LA WATCHDOG

LA WATCHDOG--The Dodgers had a very good year, especially when you consider that they set a record for placing players on the disabled list, including a number of highly paid starting pitchers.  The Bums won the National League West with 91 wins, eliminated the Washington Nationals in a nail biting five game series, and gave the Cubs a run for their money in the National League playoff.  

And once again, we led Major League Baseball in attendance.  

Now that the official season is over, the hard work begins on constructing next year’s roster so that the Dodgers have a shot of winning the World Series.  At the same time, the team needs to guard its future by protecting promising prospects and by not entering into unsustainable long term contracts.  

The first order of business is to sign Justin Turner, 31, and Hanley Jansen, 29, to reasonable contracts.  This will involve handsome raises over their existing salaries of $2.5 million and $7.4 million, respectively. 

The Dodgers will also have to trade for or enter into the free agent market to find two healthy starting pitchers and to add more punch to its lineup.  This will require the Dodgers, who already have the largest payroll in baseball, to once again open up the check book. 

The Dodgers are an attractive destination for a free agent: a winning team with a shot at a World Series ring, the second largest media market in the country, the glamor and hype of Hollywood, fantastic weather, and enthusiastic fans looking for a repeat of 1988. 

But the Dodgers are starting out with two strikes because California has the highest marginal income tax rate in the country, topping out at 13.3% for all income north of $1,000,000.  But a million bucks, while a lot of money to the ordinary fan, does not get us a starting player. 

Rather, a quality starting pitcher or a productive hitter will command a multiyear contract with an annual salary at least $20 million.  At that level, the tax bill from the State of California will be $2.6 million (12.6%), not exactly chump change. 

If the Dodgers were to make the player whole for the extra tax, it would cost the Dodgers an extra $4 million when MLB’s luxury tax is taken into consideration.

On the other hand, if Proposition 55, the union sponsored ballot measure that extends the “temporary” Soak the Rich income tax for an additional 12 years, is rejected by the voters, the player will only have to pay 9.8% of his income, or about $2 million. But this is still a hefty amount when compared to other states (Texas, Florida, and Washington) that have no income tax.

But this incremental savings may make a difference to a player or players who may have the potential to help us win a World Series and end our 28 year drought.  

While the self-serving proponents tell us that there are no adverse consequences if we stick it to the State’s highest earners, we all know that there is no such thing as a free lunch.

One very real consequence of our hostile tax environment is that many prosperous businesses and their high paying jobs will depart for locations with a more favorable tax and regulatory environment.  Or how many large multinational companies will move large manufacturing operations out of Southern California to a more business friendly climate.  Or how many people and companies will decide to pass on investing in California, especially since the State is sending the signal that it cannot be trusted when it comes to “temporary” taxes and that tax increases are a way of life. 

Prop 55 will also increase our dependence on the income tax which, when the economy and stock market tanks, will result in massive deficits, especially since Sacramento is embarking on a spending spree given the economy’s recovery.  

The Los Angeles Times, a supporter of Proposition 30 in 2012 that authorized the “temporary” income tax increase, is urging us to vote NO on Prop 55 because the Legislature has refused to reform our State’s tax structure that is “fiscally, politically, and socially unsound.”

While Prop 55 may not cost us the World Series, it is an example of the unintended consequences of this self-serving ballot measure cooked up by our public sector unions. 

Vote NO on Proposition 55.

(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 WATCHDOG--Last week, the Times Editorial Board rightfully criticized Mayor Eric Garcetti for not taking a position on Build Better LA (Measure JJJ, the Affordable Housing and Labor Standards Relating to City Planning), saying we “need straight talk from [our] City leaders” and “now’s the time for them to come out of hiding on Measure JJJ.” 

The measure’s sponsor and major proponent, the politically powerful Los Angeles County Federation of Labor, claims that Build Better LA will create more affordable housing and more well-paying construction jobs.  

The truth is that if JJJ is approved by the voters, it will stymie the development of multifamily residential housing, create fewer jobs, make affordable and market rate housing more expensive, and deprive the City of much needed revenues. 

And given the loopholes in Build Better LA that allow the City Council to amend this initiative and the massive amounts of cash involved, there is the potential for mischief and corruption. 

If passed, developers who want a zoning, height, or density change will be required to have up to 25% of the project’s units be affordable for low and moderate income tenants.  But inclusionary housing, especially at the levels dictated by JJJ, is not a free lunch because it will have a significant downward impact on rents and the developer’s return on investment. 

Developers will also have to meet stringent hiring requirements.  These will require that construction workers be paid the “prevailing wage,” a rate that is significantly higher than market wages.  Developers would also have to meet local hiring requirements and comply with onerous reporting requirements.  Overall, these “project labor agreement” mandates will increase costs by more than 40% according LA based Beacon Economics, a well-regarded research and consulting firm that has been retained by the City on numerous occasions.  

Between the lower per square foot rents resulting from the addition of affordable apartments and the significantly higher costs per unit caused by the prevailing wage and other hiring and union mandates, the developers’ return on investment tanks, the risks increase, the banks refuse to make construction loans, investors bail, and developers abandon projects that would have been viable if not for JJJ, Build BAD LA. 

As a result, fewer apartments will be built, there will be fewer construction jobs, and rents will increase because of the scarcity factor.  The City’s revenues will also be impacted by fewer construction and development related fees that are required from real estate developers. 

And the City’s economy will be adversely impacted by the downturn in construction.  

JJJ allows the City Council to adjust the affordable housing percentages if the developer is able to show that such adjustments are necessary to ensure the developer a “reasonable return on investment.”  Of course, given the amount of money involved, a few targeted campaign contributions will help ensure that the affordable set-asides guidelines are relaxed.  

The developers may also pay an “in-lieu fee” into the City’s Affordable Housing Trust Fund if they do not want to include affordable units in a project.  This will allow the developers to maintain luxury buildings where the high end tenants do not have to mix with the hoi polloi.  

But once this cash is in the Affordable Housing Trust Fund, the Mayor and creative geniuses on the City Council will no doubt figure out a way to direct these funds to their pet projects without these deals seeing the light of day. 

We are being sold a bill of goods by the Los Angeles County Federation of Labor, which, along with IBEW Local 11, have invested over $1 million in this ballot initiative.  

But where is Mayor Eric Garcetti?  Why isn’t he shedding light on this scam that is being perpetuated by the same wise guys that tried (but failed) to pull a fast one by exempting companies whose workers were represented by unions from the recently enacted minimum wage requirements?  

Or is our upwardly mobile Mayor, the wannabe Governor, Senator, or Cabinet Secretary, willing to sell us out for fear of alienating the campaign funding unions that are feasting at our expense?  

The Los Angeles Times urges a NO vote as JJJ because it will make LA’s housing crisis even worse by making affordable housing more unaffordable.  

Vote NO on JJJ.  It is BAD for LA. 

(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 WATCHDOG--Since California is not a battleground state, we have been spared from many of the inane ads for Hillary and The Donald.  But that is not to say we are off the hook as an estimated $400 to $500 million will be spent on the State’s 17 ballot measures by powerful special interests trying to convince us to reject or approve selected ballot measures. 

Of the 17 November ballot measures, three ballot measures are attracting a substantial portion of cash: Proposition 56 (Cigarette Tax), Proposition 61 (Prescription Drug Pricing), and Proposition 55 (the extension of the “temporary” Soak the Rich Income Tax Surcharge). 

Rather than succumb to barrage of ads, we should tell the big money special interests to take a hike, to buzz off, sending a loud and clear message that we are not for sale to the highest bidder, especially when they bombard us with many misleading advertisements. 

As such, both Proposition 56 (Cigarette Tax) and Proposition 61 (Prescription Dug Pricing) deserve a YES vote as Big Tobacco and Big Pharma have spent over $150 million into ads opposing these two ballot measures.  

On the other hand, Proposition 55 (Soak the Rich Income Tax Surcharge) deserves a NO vote as the California Teachers Association and the California Association of Hospitals have sunk over $55 million into this ballot measure that is betrayal of our trust and not in the best interest of the State and its economy. 

YES on 56, the Cigarette Tax 

If voters approve this initiative sponsored by the American Cancer Society, taxes on cigarettes will increase by $2.00 a pack.  This economic signal to the market will discourage people from either continuing or taking up this nasty habit that costs us billions in healthcare costs. 

The expected haul of $1.4 billion in the first year (which will decline over time as fewer butts are consumed) from this new tax will be allocated primarily to funding health care for low-income Californians. 

But Big Tobacco (primarily Philip Morris and RJ Reynolds) has “invested” over $66 million to defeat this measure, making numerous misleading claims that this tax will benefit special interests (the medical industry) and deprive schools of much needed money.  But these claims have been debunked by numerous credible sources, including our Los Angeles Times which endorses this proposition.

While many people oppose ballot box legislation, this initiative was the result of the failure of the Legislature to pass tax increases because our elected officials were bought off by generous campaign contributions (or threats) from the tobacco industry and their lobbyists.  

YES on Proposition 61, Prescription Drug Pricing 

Once again, our cowardly legislators have failed to represent their constituents as they have placed the profits of the pharmaceutical industry and their political careers and campaign war chests above our best interests.  

In this case, the Legislature’s failure to pass laws that would increase transparency into the rapidly increasing prices of prescription drugs has prompted an initiative led by the Aids Healthcare Foundation (“AHF”) that will prohibit the State of California from buying any prescription drug at a price greater than the lowest price paid by the Department of Veteran Affairs. 

While AHF has spent about $15 million placing this initiative on the ballot and purchasing airtime, this amount is dwarfed by the $87 million spent to date by pharmaceutical companies.  And the industry is expected to dump considerably more cash into its efforts to defeat this measure, with some expecting expenditures of at least $100 million. The Los Angeles Times, which opposes this measure, raised a number of valid points as to why we should vote NO.  But its solution to “fast rising drug prices” is a comprehensive, national solution that addresses competition, the speedy approval of new drugs, the role of federally funded research, and the development of new insurance models is not going to happen without prodding from the likes of AHF and the voters. 

By voting YES on 61, we will send a message to Sacramento and the international drug companies that they need to get their asses in gear and develop a comprehensive policy that is acceptable to the voters of California. Otherwise, nothing will change and we (and our wallets) will continue to be sitting ducks for Big Pharma.  

