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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.  

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LA WATCHDOG--In April of 2014, the LA 2020 Commission recommended that our City establish the Los Angeles Utility Rate Commission to oversee the operations our Department of Water and Power, set policy, appoint the General Manager, and set utility rates. 

But City Council President Herb Wesson buried this constructive measure in the bowels of City Hall, never to be discussed again, including by Mayor Eric Garcetti who promised us that he would reform DWP.  

In December of 2015, the charter mandated Industrial, Economic, and Administrative Survey recommended reforming the governance of DWP to limit the political interference by City Hall in its operations, management, and finances.  But Navigant, the consulting firm that was retained by the Controller, the Mayor, and the Herb Wesson led City Council, did not outline any specific reforms other than to form a “committee to examine governance reforms for the LADWP, with the explicit task of reporting on its findings and recommending a measure for the 2017 ballot.” 

Unfortunately, this Governance Committee will consist of City Hall insiders, including “representatives from the Mayor’s office, City Council Energy & Environment Committee, CAO, CLA, Controller, City Attorney, Office of Public Accountability, Board of Water and Power Commissioners, the general manager of LADWP, and a representative from labor.”  

But who is representing the Ratepayers, the “working slobs” who are paying the bills and being fleeced for over $1 billion a year by City Hall and its cronies? 

While the Governance Committee that consists of City Hall insiders will claim to be working in the best interests of the Ratepayers, rest assured that our Elected Elite will try to game the new system of governance to their advantage at our expense, especially when it comes to using us as an ATM. 

However, Ratepayers need to be an integral part of this process if the findings of the Governance Committee are to have any credibility with Angelenos who do not trust the Department and the hot air know-it-alls at City Hall.  Furthermore, the Governance Committee needs to conduct its business in an open and transparent manner and not behind closed doors as is so often the case at City Hall, especially when it comes to issues involving our wallets. 

Any recommendation by the Governance Committee must also include a requirement that the Department provide Ratepayers with timely information that is consistent with investor owned utilities such as Southern California Edison.  This would include not only financial information and operating statistics, but a comprehensive letter written to Ratepayers discussing the Department’s operations and financials. 

Ratepayers must also insist on transparency on all discussions between City Hall and the Department.  This would require that all conversations and meetings be documented in writing and agreed to by both parties, subject to the penalty of perjury, and be made available to the public on the web within 48 hours.  These “ex parte” rules would also apply to any conversations between City Hall and the IBEW, the Department’s domineering union.  

The Governance Committee needs to allow the DWP to establish its own Personnel Department and rules, freeing it from the City and its overly restrictive civil service regulations that do not give this 9,000 person organization with almost $5 billion in annual revenues the necessary flexibility to operate in an efficient manner. 

The Governance Committee should support a more robust and independent Ratepayers Advocate that has the resources to analyze the operations and finances of the Department on a timely basis to make sure DWP is hitting its operating and financial metrics.  The Ratepayers Advocate must also have the resources to improve its outreach to the Ratepayers and other DWP stakeholders, including those who occupy City Hall. 

The Governance Committee should also consider direct Ratepayer participation.  This would include allowing Ratepayers to vote on any rate increase that exceeds the rate of inflation and/or permitting the Ratepayers to elect the Board of Directors as is the case with the Sacramento Municipal Utility District. 

One of City Hall’s major goals would be to legitimize the 8% Transfer Fee from the Power System that is currently the subject of a viable class action lawsuit.  This year, it is expected to be in the range of $275 million.  But rather than agree to continue this less than transparent tax, Ratepayers should approve its gradual phase out over a ten year period. 

Over the next five years, DWP is anticipating spending between $15 and $20 billion transforming the Department.  This includes getting off coal, developing sources of local water, meeting numerous unfunded environmental mandates, and repairing and maintaining its aging water and power infrastructure. 

The key to this successful transition is excellent management that is allowed to operate an efficient, well-funded, flexible organization without undue interference from City Hall. 

We cannot afford to have the politically ambitious duo of Eric Garcetti and Herb Wesson bury the reform of our Department of Water and Power in the bowels of City Hall yet again.

