposed half cent increase in our sales tax to 9½%.    

The City is also considering the establishment of an Enhanced Infrastructure Financing District (“EFID”) that will allow the City to skim off its portion of the increased tax revenues from a boat load of high end real estate developments that border the River and the surrounding communities, much like the old Community Redevelopment Agency that was viewed by many as a corrupt political organization. These EFID funds will then be reinvested in the local community, most likely for streets and transportation projects to serve the more densely populated area that is not served by mass transit. 

But these non-affordable developments are not subject to a long range plan that respects the existing communities and neighborhoods.  Rather, it is the Wild West, a land grab by rapacious real estate speculators. 

Before the City proceeds with the $60 purchase and problematic remediation of the 40 acre Taylor Yard G2 parcel from the Union Pacific, the Mayor and the City Council need to have an open and transparent conversation about whether this expenditure is the best use of our cash strapped City’s scarce resources. 

The City also needs to devote the resources to develop a well thought out, long range plan for the Los Angeles River.  This includes identifying the sources for over $1 billion in cash needed to complete this important initiative.  Most importantly, this plan must respect the surrounding communities who are well aware of the impacts of unplanned development throughout the City where campaign funding real estate speculators have successfully manipulated the Mayor and the members of the City Council.

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

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LA WATCHDOG--At its meeting on Tuesday, May 3, the Los Angeles County Board of Supervisors instructed its Department of Parks and Recreation “to report back to the Board on June 21, 2016 with a final draft of the Park and Recreation Funding Measure so that the Board may consider its adoption and placement on the November 8 ballot.”  

But the likelihood of this proposed ballot measure that would raise between $200 and $300 million to fund the repair, operation, and creation of parks throughout the County being approved by the two-thirds of the voters is unlikely unless it undergoes major revisions.  And even then, it will a tough slog given all the competing tax measures that are expected to be on the November and March ballots. 

The Supervisors are considering a parcel tax of 3 to 5 cents on each of the 6.4 billion square feet of developed real estate in the County.  At 3 cents a square foot, this would produce revenues of almost $200 million a year for the Los Angeles County Regional Parks and Open Space District, a jump of 150% from the $80 million received in 2015.  This 3 cent levy would also increase based on the Consumer Price Index while the total haul would benefit from the growth in the developed real estate.

Over the 35 year life of this tax, the total revenue is projected to be in excess of $15 billion. 

But slamming the taxpayers with a 150% increase in the parks parcel tax is not going to be very popular with the voting public.  

One alternative would be to have the County put its money where its mouth is as the Supervisors have been very eloquent about the vital importance of parks and open space.  This plan will involve a hefty 25% bump in the parcel tax from $80 million to $100 million (1.5 cents per square foot or $42 for each of the 2.4 million parcels) accompanied by an annual $100 million contribution from the County’s $22 billion General Fund to its Regional Parks and Open Space District.  At the same time, the County will also be required to allocate adequate resources to its Department of Parks and Recreation. 

Another hot button issue is the allocation of this pot of gold by the Supervisors.  According to the carefully orchestrated Needs Assessment Report, a disproportionate amount of the money will be directed to “under parked’ urban areas of the County.  However, this will result in pushback from suburban voters and open space advocates who believe they will not be getting their fair share.  This may result in many voters rejecting this ballot measure. 

As such, the Supervisors will need to disclose the allocation of funds in the ballot measure that balances the goals of urban dwellers, suburban taxpayers, and open space advocates.  

The Supervisors will also need to provide independent oversight of the Regional Park and Open Space District and the Department of Parks and Recreation by establishing a Citizens Oversight Advisory Board that has the resources to conduct an objective, critical, and constructive review and analysis of the operations, finances, and management of these two entities.  This is critically important now that the fiscally prudent Zev Yaroslavsky and Gloria Molina have been replaced by two Supervisors not necessary known to be respectful of our wallets.   

This ballot measure already starts out with one strike against it as two-thirds of the voters did not approve Proposition P, a modest $50 million parks parcel tax to replace an expiring parcel tax, in November of 2014.  

This ballot measure has also received a second strike from “voter fatigue” as our tolerance will be exhausted by City and County tax initiatives totaling $1.8 billion over the next year or two. Think Metro, Stormwater, Homelessness (both City and County), Streets and Sidewalks, DWP, and Parks.  And this not include any new State taxes.  

These assaults on our wallets are the equivalent of a 37% hike in our real estate taxes or a three cent bump in our sales tax to 12%. 

If the Supervisors decide to proceed with this Parks Parcel Tax, it must be carefully orchestrated where the County limits the impact on property owners and steps up to the plate and contributes 50% of the needed funds.  At the same time, the City and the County will need to disclose their long term plans to increase our taxes and demonstrate that they are using our money efficiently and in our best interests.  

Otherwise, it’s three strikes and you’re out, game over for not only the Parks Parcel Tax, but for Metro’s proposed half cent increase in our sales tax that will cost us $120 billion over the next 40 years.

