LA WATCHDOG

LA WATCHDOG--On March 3, 2020, a little more than 15 months away, in 67 weeks from now, and in 469 days from Tuesday, we will once again go to the polls as California will hold its Presidential Primary.  

LA WATCHDOG--The City’s two pension plans had a 9.75% return on its investment portfolio of $36 billion for the fiscal year ending June 30, 2018 according to the recently released actuarial reports.  This is 2.5% higher than the targeted rate of return of 7.25%. 

LA WATCHDOG--Charter Amendment B: Shall the City Charter be amended to allow the City to establish a municipal financial institution or bank?  

LA WATCHDOG--While Eric Garcetti has been prancing around the country promoting his presidential pedigree, the City of Los Angeles is experiencing “over expenditures” of almost $100 million for the first two months of its fiscal year, blowing a hole in the City’s supposedly balanced budget. 

LA WATCHDOG--When you oppose a new tax such as the State’s Gas Tax or the County’s Rain Tax, the all-knowing political establishment, the leaders of the campaign funding public sector unions, and many other bottom feeders go ballistic, claiming that you are clueless, ill informed, and mean spirited, and do not understand the big picture and the nuances of the budget and government finance. 

LA WATCHDOG--We are being bombarded by so many political ads that we are having a difficult time sifting through all the clutter, trying to separate fact from fiction, so that we can make a rational decision on how to vote on eleven State propositions, one County measure, and three City charter amendments. 

LA WATCHDOG--Charter Amendment B: Shall the City Charter be amended to allow the City to establish a municipal financial institution or bank? 

LA WATCHDOG--Despite record revenues, the State of California is asking us to approve $14 billion in bonds (Propositions 1, 3, and 4) while the County of Los Angeles wants the voters to bless the $300 million Rain Tax (Measure W).

LA WATCHDOG--The City, the County, and the State are hauling in record revenues totaling almost $250 billion, including over $40 billion from the four million residents of the City of Los Angeles. But it is never enough as the State has placed on the ballot measures to authorize $14 billion in bonds while the County is asking us to approve the $300 million Rain Tax to fund stormwater projects (measure W). 

LA WATCHDOG--We are being asked to repeal the regressive $5.2 billion gas tax that was approved in April 2017 by two thirds of the Legislature and the Governor, but only after much arm twisting and unsavory side deals to buy votes. 

LA WATCHDOG--Mayor Eric Garcetti’s Budget and Policy Goals memo for Fiscal Year 2019-20 that was sent to the General Managers of the City Departments is using the homeless crisis to divert attention away from his fiscal mismanagement of the City’s finances despite record revenues from a robust economy. (See letter below.) 

LA WATCHDOG--Everybody wants clean air, especially here in Los Angeles.

LA WATCHDOG--Charter Amendment B: Shall the City Charter be amended to allow the City to establish a municipal financial institution or bank? 

LA WATCHDOG--On August 24, Mayor Eric Garcetti issued a press release where he touted that the City and union leaders for the police and firefighters “reached an agreement to make the Deferred Option Retirement Plan (“DROP”) more effective and less susceptible to abuse.”  

LA WATCHDOG--Liability claims against the City of Los Angeles have caused continuing nightmares for the City’s budget mavens.

LA WATCHDOG--We have the bad news, the good news, and the even better news. 

LA WATCHDOG--Investment Incentives, Controller Ron Galperin’s excellent report on Tax Abatements and Subvention Agreements, outlines the $1.3 billion in subsidies and giveaways for 11 DTLA hotels with 5,732 rooms that have been approved by Mayor Eric Garcetti and the Herb Wesson-led City Council or are in the pipeline waiting the pro forma blessing of City Hall.   

However, only about $500 million (38%) for two convention hotels with 1,850 rooms are legitimate subsidies. They have been developed or are being developed by the Anschutz Entertainment Group in connection with its pioneering $3 to $4 billion investment that revitalized the area north of the Convention Center and its proposed $1.25 billion investment to finance the long overdue expansion of the Convention Center and an adjacent four-star convention hotel with 850 rooms. 

The other nine hotels with almost 3,900 rooms were granted or are asking for giveaways of almost $800 million from the round heeled occupants of City Hall. However, preliminary due diligence confirms that the developers of these three-star hotels have above average returns on their investments without the benefit of the City’s giveaways because of the positive impact of the AEG investment in the LA Live and the Convention Center.  