NO on Proposition 55, the Soak the Rich Income Tax Surcharge 

In 2012, 55% of California’s voters approved Proposition 30.  This measure authorized a “temporary” surcharge on higher income Californians to help plug the State’s budget deficit.  And now that the State’s revenues have increased by almost $50 billion to almost $170 billion, there is no need to extend the Soak the Rich Income Tax Surcharge beyond its 2018 expiration date.  

However, the California Teachers Association and the California Association of Hospitals and Health Systems are leading a $56 million campaign to extend this surcharge for another 12 years. They are also supported by a slew of elected officials, organizations that rely on the State’s cash, and public sector unions that are addicted to our cash and who have no problem betraying the promises that were made in 2012. 

While this surcharge will produce an estimated $7 billion a year, it also increases the State’s dependence on the income tax derived from wealthy Californians.  But this places the State’s finances in a very precarious position, especially when the stock market tanks, capital gains disappear, and incomes shrivel, resulting in significantly lower tax revenues and massive budget deficits like the State experienced during the Great Recession. 

This is why the Los Angeles Times opposes Proposition 55, calling for the Legislature to produce a more comprehensive overhaul of the State’s budget process. 

Conclusion

Rather than being bamboozled by Big Tobacco, Big Pharma, and the State’s public unions, we have the opportunity to see through their misleading ads and vote for what is in our best interests and not follow the lead of our Elected Elite who have their own personal agendas. 

Vote YES on 56, Vote YES on 61, and Vote Hell NO on 55. 

(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 WATCHDOG--Of the 24 ballot measures on the November ballot, only four are specific to the City of Los Angeles. And of these four, only one deserves a YES vote (RRR - DWP Reform), two deserve a NO vote (HHH - the $1.2 billion homeless bond and SSS – Fire and Police Pension Plans), and one deserves a HELL NO vote (JJJ - Build Better LA). (See Ballot Summaries below.) 

When determining how to vote, the first and most important question is whether you trust the proponents of the ballot measure.  And in the case of the City of Los Angeles, Mayor Eric Garcetti and the City Council have not earned our trust and confidence as they have not embraced the reform of our City’s finances.  They have ignored the excellent budget recommendations of the LA 2020 Commission, have refused to address the Structural Deficit where the increase in personnel expenditures (salaries, pensions, and medical benefits) exceed the growth in tax revenues, have passed on reforming the City’s two pension plans which are $15 billion in the hole, have failed to develop a plan to repair our streets and the rest of our failing infrastructure, and continue to bow to the wishes of real estate developers and billboard operators. 

NO on Proposition HHH, the $1.2 Billion Homeless Bond 

While our Enlightened Elite who occupy City Hall have told us that addressing homelessness is a priority, they have failed to make the average payment of $65 million a year a budget priority despite a $1 billion increase in City revenues over the last four years and another $600 million over the next four years.  Rather than continue with this $2 billion revenue grab over the next 30 years (including interest payments) through an increase in our property taxes, the City has the capacity to pay for the homeless bonds by eliminating their discretionary slush funds, reduce their bloated staffs, and discontinue the hundreds of millions in “giveaways” to international hotel operators and mall operators such as Westfield.  

The City has not developed a credible financial plan to fund the $2.8 billion gap between the $4 billion cost of 10,000 units of permanent supportive housing and the $1.2 billion in bond proceeds.  Nor has it addressed the over the top cost of $400,000 a unit.  Nor has it entered into a definitive agreement with the County which is considering a quarter cent increase in our sales tax ($350 million) to fund its service to the homeless. 

The concept of throwing cash at the homeless problem without a financial and operational plan does not pass muster, especially given the lack of meaningful oversight.  

For more information, see the CityWatch article, Los Angeles Must Resolve Its Homeless Crisis … This $1.2 Billion Taxpayer Ripoff is Not the Way to Do It.  

NO on Charter Amendment SSS, the Los Angeles Fire and Police Pension Plans 

If approved by a majority of the voters, Airport Police officers will be eligible to participate in the Los Angeles Fire and Police Pension Plans (“LAFPP”) instead of the less generous Los Angeles City Employees Retirement System (“LACERS”) plan.  But without real pension reform that addresses the billions of unfunded liabilities of both LACERS and LAFPP, this ballot measure does not deserve our support.   This scheme will also result in significantly higher pension contributions by the Airport and eventually its airline tenants.  

The Los Angeles Times urges a NO vote. Police Pension Measure SSS Raises Too Much Doubt to Support. 

HELL NO on Initiative Ordinance JJJ / Build Better LA Initiative 

The Build Better LA Initiative is a crude attempt by the Los Angeles County Federation of Labor to take advantage of the affordable housing shortage in the City of Los Angeles.  It would require real estate developers who request a zoning change or variance to include units of affordable housing in the development and to agree to the equivalent of a Project Labor Agreement.  While there has not been any detailed analysis of the financial impact of this measure on housing costs, preliminary estimates indicate that it would drive up costs by 30% to 40%.  This added expense will result in a transfer of money intended for affordable housing into the pockets of construction workers and their unions. 

This misleading, self-serving ballot measure will make affordable housing more unaffordable.  

The Los Angeles Times urges a NO vote.  Measure JJJ Could Make LA’s Housing Crisis Even Worse.   

For additional information, see the CityWatch article, Build Better LA Initiative: Affordable Housing Made More Unaffordable  

YES on Charter Amendment RRR, DWP Reform 

The major problem with our Department of Water and Power is City Hall.  Unfortunately, this charter amendment does not address the issue of Ratepayers being used as an ATM by Mayor Garcetti and the City Council.  Nor are there any major changes in the governance of the Department.  But it does allow for more efficient procurement and contracting, increased oversight by the Ratepayers Advocate and a newly created Water & Power Analyst that reports directly to the Board of Commissioner, and a more transparent process of appointing a new General Manager. It also requires the Department and the Board of Commissioners to prepare a Four Year Strategic Plan beginning in 2020 for consideration by the City Council and the Mayor. 

The major source of controversy is that this charter amendment begins the process that may lead to the Department establishing its own Human Resources Department for its 9,000 employees that is separate and distinct from the City’s Personnel Department and remove the Department from the City’s cumbersome civil service rules and regulations.  The City’s civilian unions are labeling this as a “power grab” because it would lessen their influence over the affairs of the Department and limit the transfer of City employees to better paying jobs at DWP.  But any major changes would require Council approval which would “undoubtedly prompt an epic political battle.” 

While this ballot measure is not the answer to our prayers, it is a step in the right direction. 

As a side note, City Council President deserves a pat on the back for ushering this ballot measure through the City Council.  And with his leadership, hopefully other meaningful changes will be implemented by the City Council. 

The Los Angeles Times in a very good editorial urges a YES vote.  

++++++++++++ 

Ballot Summary / Question 

HHH - HOMELESSNESS REDUCTION AND PREVENTION, HOUSING, AND FACILITIES BOND. PROPOSITION HHH. 

To provide safe, clean affordable housing for the homeless and for those in danger of becoming homeless, such as battered women and their children, veterans, seniors, foster youth, and the disabled; and provide facilities to increase access to mental health care, drug and alcohol treatment, and other services; shall the City of Los Angeles issue $1,200,000,000 in general obligation bonds, with citizen oversight and annual financial audits? 

SSS – CITY OF LOS ANGELES FIRE AND POLICE PENSIONS; AIRPORT PEACE OFFICERS. CHARTER AMENDMENT SSS. 

Shall the Charter be amended to: (1) enroll new Airport peace officers into Tier 6 of the Fire and Police Pensions System; (2) allow current Airport peace officers to transfer into Tier 6 from the City Employees’ Retirement System (LACERS) at their own expense; and (3) permit new Airport Police Chiefs to enroll in LACERS? 

JJJ – AFFORDABLE HOUSING AND LABOR STANDARDS RELATED TO CITY PLANNING. INITIATIVE ORDINANCE JJJ. 

Shall an ordinance: 1) requiring that certain residential development projects provide for affordable housing and comply with prevailing wage, local hiring and other labor standards; 2) requiring the City to assess the impacts of community plan changes on affordable housing and local jobs; 3) creating an affordable housing incentive program for developments near major transit stops; and 4) making other changes; be adopted? 

RRR – CITY OF LOS ANGELES DEPARTMENT OF WATER AND POWER (DWP). CHARTER AMENDMENT RRR. 

Shall the Charter be amended to: (1) add qualification requirements, stipends and removal protections for DWP Board; (2) expand Board to seven members; (3) require DWP prepare four-year Strategic Plans for Council and Mayoral approval; (4) modify DWP’s contracting, rate-setting and other authority; (5) permit future alternatives to existing civil service standards for DWP employees through collective bargaining; and (6) require monthly billing?

+++++++++++++++++

(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 WATCHDOG--On Tuesday, the Board of Water and Power Commissioners voted 4 to 1 to approve an above market, 10 year, $41 million lease of four vacant floors of subpar office space at Figueroa Plaza, a 615,000 square foot, City owned office complex located north of the downtown Central Business District.  

LA WATCHDOG--On September 28, Mayor Eric Garcetti issued his Fiscal Year 2017-18 Budget Policy and Goals to all of the General Managers of All City Departments. The goals include closing a projected $85 million deficit for the fiscal year beginning July 1, 2017, identifying over $40 million in new general funds to maintain the City’s current commitment to the homeless, and hiring 5,000 new employees by June 30, 2018 to restore services and replace retiring workers.   

This missive is focused on next year’s budget and does not address the long term reforms that are desperately needed to tackle the City’s Structural Deficit (where the growth in personnel costs exceeds the increase in revenues), the massive unfunded liabilities of its two unsustainable pension plans (estimated to be in the range of $15 billion based on a more realistic investment rate assumption), and the deferred maintenance on its infrastructure (estimated to be north of $10 billion). 

On October 4, the Neighborhood Council Budget Advocates (“NCBAs”)* delivered the following recommendation to Mayor Garcetti and the City Council.

+++

Early White Paper Recommendation

The Neighborhood Council Budget Advocates (the “NCBAs”) urge the City Council and Mayor Eric Garcetti to implement the following recommendations of the LA 2020 Commission as part of its budget for the 2017-18 fiscal year: 

• 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 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. 