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

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LA WATCHDOG--On Tuesday, the Los Angeles County Board of Supervisors will discuss a $200 to $300 million parcel tax to fund the repair, operation, and creation of parks throughout the County.

LA WATCHDOG--While the combined budgets for the City Council and the Mayor are projected to be $100 million next year, will Paul Krekorian, the Chair of the City Council’s Budget and Finance Committee, conduct an open and transparent discussion of the individual line items of each budget so that Angelenos will have a better understanding as to how and where their money is being spent? 

For example, there has not been an open and transparent discussion about the Councilmembers’ discretionary funds that are reputed to haul in over $20 million a year, money that could be used to repair our streets or fund a portion of the City’s homeless initiative.  

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 sale of surplus property in a Council District), and AB 1290 Funds (tax increment funds associated with the dissolution of the corrupt Community Redevelopment Agency).  There are also fees from Lopez Canyon Landfill, Sunshine Canyon Landfill, and the Central LA Recycling and Transfer Station that never see the light of day. 

Where the discretionary cash goes is also not very transparent unless you are willing to hire a team of forensic accountants.  Reportedly, Councilmembers use a portion of these slush funds to fund members of their bloated staffs. 

There are discrepancies between the number of positions listed in the budget for the Mayor (94) and the City Council (108) and internal rosters, telephone directories, and web sites which indicate over 450 employees.  Naturally, this gives rise to the question of how are all these staffers being paid and what is the source of the cash to fund the extra salaries, pensions, and benefits.  

This headcount does not include numerous City employees who are on “loan” to the Mayor’s office to work on special projects and initiatives or the many employees throughout the City who are on call to answer the many time consuming inquiries from the offices of the Mayor and the Councilmembers. 

The Mayor’s budget also includes a line item of $36 million for Non-Departmental Allocations that comprises two-thirds of his $54 million fully loaded budget.  But there are no details about how and where this money will be spent in the over 1,700 pages covering the budget.  

Nor is there any information about how last year’s $38 million of Non-Departmental Allocations was disbursed.  

The City Council has also budgeted $6 million for Non-Departmental Allocations.  While this represents only an eighth of its $47 million budget, again there is no information on where this cash is going.  

Tellingly, the budgets for the City Council and the Mayor were the only departments that did not have the Supporting Data that outlines the distribution of 2016-17 total cost of their programs.  This includes pensions and human resource benefits (equal 30% of total salaries for the combined departments) and other departmental expenses.  

The unwillingness of the Budget and Finance Committee to demand transparency from the Mayor and its own City Council is justification as to why the City should implement the recommendation of the LA 2020 Commission to establish an independent Office of Transparency and Accountability to oversee the finances of our cash strapped City, whose elected officials appear to be allergic to the sunshine demanded by skeptical Angelenos. 

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The Budget and Finance Committee should also consider another recommendation of the LA 2020 Commission by creating a Committee on Retirement Security to review and analyze the City’s two underfunded pension plans, especially in light of the projected $101 million deficit in 2020 caused by an increase of over $180 million in pension contributions, wiping out the $68 million surplus that was projected last year. 

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

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LA WATCHDOG--Ever since Mayor Villaraigosa and the Eric Garcetti led City Council eviscerated the budget of our Department of Recreation and Parks in 2010 to help balance the City’s out of control budget, Rec & Parks has been on a mad dash for cash, willing to sell its soul for a few extra bucks, the hell with the neighboring communities.  

Under the new “full cost recovery” program that targeted the Recreation and Parks budget, City Hall slammed the Department with $38 million in chargebacks, consisting primarily of costs for water and power ($16 million) and General Fund expenses ($17.5 million).  This ding represented more than a quarter of the Department’s appropriation in the 2011 budget.   

Despite the healthy increase in City revenues, this policy has only gotten worse as chargebacks for the upcoming year have ballooned to $60 million, representing more than a third of its General Fund revenue. 

As a result, our parks are in disrepair and its programs gutted as the Department has eliminated more than a quarter of its worker bees. 

While the commercialization of our parks is understandable, it has not been well received by Angelenos who believe our parks should be free of billboards, signage, and other forms of intrusive advertising and corporate sponsorship.  And this opposition has only been fueled by the ham handed Department managers and Commissioners who have been less than transparent with the public, especially with those that live in close proximity to the parks. 

A prime example is the near riot by Hollywood residents over a plan to commercialize Runyon Park by allowing Pink + Dolphin, a streetwear company, to place its controversial logo on a newly constructed basketball court in exchange for $250,000.  This situation was further aggravated by Rec & Parks failure to engage the Hollywood community. 

As a result of the furious backlash, Councilmember David Ryu called a halt to this deal, at least for the time being.   

We are also seeing opposition to AngelFest, a new three day “family friendly music, food and cultural festival” that may be held in October in the Sepulveda Basin Recreation Area.  And while the Department will take in an estimated $1 million over the next three years that can be reinvested in the local parks, the Department failed to engage the environmental and conservation communities who are concerned about the adverse impact on the park and its wildlife. 