Galperin made several reasonable, easy to implement recommendations, including one that the City develop a comprehensive economic development plan that incorporates the use of incentives, including those for hotels that are within walking distance of the Convention Center.  

He also recommended that the City hire experienced professionals who have a thorough understanding of the hotel business; are able to do an in-depth business and financial analysis of the transaction and the need for, if any, incentives; develop reasonable alternatives; and negotiate favorable deals for the City. 

Finally, Galperin recommended that the City develop a process to review the individual transactions after their completion to see if the deals are meeting expectations.  This post completion review would allow for “clawback” provisions if the developer fails to honor his commitments.  

[I would add that if the deal exceeds expectations, the City should be entitled to the return of its subsidy, interest on that subsidy, and a small equity kicker, similar to what occurs in the private sector.]  

The implicit message is that the City should not participate in any more giveaways for service hotels, especially those sponsored by Councilmen Herb Wesson and Curren Price that are not within two miles of the Convention Center. 

LA WATCHDOG--Charter Amendment B: Shall the City Charter be amended to allow the City to establish a municipal financial institution or bank?  

The proponents of the November ballot measure that would allow the City of Los Angeles to establish a bank tell us that it would be an independent entity, free of political interference, because it would be “managed by a civilian commission made up of Los Angeles residents from every council district.”   

But this claim is nothing but campaign rhetoric and empty promises as the Bank of Los Angeles will be controlled by Mayor Eric Garcetti and the Herb Wesson led City Council, the same fiscally irresponsible crew that is responsible for the City’s budget deficit, its $15 billion unfunded pension liability, our lunar cratered streets, and the Structural Deficit that is in the range of $1 billion a year. 

[See - LA’s Unbalanced Budget: City Hall Stealing from Our Kids! 

The civilian commission will be appointed by the Mayor, subject to the approval of the City Council.

LA WATCHDOG--Charter Amendment B: Shall the City Charter be amended to allow the City to establish a municipal financial institution or bank? 

LA WATCHDOG--On November 6, the politicians who occupy the Sacramento Capitol and their special interest cronies are asking us to approve $14.4 billion in bonds to finance the State’s water infrastructure ($8.9 billion), its affordable housing program ($4 billion), and children’s hospitals ($1.5 billion). At the same time, the County’s Board of Supervisors are looking for us to bless a $300 million a year forever tax to fund its yet to-be-developed stormwater program (the “Rain Tax”). 

LA WATCHDOG--You would never know that the City of Los Angeles is in the midst of an ever-growing pension crisis if you attended or listened to a meeting of the Board of Administration of the Los Angeles City Employees’ Retirement System (“LACERS”), the $16 billion pension plan for the City’s civilian employees. 

LA WATCHDOG--“I’m mad as hell and I’m not going to take this anymore.”  Howard Beale (Network, 1976) 

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

LA WATCHDOG--Beginning on Friday, July 5, many Angelenos were without power for 72 hours because of the record demand for power during the unprecedented “heat storm” that overwhelmed the Power System’s outdated infrastructure. 

LA WATCHDOG--On November 6, the voters of California will be asked to support or oppose three propositions (see below) that will authorize the issuance of $14.4 billion of additional bonded debt.

LA WATCHDOG-The People’s Republic of Santa Monica is showing its fiscal responsibility by seeking to hire an independent consultant to review and analyze its unfunded pension liability of $461 million and develop alternative solutions on how to eliminate this “debt” over the next decade. 

LA WATCHDOG--Even though the City is looking at a deficit of more than $250 million this year and a Structural Deficit of $4 billion over the following four years, the City Council is considering tax breaks of more than $100 million for two hotels that are not within walking distance of the Convention Center.

LA WATCHDOG--On Tuesday, the City Council passed a Herb Wesson sponsored motion, without any discussion, that requested “the City Attorney, with the assistance of the Chief Legislative Analyst, to prepare and present the documents necessary to place on the November 2018 Ballot the necessary amendment to Section 104(g) of the City Charter to authorize the City to form a municipal bank.” 

LA WATCHDOG--The City of Los Angeles has very ambitious plans for the Civic Center, the area surrounding City Hall. According to the City’s Information Statement, the City is “considering major improvements to its Civic Center, with estimates ranging from $730 million to $760 million for the first of multiple phases of its Civic Center Master Development Plan.” 

LA WATCHDOG--On June 5, 57% of the California’s voters approved Proposition 68, a measure that authorized the issuance of $4.1 billion of bonds to fund “parks, natural resources protection, climate adaptation, water quality and supply, and flood protection.”