We request that the Budget and Finance Committee assign a Council File for each of the recommendations and agendize each of these items for its next meeting on October 17, 2016.  

The implementation of these recommendations will be the first step in addressing the City’s Structural Deficit, the massive unfunded liabilities of its two unsustainable pension plans, and the deferred maintenance on its infrastructure.  

The adoption of the recommendations of the LA 2020 Commission will result in increased transparency into the City’s complex operations and finances and begin the process of restoring Angelenos’ trust and confidence in City Hall and its elected officials.  

The NCBAs are making these recommendations prior to the 2017 Neighborhood Council Budget Advocates White Paper so that they will be an integral part of the upcoming fiscal year’s budget process.  

The NCBAs look forward to a timely response.

+++

Stay tuned to see if Mayor Garcetti and the City Council are willing to implement meaningful reform or will it be business as usual, kicking the can down the road and dumping tens of billions in unfunded obligations on the next generation of Angelenos. 

+++

NEED TO KNOW 

*The Neighborhood Council Budget Advocates are the elected to represent the charter authorized Neighborhood Councils.  Their role is to explore, research, study, seek input, prepare and present the concerns and interests of the communities of the City of Los Angeles ("City") about the use of City funds, City revenue collection, City budget and budget allocations, efficiency of City government, City finances, City financial obligations and other such concerns and related to financial matters of the City to the Mayor and City Council.  

Join the discussion: 

• Facebook 
• Twitter 

(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 WATCHDOG--Mayor Eric Garcetti and his budget team are putting a full court press on the Board of Water and Power Commissioners to approve an above market, 10 year, $41 million lease for four vacant floors of office space at Figueroa Plaza, a two tower, 615,000 square foot City owned complex located north of the Central Business District in DTLA.  (Photo above: Sculpture by Terry Allen. The bronze statue is located in Downtown L.A. at 7+FIG Plaza, on the corner of 7th and Figueroa Street, outside the corporate offices of Ernst Young) 

But this deal, like the previous 10 year, $63 million lease for six vacant floors that was proposed in June, does not pass the smell test because this above market lease is not in the best interests of the Department of Water and Power or its Ratepayers. 

Which leads us to the question of whether the five Commissioners, led by President Mel Levine and Vice President Bill Funderburk, will stand up for the interests of the Department and the Ratepayers or will they bow to the pressure from Mayor Garcetti and his budget team who are looking to balance the City’s budget on the backs of the Ratepayers? 

Figueroa Plaza is not considered a desirable location for law firms, investment banks, commercial banks, consulting firms, or other professional organizations that occupy Class A space because of its poor location north of the Central Business District.  In addition to being out of the way, this older building has a poor reputation for maintenance, services, and amenities.  This is not helped by rent roll dominated by government employees.  

Yet the City wants our Department of Water and Power to pay Central Business District Class A rents for this subprime space.  At the same time, the City wants DWP to pony up $9 million for tenant improvements, an expense that is usually born by the landlord, in this case, the City of Los Angeles.  

From the Mayor’s perspective, in the first year of the lease, the City will receive $3 million in rent and “save” $9 million in tenant improvements.  This $12 million swing will help the City close its projected $85 million budget deficit for the upcoming fiscal year.  

The Department maintains that it needs this additional space to accommodate 700 new employees.  But without a well thought out Space Utilization Plan for its 9,576 employees, an 8 to 10 year lease is inappropriate, especially given its above market cost.  

Any space plan would need to address the updating of DWP’s 50 year old historic headquarters building located across from the Music Center in downtown Los Angeles.  But this is problematic as IBEW Local 18, DWP’s domineering union, will assert jurisdiction over all the work at overtime rates, doubling the cost and the time to completion.  This will cost Ratepayers an additional $150 to $200 million.  

The question has also been raised whether the IBEW and Union Bo$$ d’Arcy would claim jurisdiction over the work at Figueroa Plaza.  

At its meeting on September 20, the Board of Commissioners discussed the proposed $41 million lease in closed session.  When the $63 million lease was on the agenda in June, the Board deferred the matter until a later time.  As a result, there has not been a public discussion or any outreach involving this controversial lease whose main beneficiary appears to be the City, not DWP or the Ratepayers. 

The Department has prepared a 229 page memo outlining this transaction. This includes a 161 page report that justifies the lease. But several experts, including potential tenants and their representatives, have discounted this report stating it was “made as indicated” and does not reflect the real rental market. 

Will the Commissioners conduct an open hearing on this above market lease?  Will the Commissioners demand that DWP prepare a Space Utilization Plan before entering into this above market lease?  Will this study include many different alternatives, including selling the DWP headquarters and moving to an area that would benefit from the economic development?  Will the Commissioners demand that the Department update its Personnel Plan to reflect the addition of 700 new employees?  

In other words, will the Commissioners act in the best interests of the Department and the Ratepayers and tell the Mayor and his budget team to buzz off?

(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].)-cw

• See also:

DWP Deserves ‘Free’ Rent at Fig Plaza

The Fig Plaza Stick Up: Ripping Off DWP Ratepayers for $40 Million

--Exposed! City Overcharging DWP Millions on Downtown Fig Plaza Rent

LA WATCHDOG--Mayor Eric Garcetti and the Herb Wesson led City Council are using the homeless issue to pick our pockets for almost $2 billion over the next 30 years in an effort to cover up their abject failure to make this unfortunate situation a priority in the City’s budget over the last four years. 

If Proposition HHH (Homeless Reduction and Prevention, Housing, and Facilities Bond) is approved by two-thirds of the voters, the City will issue $1.2 billion of bonds over the next ten years.  These funds, along with billions from politically wired real estate developers and other governmental entities, will finance the construction of 10,000 units of permanent supportive housing for LA’s homeless population at a cost as high as $4 billion.  

LA WATCHDOG--Many believe that California would be better off if we sent Attorney General Kamala Harris to Washington to succeed Barbara Boxer, the 75 year old “junior” senator from California.  But then again, is it fair to the rest of the country to stick the nation with the highly partisan Kamala Harris when Loretta Sanchez is the more qualified candidate? 

Kamala Harris’ fatal flaw is that she is a staunch opponent of pension reform.  

During the last two years, she has authored unfavorable and biased summaries for two bipartisan ballot measures that would have reformed California’s unsustainable pension plans.  Pension reform is the most important financial issue facing all levels of government as ever increasing pension contributions are required to cover the estimated unfunded liability of up to $500 billion. But these growing contributions are crowding out basic services such as public safety and the repair of our infrastructure as well as progressive initiatives involving education, affordable housing, and services to the homeless. 

This has resulted in numerous ballot measures for new taxes which, despite their stated use, are really going to fund the upside down pension plans.  

But rather than endorsing pension reform, Harris sold out to the campaign funding leadership of the public unions who are vehemently opposed to any reform of the very generous pension plans.  As a result, Harris has benefitted from significant cash contributions to her campaign war chest.   

Obviously, Harris did not get the memo from Rhode Island Governor Gina Raimondo that “you can’t be a progressive and be opposed to pension reform.” 

Ever since Harris was elected Attorney General in 2010, she has used her office as a stepping stone for higher office.  Over the years, she has been gallivanting around the country, spending hundreds of thousands of dollars on first class travel, five star hotels, and limousines and hitting up the usual out of state suspects for campaign donations. 

She has also used her office to reward her campaign contributors.   In 2015, Harris placed so many conditions on Prime Healthcare’s acquisition of the money losing hospitals owned by the Daughters of Charity that the buyer walked away from the transaction.  According to subsequent litigation, it was alleged that Harris was doing the bidding of the SEIU which was in a labor dispute with Prime Healthcare.  

No wonder the SEIU has been so generous to Harris’ campaign war chest.  

Harris has been so busy running around the country raising money and planning her next campaign that her office has suffered from the lack of organization and leadership and high turnover.  Her office has failed to implement or follow through on numerous initiatives such as gun control and criminal justice. But that has not stopped her from claiming credit for the work of others as was the case with the national mortgage settlement that was spearheaded by the Attorney Generals in New York and Delaware.  

Sanchez, on the other hand, has developed a reputation over her twenty years in House of Representatives as a legislator who can work in a bipartisan manner, much like Senator Diane Feinstein who has been an effective proponent for California. She has the endorsement of 17 of the State’s Democratic Congressional representatives, almost double the number that are supporting Harris.  

Sanchez also has a strong working knowledge of immigration, a very important issue to Californians, as she is the co-chair of the Immigration Task Force, a member of the Hispanic Caucus, and the daughter of hard working immigrants who achieved the American Dream. 

She has an excellent understanding of the water issues facing the State, having worked on matters involving conservation, groundwater, the Salton Sea, and other complex problems facing Orange County and Southern California. 

She is a ranking member of the House Armed Services Committee, but voted against the Iraq War, and the House Homeland Security Committee.  

Without doubt, Sanchez, an MBA and a financial analyst in the private sector before she upset B1 Bob Dornan in the 1996 election, is familiar with the federal budget, a complex issue that impacts all Californians. 

While Sanchez and Harris are both Democrats, we have the choice between Harris, a San Francisco ideologue who has derailed pension reform in return for union campaign cash, or Sanchez, a Southern Californian and a seasoned legislator with private sector experience who has demonstrated that she can work in a bipartisan manner to get things done. 

While Harris is leading in the polls, Sanchez has the unique opportunity to upset Harris by putting together a coalition of Hispanics, moderate Democrats, independents, and Republicans. 

Viva Sanchez.  

(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].)

-cw

LA WATCHDOG--In June, the Board of Commissioners of our Department of Water and Power postponed its consideration of a 10 year, $63 million lease of six floors of office space at Figueroa Plaza, a City owned office complex, because it did not pass the smell test.* 

Now, the Department is considering another ten year lease, but only for four floors at a cost of $41 million.  But once again, this deal is not ready for prime time as it is not in the best interests of the Department and the Ratepayers. 

The Department’s management makes the valid argument that its needs this additional space to house 700 employees who are needed to oversee the repair and maintenance of its water and power infrastructure, to modernize its IT and financial management systems, and to facilitate succession planning and the transfer of institutional knowledge as a third of its work force is eligible to retire over the next five years. 