The Department also stirred up a hornet’s nest when it bungled the proposal to have Live Nation and Anschutz Entertainment replace Nederlander as the operator of the Greek Theatre in Griffin Park.  As a result, Rec & Parks will “self-manage” the venue, a scary thought given the City’s lack of management expertise and the need for the cash strapped City to invest $20 to $40 million to upgrade the aging venue. 

We are also seeing controversies where the residents of Beachwood Canyon, Hollywood Land, Lake Hollywood Estates, and the Hollywood Dells are in open revolt against the Department because of the traffic and safety issues resulting from tourists flocking to see the Hollywood sign. 

We also have issues involving Elysian Park and Councilman Gil Cedillo’s efforts to raid a $12.5 million fund set up by the Department of Water and Power to mitigate the impact of a covered reservoir. 

Now is the time to reform our Department of Recreation and Parks. 

The first step is to establish a better relationship with the public.  This would include a Memorandum of Understanding with the Neighborhood Councils similar to the successful arrangement with the Department of Water and Power.  This would also involve considerable outreach to the public, something the Department has not done with any consistency. 

At the same time, the Department needs to develop a long range operational and financial plan that meets the goals of all Angelenos. 

Once the Department gains the trust and confidence of the public, the City should place a measure on the ballot that would increase the charter mandated appropriation by $75 to $100 million over a four year period.  At the same time, the Department would assume responsibility for all its direct and indirect expenses. 

Importantly, this is not be a new tax, but would require the City to allocate scarce funds to the Department. 

This is similar to Measure L, the March 2011 charter amendment that was approved by 63% of the voters that increased the mandated funding for the Library Department by over 70%. 

The Department of Recreation and Parks has been the center of increasing controversy, in part because of its lack of funding and the failure of its management to develop an open and transparent relationship with the public. 

But now is the time for the Department to develop and implement its good neighbor plan. 

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

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LA WATDHDOG--On Wednesday, Mayor Eric Garcetti characterized his $5.6 billion budget for the upcoming fiscal year as a “strong spending plan that is balanced and responsible, with a record investment of $138 million to tackle the City’s homelessness crisis.” 

But “spending” is the operative word as the cumulative deficit over the next four years is expected to exceed $300 million as the growth in expenditures exceeds that of revenues.  This compares to last year’s projection of a four year cumulative deficit of “only” $37 million. 

This change in fortune is exhibited by comparing the outcomes for the fiscal year ending June 30, 2020.  The current April 2016 outlook shows red ink of $101 million in 2020, up from last year’s projected surplus of $68 million, a swing of $169 million.  Underlying this differential is a less than transparent $263 million bump in expenditures caused by increases in pension contributions, employee compensation, and human resource benefits, offset by a modest $95 million growth in revenues. 

Unfortunately, these projections do not take into account the money that is needed to repair and maintain our streets, our parks and trees, the City’s building and facilities, and the rest of our deteriorating infrastructure. 

The City is also short changing its two seriously underfunded pension plans by more than $400 million a year by relying on the bogus assumption that its two pension plans will earn 7½% on its investment portfolio.  This compares to an investment rate assumption of 6½% that is recommended by Warren Buffet and other savvy investors.  

Garcetti’s budget did not include a long term financial plan to attack the homeless crisis, but indicated that he will propose a new tax to provide a dedicated source of funding for this initiative.  

But before the Mayor and the City Council place a homeless tax measure on the ballot for our approval or rejection, they need to develop a comprehensive game plan where the City collaborates with the County and takes into consideration the County’s efforts to fund its homeless initiative.  It will also need to establish a management team with clear lines of authority to offset the interference by grandstanding politicians.  

The City should also take into consideration an array of other taxes that are being considered by both the County and the City.  These include the November ballot measure to increase our sales tax by a half cent to fund Metro’s transportation projects, a County parcel tax to fund its parks, a County storm water tax, and a City tax to finance the repair and maintenance of our streets and sidewalks.  

Along with the recent increase in our taxes associated with the Department of Water and Power rate increase, these hits to our wallets would be the equivalent of a three cent increase in our sales tax to 12% or a 33% increase in our property taxes.  These do not include any new State taxes.    

Ouch! 

The Budget and Finance Committee will begin its public consideration of the Mayor’s budget on Wednesday, April 27.  This will involve discussions with all of the General Managers of the City’s departments.  But the Budget and Finance Committee would be wise to seriously consider the recommendations of LA 2020 Commission involving the establishment of an Office of Transparency and Accountability to oversee the finances of our cash strapped City, the creation of a Committee on Retirement Security to review the City’s pension plans that are over $13 billion in the red, and the annual preparation of a three year budget so that we and the Council members have a better understanding of the long term consequences of City policies and legislation. 

Unfortunately, Budget and Finance Chair Paul Krekorian and City Council President Herb Wesson will once again refuse to consider the excellent, common sense recommendations of the LA 2020 Commission.  Nor will they consider cutting back on the future expenses that contribute to the projected budget deficit of $101 million in 2020. 