(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:  lajack@gmail.com)

-cw

 

 

 

CityWatch

Vol 14 Issue 4

Pub: Jan 12, 2016

LA WATCHDOG--On April 9, 2014, the LA 2020 Commission endorsed a series of actionable recommendations designed to “enhance transparency and accountability in City Hall, put the City on a path to fiscal stability, and renew job creation in Los Angeles.”   

In January of 2015, City Council President Herb Wesson buried the Commission’s report, including the recommendations involving the our City’s finances, its pension plans, the governance of our Department of Water and Power, and the updating of the City’s Community Plans. 

LA 2020 called for the creation of the Office of Transparency and Accountability to oversee our cash strapped City’s finances.  But Paul Krekorian, the chair of the Budget and Finance Committee, tells us that the city’s budget is balanced, despite the fact that there is no plan or money to repair our lunar cratered streets and that the City raided its rainy day Reserve Fund for $150 million despite record tax revenues. 

The Commission also called for the establishment of a “Commission on Retirement Security” to “review the City’s retirement obligations in order to promote an accurate understanding of the facts” and to make “concrete recommendations on how to achieve equilibrium on retirement costs by 2020.”  This is a reasonable suggestion as the City’s two pension plans are underfunded by $13.5 billion (assuming a more realistic investment rate assumption of 6½%), representing a funded ratio of only 71%. 

The city is also underfunding its pension plans by at least $400 million a year by relying on the overly optimistic 7½% investment rate assumption, a rate that Paul Koretz, the chair of the Personnel Committee believes is too low since he is smarter than Warren Buffett who recommended a rate of 6½%. 

This twelve member blue ribbon commission, including IBEW Union Bo$$ Brian d’Arcy, called for the establishment of an independent, professionally staffed Los Angeles Utility Rate Commission that would appoint the General Manager and set rates with the intent of limiting the interference in the operations and finances of DWP by City Hall. To the surprise of no one, Felipe Fuentes, the chair of the Energy and Environment Committee, ignored this reform as the City continues to use DWP and its Ratepayers as an ATM. 

The LA 2020 Commission also called on the City to update its 35 Community Plans every five years.  This would allow residents, businesses, investors, and City Hall to have a clearer understanding of the zoning rules and regulations so that they are not “subject to the whims of special interests, nimbyism, and individual elected officials.”  However, reform has been rejected by Jose Huizar, the chair of the Planning and Land Use Management Committee, as the real estate speculators and developers, their lobbyists and lawyers, contractors, and their cronies has been a major source of campaign cash. 

While Mayor Eric Garcetti and the Herb Wesson (photo right) led City Council will close out 2015 with high fives knowing that they snookered us for yet another year, 2016 has the potential to be very different. 

The City’s finances are under pressure as this year’s budget is already $100 million in the red because of excessive legal settlements.  Next year, the City will have to finance its new labor agreement with the City’s civilian workers that will end up costing us over $100 million beginning in 2017.  Pension contributions will increase as the return on the pension plans’ investment portfolios are significantly below the overly optimistic investment rate assumption of 7½%. 

DWP will be front and center because of the five year, 30%, $1.4 billion increase in our utility rates.  And the pressure for reform has increased as the charter mandated Industrial, Economic, and Administrative - overseen by Controller Ron Galperin, Garcetti, and Wesson - has called for a change in the governance of the inefficient DWP because there are no clear lines of authority.  

Wesson and Garcetti may tell us to buzz off once again.  But the need for our votes in the November election will provide us mushrooms (in the dark covered with manure) with considerable leverage. 

In November, we will have the opportunity to approve the Neighborhood Integrity Initiative that will require the City to do “real planning,” eliminating the right of the local councilmember to “up-zone” gridlocking developments that are inconsistent with our neighborhoods.  This initiative will be opposed by our Elected Elite who are addicted to the campaign cash they receive from the real estate “gang.”    

There will also be several ballot measures to increase our taxes, despite the fact that we are one of the highest taxed states in the country with one of the lowest growth rates.  This includes a new half cent increase in our sales tax to finance transportation projects, of which 25% is returned to the City.  

In March of 2013, 55% of the voters rejected a half cent increase in our sales tax as we did not trust City Hall which refused to reform its finances and Live Within Its Means.  This was in spite of massive campaign contributions by the real estate community to Herb Wesson’s campaign slush fund in support of Proposition A.  