But a ten year, $41 million lease is out of the question since DWP has not developed a long term plan to determine its real estate needs.  This space plan would include the reconfiguration of the John Ferraro Building, DWP’s 50 year old, 1.6 million square foot headquarters that is located across from the Music Center in DTLA. Interestingly, this idea was nixed during the City’s budget crisis by Mayor Villaraigosa and the Eric Garcetti led City Council.  

The “restacking” of JFB is estimated to be an expensive two or three year project if it were properly planned and managed by an experienced, independent contractor who would develop a floor by floor plan that would limit the disruption to the Department’s operations.  

There is also the concept of locating some of the Department’s noncore functions in less expensive real estate in parts of our City that would benefit from economic development. 

A well thought out and properly executed space plan would indicate that the Figueroa Plaza lease not exceed four or five years and that Department would need only three floors of “creative” office space.  This would imply that a five year lease (including parking) would be in the range of $12 million, not including tenant improvements of around $9 million that the City wants DWP to pay.  The total lease would be approximately $21 million, a significant discount to the new $41 million proposal. 

However, the City should consider cutting DWP and its Ratepayers a break given that we are forking over $291 million to fund the illegal 8% Transfer Tax on Power System revenues.  We are also being slammed with a five year $1 billion rate increase.  As such, the City should consider waiving the annual rent of about $2 million a year, leaving DWP to pay for the tenant improvements and parking.  DWP would be responsible for the $9 million tenant improvements that would stay with the building after the lease is over.  

The City will argue that it cannot afford the loss of revenue.  But given the vacancy factor of this out of the way location, its lack of amenities, its government dominated rent roll, the lack of interest by private sector renters, and the complex’s deferred maintenance, the likelihood of attracting tenants for these three floors is questionable. 

And maybe it is time for the City to give a little something back to the Ratepayers. 

●●

• Previous CityWatch articles on the DWP lease of Figueroa Plaza 

--The Fig Plaza Stick Up: Ripping Off DWP Ratepayers for $40 Million

June 27, 2016 

--Exposed! City Overcharging DWP Millions on Downtown Fig Plaza Rent

June 20, 2016

(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].)

-cw

LA WATCHDOG--We need to send a loud and clear message to Mayor Eric Garcetti, the Herb Wesson led City Council, the County Board of Supervisors, the Los Angeles Community College District, the Los Angeles Unified School District, Governor Jerry Brown, and our representatives in Sacramento that we are not their ATM. 

LA WATCHDOG--In the 2013 Mayoral race, Candidate Eric Garcetti opposed Proposition A, the permanent half cent increase in our sales tax that would have raised our already regressive sales tax to a staggering 9½%, one of the highest rates in the country. 

LA WATCHDOG--In her ten years on the Los Angeles City Council (2001-2011), Janice Hahn never met a wage increase, rate increase, or tax increase she did not like.  She was also opposed to increased transparency into the operations, finances, and management of the Los Angeles Department of Water and Power. 

In 2007, Hahn was a major supporter of the 5 year, 25% wage increase for the City’s civilian workers.  While the economics of this deal were questionable even under favorable economic conditions, it turned out to be a disaster when the economy tanked and the City’s finances were turned upside down.  

Even with this river of red ink, Hahn was unwilling to support the hard decisions to balance the budget because she did not want to antagonize the leaders of the City’s unions who had snookered Mayor Antonio Villaraigosa and Council President Eric Garcetti with promises to bargain in good faith if the City’s financial condition changed.  

The City eventually balanced the budget, but only after it dumped 1,600 employees onto the DWP payroll (along with $175 million in unfunded pension liabilities) and enticed 2,400 senior employees to retire through the Early Retirement Incentive Program that stuck the City’s underfunded civilian employee pension plan with an additional $600 million liability. 

In 2008, Hahn was a sponsor of the Proposition A (the City of Los Angeles Special Gang and Youth Violence Prevention, After-School and Job Training Programs Tax), a $36 parcel tax designed to raise about $30 million a year.  But this ballot measure failed to receive the necessary two thirds vote, in large part because the ballot measure did not win the endorsement of the Los Angeles Times.  

In 2008 and 2010, Hahn supported two hefty rate increases in our water and power rates while, at the same time, putting on a show where she pretended to sympathize with the downtrodden Ratepayers.  After all, she wanted the continued support of DWP’s domineering union, IBEW Local 18, and Union Bo$$ d’Arcy, its politically powerful business manager.  

In 2010, she and her partner in crime Richard Alarcon sided with Mayor Villaraigosa in his scheme to have DWP withhold $73.5 million from the City’s General Fund unless the City Council agreed to an even higher rate increase. But this effort failed when the 13 other members of the City Council refused to go along with hare brained stunt that was not in the best interests of the City and the DWP Ratepayers.  

In late 2010, Hahn was also one of the opponents of the placing on the ballot the charter amendment to create the Ratepayers Advocate to oversee the operations, finances, and management of the Department.  And even after 78% of the voters approved this ballot measure in March of 2011, Hahn continued her efforts to water down the powers of the Ratepayers Advocate because Union Bo$$ d’Arcy’s concern about increased transparency and accountability into the operations and finances of our Department of Water and Power. 

While Hahn was on the City Council, Hahn gave lip service to pension reform.  But when push came to shove, Hahn was MIA because once again she was unwilling to alienate the leaders of the City’s civilian unions who refused to negotiate in good faith to reform our seriously underfunded pension plans.  

The County Board of Supervisors has undergone a significant change as the fiscally responsible Zev Yaroslavsky and Gloria Molina have been replaced by Sheila Kuehl and Hilda Solis, both of whom are not known for their budget balancing prowess.  Adding the fiscally irresponsible and inexperienced Janice Hahn to the Board of Supervisors that has a budget of $28 billion and pension liabilities exceeding $50 billion is only asking for trouble, especially if the economy experiences a downturn. 

A vote for Janice Hahn will be a vote for budget shenanigans, a vote against pension reform, a vote against transparency, a vote for the self-serving leaders of the County’s public unions, and a vote for increased taxes on the hard working citizens of Los Angeles County. 

(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].)

-cw

LA WATCHDOG--The Build Better LA Initiative is the Los Angeles County Federation of Labor’s attempt to increase affordable housing in the City of Los Angeles by requiring real estate developers who want a zoning change or General Plan amendment to include low income housing in their developments.  It also provides for increased density in Transit Oriented Communities in return for affordable units. 

But this November ballot initiative (officially the Affordable Housing and Labor Standards Related to City Planning Initiative Ordinance JJJ) is over 10,000 words and very difficult for planning gurus to understand to say nothing of us mere mortals.  But maybe this obfuscation is part of County Fed’s strategy.  

The proponents of the initiative are playing up the lack of affordable housing in the City.  But County Fed’s underlying goal is to establish the equivalent of “project labor agreements” on all developments of ten or more units that are granted General Plan amendments that allow for increased residential space, density, or height.  

Notably lacking is any discussion about the economics associated with this ballot measure.  But according to several sources, this initiative will increase construction costs by about 30% to 40%, in large part because of the onerous hiring requirements (see below) contained in the initiative. 

There has not been any discussion or analysis of the impact this initiative would have on our streets, especially in areas such as Hollywood and DTLA where congestion is already a major league problem. More than likely, these supersized skyscrapers will require many more luxury apartments to pay for the affordable units, resulting in massive increases in traffic as the upper income tenants will not rely on the bus or subway, but will tool to work in their gas guzzling BMWs. 

There are also no specific provisions that require the City to update its General Plan or its 37 Community Plans.  Rather, it appears that “up zoning” and “spot zoning” will continue to be business as usual, only this time on steroids, all to the detriment of our family oriented neighborhoods and streets.  

This initiative also gives extraordinary power to the City Council as it will have the ability to adjust the affordable housing requirements of a particular project “upon a showing of substantial evidence that such adjustments are necessary to maximize affordable housing while ensuring a reasonable return on investment for Developers.” 

Talk about an invitation for corruption! 

Union sponsored Initiative JJJ is not ready for prime time.  It adds significantly to the cost of construction.  There is no planning.  It is overdevelopment of steroids.  It does not respect our neighborhoods.  It grants the City Council too much power.  And it is an invitation for corruption. 

Vote NO on JJJ.  There are better ways to build LA.

●●

Ballot Language 

AFFORDABLE HOUSING AND LABOR STANDARDS RELATED TO CITY PLANNING. INITIATIVE ORDINANCE RRR 

Shall an ordinance: 1) requiring that certain residential development projects provide for affordable housing and comply with prevailing wage, local hiring and other labor standards; 2) requiring the City to assess the impacts of community plan changes on affordable housing and local jobs; 3) creating an affordable housing incentive program for developments near major transit stops; and 4) making other changes; be adopted? 

Hiring Requirements 

All building and construction work on the project will be performed at all tiers by contractors which

(a) are licensed by the State of California and the City of Los Angeles;

(b) shall make a good-faith effort to ensure that at least 30% of all their respective workforces’ construction workers’ hours of Project Work shall be performed by permanent residents of the City of Los Angeles of which at least 10% of all their respective workforces’ construction workers’ hours of Project Work shall be performed by Transitional Workers whose primary place of residence is within a 5-mile radius of the covered project;

(c) employ only construction workers which possess all licenses and certifications required by the State of California and the City of Los Angeles;

(d) pay their construction workers performing project work the wages prevailing in the project area determined pursuant to California Labor Code § 1770; and

(e) have at least 60% of their respective construction workforces on the project from: (1) workers who have graduated from a Joint Labor Management apprenticeship training program approved by the State of California, or have at least as many hours of on-the-job experience in the applicable craft which would be required to graduate from such a state-approved apprenticeship training program, and (2) registered apprentices in an apprenticeship training program approved by the State of California or an out-of-state, federally-approved apprenticeship program.

●●

(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].)

-cw 

LA WATCHDOG--In November, we will be asked to reject or approve “The California Children’s Education and Health Care Protection Act of 2016.” If approved by a majority of the voters, this ballot measure, Proposition 55, will extend to December 31, 2030 the “temporary” income tax surcharges on upper income Californians that were authorized in November of 2012 when 55% of the voters approved Proposition 30. 