But then again, if the City Council does not get its financial act cleaned up, we do not have to approve any tax increases.  

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

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LA WATCHDOG--On Thursday, Mayor Eric Garcetti delivered his State of the City address (photo above) to an enthusiastic City Hall centric audience at the headquarters of Norabachi Corporation, a growing Harbor City manufacturer of LED lighting for industrial and commercial applications.  On Wednesday, April 20, he will present his proposed budget for the year beginning July 1, 2016. 

LA WATCHDOG--City Council President Herb Wesson is hell bent to place on the November ballot a measure to reform and restructure our Department of Water and Power so that it will be a more “nimble and efficient” enterprise that will grant management the flexibility to meet the ever increasing operating, organizational, and financial challenges in our rapidly changing world.  

LA WATCHDOG--“God gave us rain and you figured out how to tax it.” 

The current Board of Supervisors of the County of Los Angeles is considering developing its own Stormwater Plan to capture rainwater, stormwater, and urban runoff in effort to curb pollution in the Santa Monica Bay and to develop new sources of water to recharge our groundwater supplies. 

LA WATCHDOG--The Department of Water and Power will ship $267 million of our hard earned cash to City’s coffers this fiscal year pursuant to the 8% Transfer Fee. Along with the 10% City Utility Tax of $344 million, the City’s total haul will be over $610 million, an amount equal to 16% of the Power System’s revenues. 

LA WATCHDOG--On April 9, 2014, almost two years ago, the Los Angeles 2020 Commission recommended unanimously that our City create an independent Office of Transparency and Accountability to review and analyze the City’s budget and finances and the efficiency of its operations.  But this recommendation, along with other constructive, easy to implement measures contained in the LA 2020 report, A Time for Action, was buried in the bowels of City Hall, never to be heard of again. 

LA WATCHDOG--The Los Angeles County Metropolitan Transportation Authority (“Metro”), Mayor Eric Garcetti, and the transportation lobby have started their full court press on the voters of Los Angeles County to approve a new 40 year, half cent increase in our sales tax to a 9½%, one of the highest rates in the country. 

LA WATCHDOG--A simple investigation into how much it would cost to implement Councilmember Mitch O’Farrell’s motion to establish Indigenous Peoples Day as a legal holiday in the City of Los Angeles revealed that the average city employee’s fully loaded compensation is in excess of $165,000 a year for each of the City’s 31,000 civilian and sworn employees. 

LA WATCHDOG--Mayor Eric Garcetti, City Council President Herb Wesson, Budget Committee Chair Paul Krekorian, (photo above) and Personnel Committee Chair Paul Koretz all have their heads buried in the sand, ignoring the implications of a $15 billion unfunded pension liability, $1.5 billion in annual pension contributions consuming 30% of the General Fund, and a negative net worth in the its Governmental Accounts. 

LA WATCHDOG--In 2007, the Bureau of Street Services estimated that the cost to repair our 4,600 miles of broken sidewalks was in the range of $1.2 billion. However, since that time, our City’s “leaders” have made very little, if any, progress in addressing the sorry state of our 10,750 miles of sidewalks that comprise over 2% of the City’s land mass.    

LA WATCHDOG--You need be a skilled forensic accountant with a large, well trained staff to even begin to understand the shenanigans associated with the discretionary slush funds controlled by the fifteen members of the City Council.  You may even need a high priced lawyer to haul the Council Members into court to have them honor your request made pursuant to the California Public Records Act. 

LA WATCHDOG--In late February, the City indicated that it was investigating a ballot measure that would authorize a new tax, fee, or bond offering to fund the City’s homeless plans that are estimated to cost $1.85 billion over the next ten years. 

LA WATCHDOG--On January 22, Councilman Felipe Fuentes introduced a motion calling for a 2016 ballot measure to reform and to restructure our Department of Water and Power by creating a full time, professional Board of Commissioners, eliminating civil service for the Department, and placing a cap on the Transfer Fee at the pre Proposition 26 level of $221 million.  

LA WATCHDOG--NIMBY is a pejorative label used by real estate speculators when they are having a hissy fit about local residents fighting their oversized, out of character, luxury developments that will create even more traffic congestion and gridlock, adversely impacting small mom and pop businesses, affordable housing, and the quality of life of the renters and homeowners in the surrounding communities.  

LA WATCHDOG--Our Department of Water and Power cannot get out of the spotlight these days as it has proposed to raise our rates by more than $1 billion over the next five years.  This estimated 22% bump in our rates will also be accompanied by about a $175 to $200 million tax increase based on the less than transparent 8% Transfer Fee and the City Utility Tax. 

There have also been calls to reform and restructure the Department by Council Felipe Fuentes, Mayor Eric Garcetti, and others, including Mickey Kantor and Austin Beutner, the co-chairman of the LA 2020 Commission which called for an independent Los Angeles Utility Rate Commission almost two years ago to oversee the Department and its rates, finances, operations, and management. 

There are three areas of reform.  