In November, we will be able to send a clear message by voting NO on the proposed tax increases and YES on the Neighborhood Integrity Initiative. 

In 2015, Garcetti, Wesson, and the City Hall gang kicked the can down the road.  In 2016, we can kick them in the can. 

 

(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:  lajack@gmail.com)

-cw

 

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CityWatch

Vol 14 Issue 1

Pub: Jan 1, 2016

 

 

 

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:  lajack@gmail.com)

-cw

 

 

 

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:  lajack@gmail.com)

-cw

 

 

 

CityWatch

Vol 14 Issue 5

Pub: Jan 15, 2016

LA WATCHDOG-Comcast’s decision to terminate its $45 billion acquisition of Time Warner Cable may be good news for the 3.5 million Southern Californian households that have been deprived of the right to watch the Dodgers from the comfort of their own homes.  

Underlying this blackout of 70% of the market is the unwillingness of DirecTV, Charter, Cox, and other cable companies to pass along the $5 a month subscriber fee associated with TWC’s over-the-top offer to pay the Dodgers $8.35 billion over the next 25 years to distribute SportsNet LA, the Dodgers regional sports network.  Assuming five million subscribers, the public would eventually be tagged for $600 million a year when you factor in the 100% markup that is needed to preserve the distributors’ 50% gross profit margin.  

TWC has been reluctant to lower its price per subscriber because it may trigger a substantial write-off of its investment, probably in the range of $500 million to $1 billion. But TWC has been concerned that this sizeable hit to its financials would have an adverse impact on the market’s perception of its proposed deal with Comcast. 

But now that the deal with Comcast is history due to the opposition of the Federal Government, TWC is in a position where it can write-off not only its costs associated with the failed merger (probably in excess of $100 million), but a portion of the Dodger contract associated with a lower subscriber fee, probably in the range of $1 to $2 per subscriber, or $500 million to $1 billion. 

This write-off, while substantial, represents at most 2% of TWC’s $45 billion market value.  Furthermore, sophisticated investors, including Charter Communications which is interested in buying TWC, will see through the smoke and value the Dodger contract based on more rational assumptions. 

Consequently, it would be in everyone’s best interest for TWC to lower its price to around $3 a subscriber.  Unfortunately, life has become more complicated since early in 2013 when TWC inked its deal with the Dodgers. 

According to several newspaper accounts, the independent distributors may be trying to offset some of the high costs and low ratings associated with the TWC’s 20 year, $3 billion contract with the Lakers by lowering the subscriber fees for the Dodgers.  There may also be efforts to tie the fees of both the Dodgers and Lakers to their performance, thereby increasing TWC’s risk profile. 

The cable and satellite companies are also experiencing the increasing loss of subscribers as consumers are “cutting the cord,” embracing streaming services such as Netflix and Amazon in an attempt to lower their overhead.  This is forcing the distributors to become more cost conscious as can be seen by their reluctance to overpay for the Dodgers.

There is also considerable pressure for distributors to “unbundle” their basic offering which would allow consumers to choose channels on an a la carte basis. This is particularly true of the sports related offerings which comprise an estimated 50% of the cost of the basic cable TV package, but are only viewed by only 25% of the subscribers. 

This effort to “slim” down the basic offering is playing out in a lawsuit as Verizon, the sixth largest pay TV provider, is attempting to offer a basic package without ESPN, contrary to its contractual arrangement with the channel.  As a matter of interest, ESPN, along with its affiliated offerings that are forced upon the distributors, is by far and away the most expensive network.  

TWC is in an interesting predicament of its own making.  

Does it continue to lose $100 to $200 million a year by holding out for a $5 subscriber fee or does it take the $1 billion hit to its financials, recognizing that in its exuberance that it overpaid big time for the Dodgers’ media rights, cut its losses, and lower the subscriber fee to $3? 

If it is worried about its reputation, it is time for Time Warner Cable to take the hit for the home team.  It is time for Dodger baseball. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, The Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com
-cw

  

CityWatch

Vol 13 Issue 35

Pub: Apr 28, 2015

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