Prop 30 was designed to prevent “devastating” cuts to the State’s educational budget by establishing a seven year “soak the rich” income tax surcharge (2012 to 2018) and a four year quarter of a cent increase in our sales tax (2013 to 2016).  

According to Legislative Analyst, this 12 year extension of the ‘temporary” income surcharges will increase state revenues by $4 billion to $9 billion a year from 2019 through 2030, depending on the economy and, importantly, the stock market.  This year’s budget assumed $7 billion from these income tax surcharges. 

But this is not the only “revenue enhancement” scheme that is being cooked up by our friends in Sacramento and the campaign funding leadership of the public sector unions. 

State Senator Bob Hertzberg (D-Van Nuys) is pushing to extend the sales tax to include services.  This so called “reform” would generate “roughly $10 billion in its first year and increasing amounts thereafter.”  According to a chart prepared by the California Board of Equalization, the State has identified 15 industries and 487,000 firms that have the potential to generate $111 billion in sales tax revenue.  This includes lawyers, accountants, and other value added service providers. 

According to a report by State Controller Betty Yee and her Council of Economic Advisors on Tax Reform, another revenue enhancement is the “split roll” where commercial and industrial properties would be assessed at their fair market value.  At a 1% property tax rate, annual “revenue gains would likely surpass $5 billion and may add up to more than $10.2 billion.”  However, the split roll will require the approval of the voters since it involves amending Proposition 13, the third rail of California politics. 

The folks in Sacramento and their cronies in the transportation lobby are also beating the drums for an increase our gas tax, already the highest in the nation when you factor in the impact of the “cap & trade” fees.  This proposed increase is estimated to be in the range of $2 billion to $4 billion a year.  This money would help fund efforts of the California Department of Transportation to repair the State’s highways, roads, bridges, and other related infrastructure.  

At the same time, the State is swiping $1 billion a year from CalTrans, a bloated agency where 3,500 surplus employees are costing the State, its taxpayers, and our roads over $500 million a year. 

Our good friend Hertzberg is also pushing a bill (SB 1298) that would allow stormwater / urban runoff to be considered as wastewater, thereby allowing the County of Los Angeles to levy $20 billion in fees without the approval of the voters.  This would result in an increase in our real estate taxes of 8%.  

Proposition 30 has done an admirable job of making up revenue shortfall over the last five years.  Since 2012, the State’s General Fund revenues have increased by almost $34 billion (39%) while overall revenues, including special funds, has increased to almost $171 billion, a bump of more than 40%. 

Now that income and sales tax revenues have rebounded to record levels, Proposition 55 and the 12 year extension of the “temporary” income tax surcharges represents just another revenue grab by the State, the California Teachers Association, the hospital lobby, and the SEIU (Service International Employees Union) that deserves to be rejected by the voters in November. 

And while a “soak the rich” tax has a certain appeal, we need to be careful not to kill the golden goose.  If only a small percentage of the upper income taxpayers and their profitable corporations and the small businesses they control decide to relocate or not invest in our economy, many of our fellow citizens will be without good manufacturing or value added service oriented jobs.  

We need to send a message to the fiscally irresponsible scoundrels in Sacramento, their cronies, and the campaign funding leaders of the public sector unions that we are not their ATM.  After all, we are doing more than our fair share as we have the highest income tax rate, the highest sales tax, and the highest gas prices in the country.  

Vote NO on Proposition 55.

(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].)

-cw

LA WATCHDOG--David Wright (photo above on left front with Mayor Garcetti) is an excellent choice to be the permanent General Manager of our Department of Water and Power. But you have to wonder why we would endorse Wright as he has to have a screw or two loose if he is willing to take a position that is the toughest job in the City.  

He will be caught in a crossfire between skeptical Ratepayers who are concerned about ever increasing rates, the environmental lobby where money is no object, a domineering union and its rich contract and overly restrictive work rules, the media who loves to put DWP on the front page, the public’s demand for increased transparency, the Mayor and the City Council who view the Department as an ATM, and the credit rating agencies.  

At the same time, he and his management team are responsible for leading a complex enterprise with 9,000 employees, $5 billion in annual revenues, and a five year capital budget of over $13 billion that is designed to finance numerous unfunded mandates and regulations and update the Department’s water and power infrastructure. 

He has to be crazy. 

Nevertheless, Tony Wilkinson (Chair of the Neighborhood Council DWP Memorandum of Understanding Oversight Committee and an active participant in developing the November ballot measure to reform certain aspects of Department) and I sent the following letter to City Council President Herb Wesson endorsing Wright as our next General Manager.  

●● 

City Council President Herb Wesson

Los Angeles City Hall 

Appointment of David Wright as LADWP General Manager  

Dear Herb, 

This is a critical time for the Department of Water and Power which is why we support naming David Wright as its permanent General Manager.  

The City has placed on the November ballot a measure to reform the Department of Water and Power.  This reform will also require additional legislation by the City Council.  However, it appears that the City’s unions and other organizations are preparing to oppose this reform as they are putting their own interests ahead of those of the Ratepayers and the City.  

The Department is also in the midst of a major capital expenditure program to update its infrastructure, to repower its generating capacity so that 33% of our energy will be from renewable resources by 2020, and to meet numerous clean water requirements. 

The Department is also engaged in many internal reforms, including the establishment of the Administrative System Services unit to replace the “Joint Services” operation.  This new division will focus on improving customer service and the billing systems, establishing a more efficient personnel department, modernizing information technology and computer systems, enhancing physical and cyber security, and creating a more efficient procurement and contracting operation. 

Over the last five years, under the management of knowledgeable industry executives, the Department has made considerable progress in meeting its goals.  As such, it makes sense to continue with our existing management team and avoid the risk of bringing in an outside General Manager who does not have a working knowledge of the Department, its people, its goals, its Ratepayers, the City Council, and the Mayor.  

We are fortunate to have David Wright, the Interim General Manager who has been the Department’s Chief Operating Officer for the past year. He has a strong industry background and is knowledgeable about the Department and its operations.  He also has had considerable experience with other organizations, which will allow him to introduce new ideas to the Department. 

Importantly, Marcie Edwards has endorsed David, in large part because of the excellent job he has done in addressing the billing fiasco caused by a flawed Customer Information System.  He has made considerable progress in reorganizing and rationalizing Joint Services, a thankless but important job that nobody was willing or able to tackle.  

As Ratepayers, we were impressed with Wright’s August 6 presentation to the Neighborhood Council DWP MOU Oversight Committee where he emphasized the need for excellent customer service which in turn will improve the Department’s reputation.     

We strongly believe that selection of a new General Manager cannot wait until a year from now, when an entirely new and lengthy selection process may be in place. DWP needs a firm hand today. It needs a General Manager who is not handicapped by the term Interim in his title. 

We urge you to make this process easy, put this task behind you, and name David Wright as the permanent General Manager of the Department of Water and Power.  

Tony Wilkinson

NC DWP MOU Oversight Committee 

Jack Humphreville

DWP (Advocacy) Committee 

PS: We also recommend that the Department, the Board of Commissioners, the City Council, and the Mayor retain the services of Marcie Edwards for the next six months to facilitate an orderly transition, to assist the Department in analyzing pending legislation and regulations, and to protect DWP’s assets from regionalization. 

●●

(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].)

-cw 

LA WATCHDOG--The Wall Street Journal is reporting that Gannett, the nation’s largest publisher of newspapers, has sweetened its offer to purchase Tribune Publishing* (“Tribune” or the “Company”), the owner of the Los Angeles Times, The San Diego Union-Tribune, the Chicago Tribune, and six other daily newspapers around the country. (Note: Tribune Publishing changed its name to “tronc,” which was derived from TRibune ONline Content.) 

While the terms of this overture were not disclosed, it is most likely north of the all cash $15 a share offer that was rejected out of hand by Tribune’s Board of Directors in late May.  But this unilateral action of the Board was not appreciated by many of the other shareholders who believed that this offer, double the price of the stock when Gannett made it first offer in April, represented an excellent price for Tribune. 

The back story of this rejection of Gannett’s very generous offer started in February with the private sale of 15% of Tribune’s stock at a below market price to Michael Ferro, a Chicago based internet entrepreneur, in a back room deal most likely orchestrated by Eddy Hartenstein, the then Chairman of the Board and the former publisher of the Los Angeles Times.  Hartenstein, not to his credit, was an associate of Sam Zell, the controversial Chicago based financial wizard who was responsible for the 2008 bankruptcy of the Tribune Company, the former parent of the Company, that was saddled with $13 billion of leveraged buyout debt. 

Within two months, Ferro had fired the Chief Executive Officer, replaced him with one of his long time henchman, and reconstituted the Board of Directors, leaving him with absolute control of Tribune. Today, Hartenstein is one of the two remaining directors. 

In May, subsequent to Gannett’s offer of $15 a share, Ferro engineered the private sale of 5 million shares at $15 a share (a total of $75 million) to Patrick Soon-Shiong, a Westside medical entrepreneur who is reputedly the wealthiest person in Los Angeles.  (He also owns a minority interest in the Los Angeles Lakers which he purchased from Magic Johnson.) Combined, Ferro and Soon-Shiong, now the Vice Chairman of Tribune, own 28% of the stock and control the Board of Directors.   

But the other 72% of the shareholders, many of which are sophisticated institutional investors and hedge funds, will not be happy campers if Tribune rejects another very generous offer from Gannett.  And this time, it will result in litigation. 

On June 13, Oaktree Capital Management, a well-respected Los Angeles based investment firm and the owner of 13% of Tribune stock (18% prior to the diluting sales to Ferro and Song-Shiong), sent a five page letter to Tribune asserting its right under Delaware Law to inspect the books and records of the Company.  Of particular interest are the shenanigans associated with the February below market sale of over 5 million shares to Ferro and the subsequent actions that allowed Ferro to seize control of the Company without paying a premium price.    

Other institutional investors have also indicated their displeasure at the cavalier rejection of Gannett’s offer, calling for the Board to retain an independent financial advisor to determine the fairness of the Gannett offer and to enter into negotiations with Gannett.  

According to The Wall Street Journal, Tribune is expected to respond to the new offer by the end of the week.  At that time, we will know if the Company has entered into a $1 billion deal with Gannett (this includes almost $400 million in debt).  Tribune’s Board may also decide to enter into negotiations with Gannett with the desire to increase the offer or to entertain offers from other potential purchasers, including News Corporation, a company controlled by Rupert Murdoch. 