The first calls for a more independent Board of Commissioners, free - for the most part - from the counterproductive political meddling by the City Council and Mayor.  This Board would be supported by a more robust Ratepayer Advocate.  However, there are some significant differences between the Fuentes and Garcetti proposals that need to be reconciled by June 17 so that this reform may be placed on the November ballot. 

The second reform would establish an independent DWP Personnel Department, free from the stifling City Hall bureaucracy and its restrictive civil service rules.  It may also allow for a more flexible contracting process.  

The third and most controversial reform involves the taxes that are paid by the Ratepayers.  The two taxes consist of the City Utility Tax and the 8% Transfer Fee that together are expected to contribute about $640 million to the City’s coffers this year.  However, there is a high probability that the 8% Transfer Fee will be tossed out by the courts.  As a result, Fuentes is proposing lowering the Transfer Fee to $220 million from its current level of $267 million, subject to the approval of the voters. 

On the other hand, Kantor and Beutner are proposing to freeze the payments to City Hall at its current level of $640 million which would essentially result in a lowering of the Transfer Fee over time. 

But the rate increase and the three reforms are on a very slow boat as Felipe Fuentes has refused to place these individual matters on the agenda of the Energy and Environment Committee.  Rather, it appears that he wants to delay the process by lumping them all together in a big bundle and hold the rate increases, deemed reasonable by the Ratepayers Advocate, and the two non-monetary reforms hostage to voter approval of the $220 million Transfer Tax.  

However, at a meeting of the Rules Committee last Friday, City Council President Herb Wesson took control of the process and pledged to have “an open and public conversation about making the City’s utility run more efficiently and effectively while ensuring accountability.” But it remains to be seen if this “outreach” will be a dog and pony show, with the City Council trying to sell us on its already drafted ballot measure that was created behind closed doors by Fuentes with help from IBEW Union Bo$$ d’Arcy.  Or will the City Council and the Mayor enter into a real give and take dialogue with the Ratepayers, the Neighborhood Councils, and other interested parties?  

While the increases in our water and power rates are not our idea of a good time, DWP has been open and transparent throughout the process and has made significant concessions, including lowering its rate request and agreeing to measureable goals that are subject to review and analysis by a more robust Ratepayers Advocate.  

As such, the Energy and Environment Committee and the City Council should move to approve the rate increases separate and apart from the proposed reforms.  Furthermore, each of the three reforms should be considered separate and distinct and allowed to stand on its own merits. 

Holding the rate increases and the non-monetary reforms hostage to the tax increase will backfire, resulting a lose-lose situation, where already skeptical voters will reject these reforms and tax increase because of their contempt for City Hall.

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

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LA WATCHDOG--The primary goal of the ballot measure to reform and restructure the governance of our Department of Water and Power is to have the voters of the City of Los Angeles approve a new $221 million DWP Transfer Tax on Ratepayers in the November Presidential election.  

LA WATCHDOG--At the Tuesday morning meeting of the City Council’s Public Safety Committee, Police Chief Charlie Beck told Mitch Englander and his fellow committee members that our Police Department needed to beef up its ranks to 12,500 officers by 2020 to “most effectively protect the City and keep crime down.” 

But there was no discussion about the cost of adding 2,500 officers, not an insignificant issue since the City is anticipating years of red ink as a result of the budget busting contract with the City’s civilian workers. 

Over the next four years, the City is expected to have a cumulative deficit of over $400 million.  This does not include any additional funds to fund the proposed homeless initiative, the hiring of 5,000 new civilian workers as outlined in the new labor contract with the civilian workers (some of which will replace retiring employees), or the repair and maintenance of our lunar cratered streets.  

Assuming that the LAPD could increase the size of the department to 12,500 officers and an all in cost (including pension contributions and healthcare benefits) of $100,000 a year for the new hires, the four year budget deficit would increase by over $600 million, resulting in a $1 billion shortfall over the next four years. 

However, it is highly unlikely that the LAPD will be able to hit the 12,500 officer target by 2020 as many experienced veterans will be retiring.  This is compounded by the LAPD’s difficulty in attracting qualified recruits given its poor reputation relative to other law enforcement agencies.  

The LAPD has the difficult mission of maintaining public safety.  It also has to report to the Police Commission and the City Council who often second guess the Department, relying on their 20-20 hindsight, especially now the crime rate has spiked and there have been some unfortunate killings of civilians. 

The Police Department is also a large, complex organization with almost 14,000 sworn and civilian employees and a budget, including all related costs, of almost $2.6 billion, an amount that may be understated because of all the recent liability claims that have contributed to this year’s budget deficit of almost $100 million.  The department also needs almost $300 million over the next five years to replace old equipment.  

As with any large, complex organization, the most important factor is management and its ability to develop and implement a strategy and communicate with its constituency.  But that seems to be lacking at our Police Department as Chief Charlie Beck is under fire by the Department’s union and many members of the minority communities.  