If the Board of Directors rejects Gannett’s generous offer, the outside shareholders will no doubt haul the Company and its directors into court in an attempt to force the Tribune to sell the Company.   

Alternatively, Gannett may bide its time and launch, with the support of the outside investors, a proxy contest to oust the current directors at next year’s annual meeting.   

In any case, stay tuned. 

(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].)

-cw 

LA WATCHDOG--Of the 24 ballot measures* on our November ballot, the least controversial is Proposition 54, the California Transparency Act, unless, of course, you are a Sacramento insider who likes the cover of the dead of night.  

This initiated Constitutional amendment will prohibit the State Legislature from “passing any bill unless it has been in print and published on the internet for at least 72 hours before the vote, except in the case of public emergency.” 

This straight forward, easy to understand provision would eliminate the “gut and amend” maneuver where “legislative leaders hollow out innocuous bills and insert new language on unrelated but often controversial issues, then ram the bills through in the final hours of a legislative session.” 

If approved by a majority of the voters, we will have a more transparent legislature as the media and the voters will have the opportunity to review, analyze, and comment on any last minute changes made by the politicians and their cronies.  This contrasts with the past practice where numerous state budgets and spending bills were ram rodded through the Legislature at the last minute, benefitting special interests and often times much to our detriment. 

Proposition 54 also requires the Legislature to make audiovisual recordings of its public meetings in their entirety and post them on the internet within 24 hours. These recordings must be available to the public through the internet for at least 20 years.  

We will also have the right to record by audio or video any public meeting which recordings may be posted on the internet and used for any “legitimate” purpose without having to pay any fees.  

Wouldn’t it be fun to catch a legislator catching a few zzzz’s or playing internet games while the Assembly or Senate was in session! 

The opponents have claimed that this Constitutional amendment will result in “unnecessary and costly delays” that will cost “millions of dollars – funds that could be used to improve education, lower tuition costs, or help create jobs.”  But the Legislative Analyst and Director of Finance estimate the initial cost to be $2 million and the annual cost to be about $1 million, not even budget dust compared to the State’s annual budget that is rapidly approaching $200 billion. 

The opponents of the California Legislature Transparency Act will also take shots at its backer, Charles T. Munger, Jr., claiming that this son of a philanthropic billionaire has his own political agenda.  To the contrary, Munger’s stated goal is “to take power from narrow factions and return it to ordinary Californians.”  

This initiative has broad bipartisan support which is already having an impact as the Legislature is on good behavior knowing that any last minute “gut and amend” shenanigans will be used to promote Proposition 54. 

Whether you are a Democrat or a Republican, or a Libertarian or a Green, this common sense initiative is a no brainer. 

Vote YES on Proposition 54, the California Legislature Transparency Act.  

●●

NEED TO KNOW

The following is the ballot language:  

Prohibits Legislature from passing any bill unless it has been in print and published on the Internet for at least 72 hours before the vote, except in cases of public emergency. Requires the Legislature to make audiovisual recordings of all its proceedings, except closed session proceedings, and post them on the Internet. Authorizes any person to record legislative proceedings by audio or video means, except closed session proceedings. Allows recordings of legislative proceedings to be used for any legitimate purpose, without payment of any fee to the State. 

*There are 24 ballot measures: 17 State measures, 2 County measures, 4 City measures, and a last minute $3.3 billion bond measure sponsored by the Los Angeles Community College District. 

Websites: 

Yes on Prop 54: Voters First, Not Special Interests: www.YesProp54.org 

Vote No on Prop 54, Stop the Special Interest Power Grab: www.NoOnProposition54.com 

●●

(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].)

-cw 

LA WATCHDOG--Saturday’s scoop by David Zahniser of the Los Angeles Times that Marcie Edwards (photo above), the respected General Manager of our Department of Water and Power, has been in discussions with Mayor Eric Garcetti’s office about retiring, but only after an orderly transition.  But what was not disclosed is that these discussions have been going on for several months and that Mayor and his office were unable to make a timely decision on how to transition from Edwards to a new General Manager. 

As a result of Zahniser’s article, Mayor Garcetti reacted by announcing on Monday afternoon that Edwards will retire on August 16 and that David Wright, the Department’s Chief Operating Officer and Edwards’ choice as her successor, will be appointed as DWP’s Interim General Manager. (See the press release below.) 

Edwards, who was appointed General Manager in February of 2014, has done a very credible job.  Most importantly, she developed a strong management team that allowed the Department to address a number of politically sensitive controversies.  These include the brouhaha over the Joint Training and Safety Institutes and the questionable use of $40 million of Ratepayer money and the flawed Customer Information System that resulted in a large number of highly publicized billing mistakes. 

She also built on the legacy of Ron Nichols, the previous General Manger (January 2011 to January 2014), by establishing credible relationships with the Ratepayers, the environmental community, and the City Council. These relationships, coupled with numerous meetings throughout the City, allowed the Department to implement a five year, $1 billion rate increase without the usual controversy.  

David Wright (left), the Interim General Manager, is a relatively new addition to the Department’s management ranks, but has had considerable utility experience, including as General Manager of Riverside Public Utilities.  As the Chief Operating Officer, he also has an understanding of DWP, its management, its strengths and weaknesses, and its highly politicized environment. 

He also has a strong working knowledge of the proposed charter amendment involving the partial reform of DWP’s governance and contracting and procurement policies as well as the follow up ordinances that have been considered by the City Council Rules Committee. 

Over the next three months, Garcetti will need to focus on who will be the next General Manager of our Department of Water and Power.  The new full time General Manager, which may well be Wright, must have considerable management experience in the utility industry and be able to develop a strong and deep management team and to establish strong relationships with the members of the City Council, Ratepayers, and other outside constituencies. 

However, if the DWP Charter amendments are approved by the voters in November, the process for selecting the General Manager will be changed to follow the more elaborate process used in selecting the Police Chief. 

In any case, the appointment of the General Manager is the most important decision that the Mayor makes involving our Department of Water and Power and that is why the Ratepayers need to be an integral part of the decision making process. 

●●

The following is Garcetti’s press release.

MAYOR ERIC GARCETTI

CITY OF LOS ANGELES

FOR IMMEDIATE RELEASE

August 1, 2016

MAYOR GARCETTI ANNOUNCES RETIREMENT OF LADWP GENERAL MANAGER MARCIE EDWARDS, NAMES DAVID WRIGHT AS UTILITY’S INTERIM LEADER 

LOS ANGELES—Los Angeles Department of Water and Power (LADWP) General Manager Marcie Edwards will step down after more than two decades of service to the utility, Mayor Eric Garcetti announced today. She retires as the first woman ever to lead LADWP in its 114-year history. 

Concurrently, Mayor Garcetti named the Department’s current Chief Operating Officer, David Wright, a 27-year public utility veteran with a strong background in reliability, infrastructure development and customer service, to serve as Interim General Manager. 

During Edwards’ more than two years of service as LADWP’s General Manager, she guided and stabilized the utility through a critical moment in its history. As punishing drought conditions strained local water supplies, she led the push to cut LA water use by 20 percent in just one year. 

At the same time, she effectively navigated LADWP through significant unforeseen issues with its billing system, and built widespread consensus for a sensible rate increase plan to enable critical future investments in sustainable water and power infrastructure, maintaining LADWP’s exemplary reliability track record and completely getting off coal.  

“When I took office, LADWP was facing difficult challenges -- we needed a visionary leader to put our utility back on track, and that’s exactly what Marcie Edwards has done,” said Mayor Garcetti. “She has left an indelible mark on our city, and I am deeply grateful for her service.” 

Wright has been at DWP since early 2015 focusing on fixing the billing system and improving customer service after spending nearly a decade as General Manager of Riverside Public Utilities, earning consistent praise for his success in improving service to his customers. He has also served as Chief Financial Officer for the Las Vegas Valley Water District, the Southern Nevada Water Authority and the Silver State Energy Association, overseeing a nearly $1 billion budget for the three water and electric organizations. 

At Riverside Public Utilities, Wright led a complete overhaul of the customer service system, an upgrade that provided customer satisfaction levels that were at the top of the industry.  The effort was so successful the City of Riverside later adopted the platform to handle all of its constituent services through their 311 call center. As one of his first tasks, Mayor Garcetti has asked Wright to develop and implement a “customer bill of rights” to provide specific service level guarantees for the utility’s ratepayers. 

“LADWP exists to serve the people of Los Angeles -- its leader should be someone who has a proven customer service track record,” said Mayor Garcetti. “David Wright has spent his career making public utilities work better for the people they serve, and I’m proud to appoint him as LADWP’s next Interim General Manager.” 

Edwards will step down as General Manager on August 16, 2016.  She will assist with an orderly transition and serve as special advisor to the Mayor, LADWP Board and Mr. Wright, the interim General Manager, through Dec. 31.  

“It’s been a privilege to lead LADWP through both difficult challenges and transformative efforts to build a sustainable future for Los Angeles,” Edwards said. “I am grateful to Mayor Garcetti for the opportunity to serve my city.” 

“I am deeply honored that Mayor Garcetti has chosen me to lead LADWP during such an important period for the utility,” Wright said. “I will do everything I can to make LADWP a utility that not only focuses on infrastructure, reliability and sustainability, but that strongly focuses on improving service levels to our customers to significantly higher levels.  It’s important that LADWP makes it easy to do business with us by working better and more efficiently for our customers than ever before.”

●●

LA WATCHDOG--How does Metro expect us to understand its 27 page, 12,000 word ballot measure that would increase our sales tax by half a cent to a whopping 9½%, one of the highest rates in the county? 

Or should we just trust Metro’s Board of Directors led by Mayor Eric Garcetti, his three appointees, and the four County Supervisors who voted to place this ill-conceived measure on the November ballot? 

But there is much more than a plain old multibillion dollar tax increase buried in these 27 pages of mumbo jumbo that will make the Los Angeles County Metropolitan Transportation Authority and its Board of Directors less accountable to the voters. 

If the proposed half a cent increase in our sales tax is approved by two-thirds of the voters, Metro will collect an additional $860 million in the first year, bringing the total haul from the four voter approved sales taxes to $3.5 billion in 2018. 