That includes many voters who remember his threat that a “minimum of 500 officers that patrol our neighborhoods will be laid off and our historically low crime rates may be in danger” unless the voters approved Proposition A, the proposed permanent half cent increase in our sales tax.  Of course, shortly after Proposition A was rejected by 55% of the voters in March of 2013, Mayor Villaraigosa announced that there would be no layoffs. 

The Police Department cannot afford to increase the size of the police force to 12,500 officers unless there is a sizeable tax increase that will most likely be in the range of $500 million.  This equates to a 10% increase in our real estate taxes or a 1% increase in our sales tax.  But Chief Charlie Beck does not have the necessarily credibility with the voters which would result in another failed ballot measure. 

Maybe it is time for Chief Charlie Beck to retire. 

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

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LA WATCHDOG--While the Ratepayers Advocate opined that the five year, 25% increase in our power rates proposed by our Department of Water and Power is “just and reasonable,” the accompanying $160 million increase in our utility taxes that flow to City Hall is not just and reasonable.  Rather, it is continuation of a pattern where Mayor Eric Garcetti, City Council President Herb Wesson, and the rest of City Council treat Ratepayers as an ATM to finance their pet projects and to pay for the $125 million a year in higher labor costs as a result of the new union contract for the City’s civilian employees. 

LA WATCHDOG--On Tuesday, the Los Angeles Unified School District’s Board of Education engaged in some last minute grandstanding by issuing a press release calling for LAUSD to engage in discussions with the Los Angeles City Council because its DWP bill will be increasing by 27%, or $22.4 million, over the next five years.  

LAUSD is also overreaching by requesting that the City provide it with $11 million of services, financed with a portion of the $267 million Transfer Fee from DWP’s Power System to the City’s General Fund.  These services would include paying for street crossing guards near elementary schools, providing free refuse removal, and performing tree trimming services. 

While LAUSD is a very important governmental entity, the Department of Water and Power and its Ratepayers are not allowed to subsidize its operations, a point that was hammered home by a recent court decision involving the City of San Juan Capistrano and its tiered water rates.   

Nevertheless, the Department has worked with LAUSD, explaining on multiple occasions the reasons for the rate increases.  The Department even agreed in September to invest a staggering $43 million of our money in energy efficiency and water conservation projects which are intended to offset the proposed increases in its power and water rates. 

The Energy and Environment Committee can also expect to hear from Recreation and Parks whose utility bill is expected to double over the next five years to $30 million because of the recent court ruling involving San Juan Capistrano, Proposition 218, the cost of service, and why subsidized rates are illegal.  But again, the Department has been working cooperatively with this large customer, investing millions of Ratepayer money in water conservation and energy efficiency projects.  

The Department also has to contend with lame duck Councilman Felipe Fuentes, the Chair of the Energy and Environment Committee.  He is rumored to be considering limiting the rate increase to only three years since the five year proposal will involve rate hearings in 2020, an election year. 

But why is he considering a last minute change when he has known about the five year plan for over a year, especially since he will be leaving the Council in 2017 after only one term? 

Fuentes is also considering holding the much needed rate increases hostage to his plan to reform the governance of the Department.  This would involve the creation of a full time paid Board of Commissioners, a new personnel department free from the City’s civil service rules, and a lower Transfer Fee that would need to be approved by the voters.  

Based on the details in the four page motion (most are only one page), it is probably safe to assume that Fuentes’ proposed ballot measure and the supporting documentation have already been written, most likely ghostwritten under the watchful eye of IBEW Union Bo$$ d’Arcy.  This is a stunt that Fuentes mastered in Sacramento where he was considered “The Worst Legislator in California.” 

But why is Fuentes rushing this already controversial DWP reform plan to the ballot without engaging in a robust and transparent discussion and debate that involves Ratepayer participation?  After all, he needs our votes to approve the necessary charter amendments and $221 million Transfer Fee. 

According to speculation by City Hall insiders, Fuentes is either angling to be a full time, paid Commissioner (would you call that reform!) or a high ranking executive in IBEW Local 18, the DWP’s domineering union, so that he is in line to succeed Union Bo$$ d’Arcy as the union’s highly compensated  Business Manager.  

The issues involving the five year rate increase, deemed “reasonable” by the Ratepayers Advocate in light of the need to repair DWP’s infrastructure and meet unfunded environmental mandates, and its impact on LAUSD, Recreation and Parks, and single family residences deserves a full airing, separate and distinct from Fuentes controversial plan to reform our Department of Water and Power.  

Reform of our Department of Water and Power and its long term implications are too important to be rushed to the ballot. 

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

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LA WATCHDOG--On Saturday, the Neighborhood Council DWP Memorandum of Understanding Oversight Committee unanimously approved the following resolution: 

The DWP Oversight Committee calls on the City Council to follow the recommendation of the charter mandated Industrial, Economic, and Administrative Survey to form “a committee to examine governance reforms for the Department with the explicit task of reporting its findings and recommending a measure for the 2017 ballot.” 

LA WATCHDOG--The City of Los Angeles is embarking on an ambitious, $470 million plan to modernize and expand the Convention Center so that it can compete with other first tier, West Coast cities such as San Francisco, San Diego, and Anaheim in attracting large scale conventions. This undertaking is expected to be completed by 2020 and is designed to promote tourism, one of the main drivers of our economy, and to stimulate the private development of hotels, restaurants, residences, and office and retail space in the South Park neighborhood and the rest of DTLA. 

This expansion will increase the Convention Center offering to almost 1.25 million square feet, up 43% from the current level of 870,000 square feet.  At the same time, the new and improved Convention Center campus is designed to be an integral part of the community, linking seamlessly with the neighborhood, LA Live, and Staples. 

The City will also encourage the development of several thousand new hotel rooms in DTLA to accommodate highly desired, big spending, out of town conventioneers who will not only stimulate our economy, but will also contribute generously to the City’s coffers through the 14% Transit Occupancy Tax on their hotel bill.  

This also includes a privately financed, upscale Convention Headquarters Hotel of at least 1,000 rooms that will be strategically located on City owned property, most likely near Staples and LA Live on the north end of the campus.    

The City intends to finance this $470 million expansion with debt, which, when combined with existing Convention Center debt of almost $300 million, will total a staggering $770 million. This debt will be serviced by the Convention Center’s 25% share of the Transit Occupancy Tax which is expected to yield the Convention Center $54 million this fiscal year.  By 2020, this tax is projected to increase by over 20% to $261.8 million, resulting in $65 million to service Convention Center debt. 

However, our cash strapped City does not have the financial flexibility to finance this expansion and other immediate worthwhile projects, including the $1 billion to replace its aging and neglected equipment (including police cars, fire engines, and ambulances) without blowing a gaping hole in its Debt Management Policy which limits debt service for Non-Voted Indebtedness to less than 6% of General Fund revenues.  This violation would send the wrong message to the investment community, resulting in a downgrading of the City’s credit rating and higher interest rates.  

The City Administrative Officer has recommended that the City enter into a Public Private Partnership (a “P3”) where the City would select a turnkey development partner to design, build, finance, operate and maintain the expansion of the Convention Center and the development of the surrounding real estate.  Under this recommended alternative, the 44 year old West Hall would be demolished and rebuilt (not retrofitted as currently envisioned).  The partner would also develop 9 to 14 acres of the 54 acre campus by creating “an integrated mixed-use real estate development” that would help to offset the costs of associated with the Convention Center, a loss leader that cannot even begin to pay the interest on $770 million of debt.  Needless to say, any development plans need to be consistent with the Community Plan.  

A P3 also protects the City from any cost overruns associated with the expansion of the Convention Center and the construction of the Headquarters Hotel and isolates it from any operating losses.  The partner is also responsible for maintaining the campus in excellent condition, a task that the City has demonstrated that it is incapable of doing on a sustained basis. 

While the terms of the P3 need to be worked out, including any “availability service payments” by the City to service the debt, the net result will result in more cash for our City’s deficit prone budget by creating a more vibrant Convention Center, more out of town visitors resulting in higher increased Transit Occupancy Tax revenue, and lower contributions to the Convention Center. 

The expansion of the Convention Center in conjunction with a well-capitalized partner is a win-win for our financially challenged City.  Don’t blow it. 

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

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LA WATCHDOG--On Friday, Councilmember Felipe Fuentes “introduced a motion calling for a 2016 ballot measure to reform and restructure” our Department of Water and Power.  

LA WATCHDOG--On Tuesday, the Board of Water and Power Commissioners approved a five year, 21% increase in our power rates that were appropriately deemed “just and reasonable” by the Ratepayers Advocate.  This represents a bump of 4% a year, considerably lower than the 8% that was tossed around a year ago. 

But there was no discussion about how DWP Ratepayers would be hit with $150 million in new taxes as a result of the $770 million increase in revenues over the next five years.  Overall, the City’s haul from the Ratepayers is projected to increase to over $800 million, up from the current level of around $650 million. 

There are two taxes on power system revenues, the City Utility Tax and the 8% Transfer Fee. 

The City Utility Tax is equal to 10% of residential revenues and 12½% of commercial revenues with a blended rate of about 11½%.  Based on projected revenues of $4.22 billion for the fiscal year ending June 30, 2020, this tax will generate around $485 million for our friends that occupy City Hall. 

The 8% Transfer Fee is equal to 8% of the prior year’s revenue and according to DWP’s projections, it is scheduled to increase to $327 million in 2020, up from $266 million last year.  

But this fee is the subject of a class action lawsuit (Eck v. City of Los Angeles) that alleges that this “fee” is a violation of Proposition 26 (The Supermajority Vote to Pass New Taxes and Fees Act), a ballot measure that was passed by voters of California in November of 2010 that prohibits the collection of “disguised taxes” in the form of fees or rates. 

This issue was addressed in public comment at the Tuesday Board meeting by Walter McNeill, a Redding based attorney who successfully sued the City of Redding and its municipally owned utility in a similar case.  But that was the end of the discussion because the City (and not the Department of Water and Power) is opposing the class action lawsuit. 