However, unlike the 2008 voter approved Measure R half cent increase that was to expire in 30 years (2039), this tax does not have a sunset provision unlike the March version of this ballot measure.  Furthermore, this measure proposes to make the Measure R half cent tax permanent. 

As a result, Metro will be able to incur substantially higher levels of debt that will burden the next generation of Angelenos who will not have the opportunity to say “No More Debt” at the polls.  

There are also serious questions about Metro’s management and organization and whether it has the ability to manage its daily operations, increase ridership and fares, properly maintain its aging infrastructure, and execute its ambitious expansion plans on time and on budget, especially given recent problems with the widening of 405 through the Sepulveda Pass and the Regional Connector. 

Metro claims that there will be enhanced level of accountability for expenditures.  But how is it possible for seven politically appointed members of the Independent Oversight Committee to oversee a sprawling enterprise with over 9,000 employees, $2 billion in annual expenditures, a $750 million operating loss, $15 billion in assets, and a multibillion capital expenditure program? 

There are also a number of pet projects in the measure’s Expenditure Plan, including $1.1 billion for the bike path along the LA River, the “LA Street Enhancement & Great Streets Program,” and Jose Huizar’s Historic Downtown Street Car.  And needless to say, there are other stinkers buried in the $120 billion Expenditure Plan. 

Metro has been actively promoting the Los Angeles County Transportation Improvement Plan, assisted by Garcetti, the Board of Supervisors, and all the special interests who will benefit from the increased revenue and the proceeds the billions in new debt.  But this measure is going to be a tough sell. 

In 2014, Measure J, the thirty year extension of the Measure R half cent tax, received only 66% of the vote, just short of the two thirds needed for approval.  But this ballot measure is more complicated as Metro is asking us to pony up an additional $860 million a year and $120 billion over the next 40 years. 

The voters of the City of Los Angeles are also frustrated with City Hall.  For example, our City does not have a plan to repair our lunar cratered streets despite the fact that the City is entitled to more than 8% of the sales tax revenue generated from the four voter approved sales taxes.  As of now, the City is expected to receive over $18 billion from this Local Return program over the next 40 years. 

Furthermore, Garcetti and the Herb Wesson led City Council have refused to reform its finances, refusing to Live Within Its Means and ignoring the common sense, easy to implement recommendations of the LA 2020 Commission.  These include multiyear budgeting, the establishment of an Office of the Transparency and Accountability to oversee the City’s fragile finances, and the creation a Commission on Retirement Security to review the City’s unsustainable pension plans. 

And finally, we, the voters, are being overwhelmed by numerous ballot measures (see the note below) that will funnel billions of our hard earned money to our inefficient, bloated State, County, and City governments which are controlled by self-serving politicians and their cronies.  

Metro does not deserve a $120 billion blank check.  

●● 

The ballot measure shall read as follows: 

Los Angeles County Traffic Improvement Plan.  To improve freeway traffic flow/safety; repair potholes/sidewalks; repave local streets; earthquake retrofit bridges; synchronize signals; keep senior/disabled/student fares affordable; expand rail/subway/bus systems; improve job/school/airport connections; and create jobs; shall voters authorize a Los Angeles County Traffic Improvement Plan through a ½ cent sales tax and continue the existing ½ cent traffic relief tax until voters decide to end it, with independent audits/oversight and funds controlled locally? 

●● 

Note: In addition to Metro’s permanent $850 million increase in the county’s sales tax, voters are being bombarded by the City’s $1.2 billion bond measure to fund supportive housing for the homeless and the County’s evergreen $95 million parcel tax for its parks.  The Los Angeles Community College District announced a $3.3 billion bond measure.  And the state ballot has a $1 billion cigarette tax, a 12 year extension of the $10 billion of “temporary” soak-the-rich income tax, and a measure authorizing $9 billion in school construction bonds, 

Other taxes that are waiting in the wings are a $4.5 billion bond measure to repair the City’s streets and sidewalks, a homeless tax to fund the County’s homeless initiatives, a tax to fund the City and County’s $20 billion stormwater / urban runoff program, and an increase in the State’s gas tax.  There is also the issue of how to fund the unfunded pension liabilities of the City and County that exceed $65 billion (about $10,000 for each of the City’s 4 million residents). 

Earlier this year, we were also hit with an additional tax of $150 million associated with DWP’s $1 billion rate increase. 

(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].)

-cw 

LA WATCHDOG--On June 23, the politicians on the Board of Directors of the Los Angeles County Metropolitan Transportation Board voted to place on the November ballot the “Los Angeles County Traffic Improvement Plan” which, if approved by two-thirds of the voters, will increase our sales tax by a half cent to 9½%, one of the highest rates in the country.  

The Supervisors also decided to make this a permanent increase, eliminating the 40 year time horizon that was an integral part of the previous proposal in March.  

This ballot measure will also make permanent the Measure R half cent tax increase that County voters approved in 2008, eliminating the 2039 sunset provision.  Interestingly, in 2012, the County’s voters did not approve extending this tax for another 30 years until 2069. 

If this measure is approved, it will increase Metro’s tax revenue over the next 40 years by $120 billion to an estimated $300 billion.  These funds will be used to subsidize Metro’s money losing operations, fund its pensions, and finance its very ambitious, debt fueled capital expenditure program that will burden future generations of Angelenos.    

But this appears to be just the beginning of our Enlighten Elite’s efforts to raise our taxes to astronomical levels. 

In all likelihood, once Janice Hahn (who never met a tax or rate increase she did not like) is elected to the Board, the Supervisors will approve placing on the ballot a quarter of cent increase in the sales tax to fund the County’s homeless initiatives.  

Of course, our Elected Elite will tell us that this new homeless tax will be offset by the expiration on December 31, 2016 of the quarter of a cent sales tax under the terms of Proposition 30 that was approved by 55% of California voters in November 2012. 

Our City is also on the sales tax bandwagon. 

In 2013, the Herb Wesson led City Council placed on the ballot Proposition A, a permanent half cent increase in our sales tax to finance City services.  Despite City Hall’s well-financed campaign and threats by Mayor Villaraigosa and Police Chief Charlie Beck to lay off cops, 55% of the voters rejected this tax increase.  

Interestingly, mayoral candidate Eric Garcetti opposed Proposition A because he said that Angelenos were already paying their fair share and could not afford another hit to their wallets.  Yet now, as Mayor and a member of the Metro Board, Eric is an enthusiastic backer of this new tax that will cost County taxpayers an estimated $850 million next year.    

In 2014, the City considered placing on the November ballot another half cent bump in the sales tax to finance the $4.5 billion plan to repair and maintain our lunar cratered streets.  But the Save Our Streets – LA proposal never made it to the ballot because City Hall realized that skeptical voters would have trashed this measure, especially after they were made privy to Controller Ron Galperin’s critical audit of the Department of Street Services. 

Garcetti and the Herb Wesson led City Council are cooking up numerous schemes to raise taxes so they can throw money at problems rather than figuring out how they can make the City operations more efficient.  

We are hearing chatter about the City’s infrastructure needs, ranging from streets and sidewalks to stormwater and urban runoff.    There are discussions about budget busting increases in the size of the City’s work force by hiring 5,000 new civilian employees.  And the City and the County need to address their unsustainable pension plans that have a combined unfunded pension liability of at least $70 billion (almost $10,000 for every Angeleno).   

With all of these “needs,” a 10% sales tax might be considered a bargain by our elected officials.   

Before we consider approving the Metro’s half cent increase in our sales tax, the City $1.2 billion bond issue for the homeless, and the County $100 million parcel tax for its parks, we must demand that the City and the County develop a long range operational and financial plan that outlines the total burden they want us to bear.  The City should also implement the recommendations of the LA 2020 Commission to implement multiyear budgeting, to establish an Office of Transparency and Accountability to oversee the City’s fragile finances, and to form a Commission on Retirement Security to develop information and solutions to our unsustainable pensions.  

Until then, these ballot measures deserve a NO vote. 

And this Note: These City and County tax proposals are in addition to the State ballot measures involving the issuance of $9 billion in school construction bonds, an additional $1 billion tax on cigarettes, and the 12 year extension of Proposition 30’s “temporary” multibillion dollar “soak the rich” income tax.  

(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].)

-cw 

LA WATCHDOG--Why haven’t Mayor Eric Garcetti and City Council President Herb Wesson followed up on the recommendation by the LA 2020 Commission to “establish a Commission on Retirement Security to review the City’s retirement obligations in order to promote an accurate understanding of the facts” and make “concrete recommendations on how to achieve equilibrium on retirement costs by 2020?”  

Why?  Because these two ambitious politicians fear alienating the campaign funding leaders of the City’s unions who do not want a public discussion of the facts surrounding the City’s ever increasing annual contributions to the City’s two massively underfunded pension plans that are forcing the City to scale back on basic services. 

Over the last ten years, the City’s contribution to its two pension plans (Los Angeles City Employees Retirement System and the Los Angeles Fire and Police Pension System) has tripled to $1.1 billion, up from $350 million in 2005.  As a result, pension contributions now chew up 20% of the City’s $5.6 billion budget, up from less than 10% in 2005. 

This $750 million increase in pension contributions has forced the City to cut back on basic services such as public safety and the repair and maintenance of our streets, sidewalks, and parks.  The City has even resorted to placing an ill-conceived $1.2 billion bond measure on the November ballot to fund supportive housing for the homeless. 

Unfortunately, it is only going to get worse as the City, its pension plans, and their fiscally irresponsible, Garcetti appointed Commissioners are banking on an overly optimistic rate of return of 7½% on the combined investment portfolio of $33 billion.   

But the stock and bond markets are not cooperating as demonstrated by this year’s less than 1% return on CalPERS (California Public Employees’ Retirement System) $300 billion investment portfolio.   

If the City’s pension funds earned this meager 1% as compared to the targeted 7½%, it would result in an investment shortfall of an estimated $2.7 billion, an amount equal to about half of the City’s annual budget.  This “loss” will increase the unfunded pension liability as of June 30, 2016 to almost $11 billion, representing a funded ratio of an unhealthy 74%.  