But unlike the class action lawsuit involving the Telephone Users Tax (Ardon v. City of Los Angeles) where the City hoodwinked Superior Court Judge Amy Hogue and escaped a billion dollar liability owed to Angelenos for an estimated $25 million plus a very generous $18 million in legal fees, this litigation is higher profile and more clear cut as it concerns easily identifiable payments from DWP to the City and does not directly involve DWP’s 1.4 million Ratepayers. 

If the City were to lose this case, and there is a high likelihood that it will, the revenue stream from the 8% Transfer Tax would come to a screeching halt, blowing an even larger hole in the City’s already unbalanced budget.  Over the next four years, the City’s cumulative deficit will exceed $400 million as a result of the new labor contract with its 20,000 civilian workers.   

The City would also be liable for over $1.5 billion for past transfers.  This would cost the City $150 million a year to service the Judgement Obligation Bond that would be floated to pay this liability.  

Rather than play Russian Roulette with the City’s finances, where there are at least four bullets in the six shooter, the City needs to reach a negotiated settlement with the plaintiffs, the Ratepayers, and the City’s voters that requires the City to reimburse DWP and its Ratepayers, that places a new tax on the ballot to help the City balance its budget and repair its infrastructure, that truly reforms the governance of the DWP, and that requires the City to Live Within its Means. 

Otherwise, the City, true to form, will continue to “kick the can down the road” until the spaghetti and meatballs really hit the fan.

(Note: On Friday, Councilmember Felipe Fuentes will introduce a motion to the City Council that will have recommendations on how to reform the governance of our Department of Water and Power.  But any reform must include significant input and buy in from the Ratepayers who do not trust the Herb Wesson led City Council and Mayor Eric Garcetti who view Ratepayers as their dedicated ATM.  See “DWP Reform: Set for Yet Another Burial.”)  

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

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CityWatch

Vol 14 Issue 7

Pub: Jan 22, 2016

LA WATCHDOG--At its December 10 meeting, the Garcetti appointed City Planning Commission unanimously approved the “up zoning” of the Palladium Residences (photo: proposed) to allow the development of two thirty story towers that will house 731 luxury rental apartments.  The doubling of this project’s density will result in additional profits of at least $50 million for Crescent Heights, the Miami based developer. 

This mixed use development will also include a mere 24,000 square feet of retail space and restaurants and also includes improvements to the 63,000 square foot Palladium, the 1940 Art Deco venue located in the heart of Hollywood, one block east of Sunset and Vine. 

The supporters of this $500 million project claim that it will help alleviate the City’s housing crisis.  But the rents in these luxury apartments are not affordable unless you are making north of $100,000 a year.  This is double the City’s median household income of less than $50,000 a year. 

Nor are these apartments family friendly unless there is a household income in excess of $200,000 a year.  

The developer and its bought and paid for supporters in City Hall are touting that 5% of the apartments are being reserved for working class Angelenos who make no more than 120% of the median income. But that will result in a modest decrease in revenues of less than 2%, or $600,000 a year, a small price to pay for at least $50 million in additional profits.  

To put the 5% set aside in perspective, New York City is demanding that 25% of the units in an up zoned building be reserved for affordable housing. 

The Planning Commission was also impressed that this “elegant density” project was in an area served by the Metro Red Line and numerous bus routes.  But most of the residents in these two luxury high rises will not be schlepping to work on the subway or bus, but rather tooling to their offices in high powered BMWs.  

This will lead to increased gridlock at Sunset and Vine and Hollywood and Vine, two of the most dangerous intersections for pedestrians in the City.  And this does not include the impact of Millennium Hollywood and many of the other projects in the surrounding area that will add thousands of new residents and cars to the already stressed street and freeway infrastructure. 

Real estate speculators and developers and their cronies argue that this “up zoned” project is good for the economy.  While that can be argued, the need for high end apartments is questionable as the City’s Housing and Community Investment Department reported that there is a 12% vacancy rate for apartments built in the last ten years.  Furthermore, there are many other development opportunities in Hollywood and throughout the City that will not destroy our neighborhoods, be less stressful on the infrastructure and public safety, and most importantly, provide affordable housing to thousands of hard working Angelenos. 

The Palladium Residences is just another poster child in a long list of developments where City Hall has sold out to campaign funding real estate speculators and developers who could care less about ordinary Angelenos. 

So it is not surprising that former Mayor Richard Riordan has endorsed the Neighborhood Integrity Initiative that would eliminate “spot zoning” of mega projects if it is approved by the voters in November. 

While a recent poll indicated that 72% of the voters approved of the Initiative, Riordan’s game changing endorsement has put City Hall and Mayor Eric Garcetti on the defensive.  As Riordan said, Garcetti “isn’t doing anything for the poor but helping the rich get richer -- through these zoning deals on land development.”

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

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CityWatch

Vol 14 Issue 5

Pub: Jan 15, 2016