However, if the investment rate assumption was a more reasonable 6½% as recommended by knowledgeable investors such as Berkshire Hathaway’s Warren Buffett, the unfunded pension liability would jump to over $16 billion, representing a dangerously low funded ratio of 66% and almost three times the City’s annual budget. 

Over the next five years, the City’s two pension plans will rack up an additional shortfall of over $5 billion if the rate of return on their investment portfolios is 6½%, a much more likely outcome than the targeted return of 7½%. 

But rather than recognizing this combined shortfall of $7.9 billion over the next five years, the City has cooked up a scheme to amortize these losses over a 20 year period, reducing the hit to the City’s budget.  

Even with this scheme, the City’s pension contribution is expected to increase by more than 50% over the next five years to $1.7 billion, representing 27% of the City’s projected General Fund budget. 

Garcetti and Wesson, along with Budget Committee Chair Paul Krekorian and Personnel Chair Paul Koretz, will tell us they made significant reforms to LAFPP in 2011 and LACERS in 2013 and 2015.  But these cosmetic amendments are nickels and dimes and did not address the overly optimistic investment rate assumption of 7½% and the unsustainable post-retirement medical benefits. 

This pension time bomb is a weapon of mass financial destruction where we will burden the next generation of Angelenos with tens of billions of unsustainable debt. This will destroy their standard of living and their environment.  

It is time for Garcetti, Wesson, and the members of the City Council to get off their fat asses, put on their big boy pants, and begin to address this problem by establishing an independent, well-funded Committee for Retirement Security. 

Only then will we be able to begin the hard task of developing a solution where the City and its future will not be devoured by the pension monster. 

(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].)

-cw 

LA WATCHDOG--On Tuesday, July 5, the County Board of Supervisors voted to place on the November ballot a $95 million parcel tax to benefit the County’s parks.  

Unlike a traditional parcel tax of $40 on each of the County’s 2.4 million parcels, this new parcel tax will be based on the square footage of improved property in the county (6.4 billion square feet) times 1.5 cents per square foot, an amount that may be adjusted upward based on the Western Urban Consumer Price Index.  Over the next 35 years, this tax will raise almost $6 billion based on reasonable assumptions for inflation and growth as compared to $4 billion under the traditional parcel tax. 

This new levy will replace two parcel taxes totaling $81 million that were approved by the voters in 1992 and 1996, one of which expired in 2015 ($52 million) while the second parcel tax ($29 million) will expire in 2019. 

In drafting the final, 8,700 word ballot measure, the Supervisors listened to the public (and their polls) and lowered the proposed tax to $95 million from the $200 to $300 million level that was discussed in its May 3 meeting.  

While this proposed increase (including the cost of living adjustment) is reasonable, especially given inflation since 1992, getting the approval of two-thirds of the voters will be a tough sell. 

The Supervisors may snatched defeat from the jaws of victory by approving Sheila Kuehl’s motion to make this parcel tax a permanent tax, eliminating the 35 year sunset provision.  

In 2013, 55% of voters in the City of Los Angeles rejected Proposition A, in part because many Angelenos were turned off by the permanent nature of the half cent increase in our sales tax to a whopping 9 ½ %.  This may also apply to the permanent half cent increase in our sales tax that is being proposed by the Metropolitan Transportation Authority (“Metro”) for the November ballot. 

Another contentious issue is the allocation of the tax revenues.  The Valley and the other parts of the County believe that they are not getting their fair share as the Supervisors are favoring the districts represented by Hilda Solis and Mark Ridley-Thomas based on the Needs Assessment Report that called for revenues to be spent disproportionately in underparked areas of the County. 

There are other issues that are of concern, including the lack of independent oversight, the lack of a maintenance plan for the County’s existing parks, shifting the burden to the owners of commercial real estate, and the potential for the new Board of Supervisors to burden the next generation with mountains of debt secured by this new parcel tax.  

But the real kiss of death may be “voter fatigue” where the overwhelmed and mad as hell voters reject all of ballot measures trying to pick our pockets.   

At the State level, we are being asked to approve $9 billion in general obligation bonds to finance K-12 and Community College facilities (Proposition 51), a $1 billion cigarette tax (Proposition 56), and the 12 year extension of the Governor Brown’s “temporary” income tax surcharge that is expected to yield $5 to $11 billion a year (Proposition 55, also known as the Pension Tax as these revenues will eventually fund the massive pension liabilities of CalPERS and CalSTRS).  

The County is also proposing a $130 million marijuana tax to finance its homeless efforts. 

Metro is proposing to nick us for an additional $850 million a year by permanently increasing our sales tax by a half cent, resulting in a sales tax of mind boggling 9 ½ %.  This, along with the other related taxes, will result in tax revenue of $3.5 billion a year for Metro.  

Finally, our City has placed on the ballot a measure to allow the City to issue up to $1.2 billion in bonds to fund, along with private real estate developers and other government entities, an estimated $3 to $4 billion of supportive housing. 

And this assault on our wallets does not include the $150 million tax increase associated with the recent $1 billion increase in our DWP water and power rates, a street tax that was pushed by the Los Angeles City Council in 2014, or any taxes to fund the County’s $20 billion stormwater plan.   

Maybe it is time for us to send our Elected Elites (and their cronies) in Sacramento, the County, and the City a loud and clear message that we are sick and tired of being their ATM by voting NO on all of these ballot measures.

●●

Ballot language

Safe, Clean Neighborhood Parks, Open Space, Beaches, Rivers Protection, and Water Conservation Measure           

To replace expiring local funding for safe, clean neighborhood/ city/ county parks; increase safe playgrounds, reduce gang activity; keep neighborhood recreation/ senior centers, drinking water safe; protect beaches, rivers, water resources, remaining natural areas/ open space; shall 1.5 cents be levied annually per square foot of improved property in Los Angeles County, with bond authority, requiring citizen oversight, independent audits, and funds used locally? 

●●

(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].)

-cw 

LA WATCHDOG--“Need now means wanting someone else's money.  Greed means wanting to keep your own.  Compassion is when a politician arranges the transfer.”  

Once again it is silly season in Los Angeles as our Enlightened Elite will be blowing smoke in our face, urging us to approve the proposed offering of up to $1.2 billion bonds over the next ten years.  These funds, along with billions from real estate developers and other governmental entities, will finance the construction of an estimated 10,000 units of supportive housing for LA’s homeless population. 

But this well intentioned measure that will be on the November ballot does not deserve our support. 

For openers, the City does not have the necessary management expertise, organizational capabilities, or experienced personnel to manage such a complex program.  This is because social services are the responsibility of the County which has dropped the ball in caring for the homeless population that numbers around 45,000 persons (less than 0.5% of the County’s population). 

Furthermore, the City does not have a well thought out plan to implement this ambitious multi-billion dollar endeavor.  How does the City propose to work with real estate developers and other government entities to raise billions needed to complete the build out of 10,000 housing units?  How does the City intend to work with County and the State, each of whom have their own ideas about how to address the homeless issue?  How does the City propose to pay for the necessary services that the homeless require since the City is prohibited by law from financing these day to day expenses with bond money? And how will the City develop a team of qualified individuals to implement this program in an efficient manner? 

There is also inadequate oversight of this multi-billion dollar build out that involves numerous real estate developers, many of whom already have close relationships with our elected officials.  The City is proposing to establish by ordinance a Citizens Oversight Committee where its seven members will be appointed by the Mayor and City Council.  But will this Committee be independent of the Mayor and the City Council?  And will it have the necessary expertise, resources, and authority to monitor and control the effectiveness of this program? 

In developing this $1.2 billion bond measure, the City Council failed to solicit input from the Neighborhood Councils and the public, unlike the process involving the reform of Department of Water and Power that will be on the November ballot and DWP’s $1 billion rate increase.  Rather, it is a top down process, where the all-knowing City Hall apparatchiks dictate policy to the City’s proletariats. 

The City proposes to service the $1.2 billion of bonds by imposing a new tax on our property.  But this tax, which starts off at $6 million a year and peaks at $100 million in 2028, is not necessary because the debt service (principal and interest) may be financed by a small percentage of the projected increase in the City’s General Fund revenues.  

Over the next 30 years, the average annual debt service is $60 million and equals 3.5% of the increase in the City’s tax revenues.  

This leads to the question that if the Mayor and City Council believe that the homeless issue is so important, why not make it a budget priority?  This contrasts with the City authorizing a $200 million giveaway for the Grand Avenue Hotel or approving a $125 million a year wage and benefit increase for the City’s civilian unions. 

The City has also refused to address its Structural Deficit, its annual budget, and its finances.  The Mayor and City Council have ignored the recommendations of the LA 2020 Commission to establish an Office of Transparency and Accountability to oversee the City’s finances, to develop a multiyear budget, and to form a Commission on Retirement Security to review the City’s seriously underfunded pension plans.  It has also not developed a plan to repair and maintain our lunar cratered streets or to benchmark the efficiency of the City’s operations. 

Simply stated, Mayor Garcetti and the Herb Wesson led City Council do not want our City to Live Within Its Means.  

The proposed $1.2 billion bond proposal is just another attempt by our Elected Elite to throw money at a problem based on the premise that we, the voters, should trust them to spend our hard earned dough efficiently. 

But with no organization and management, no plan, no oversight, no outreach, no respect for our wallets, and no budget reform, the measure to authorize $1.2 billion in bonds to fund the City’s homeless initiative deserves a NO vote in November. 

●●

The following is the proposed ballot language. 

HOMELESSNESS REDUCTION AND PREVENTION, HOUSING, AND FACILITIES BOND. 

To provide safe, clean affordable housing for the homeless and for those in danger of becoming homeless, such as battered women and their children, veterans, seniors, foster youth, and the disabled; and provide facilities to increase access to mental health care, drug and alcohol treatment, and other services; shall the City of Los Angeles issue $1,200,000,000 in general obligation bonds, with citizen oversight and annual financial audits?

(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].)

-cw

LA WATCHDOG--At its meeting last Tuesday, the politically appointed Board of Commissioners of our Department of Water and Power postponed its consideration of DWP’s proposed ten year, $63 million lease of 124,350 square feet of office space in Figueroa Plaza, a City owned office complex, because a CityWatch article suggested that the Department may be overpaying by $20 million. 

This overpayment is part of the City’s scheme to stick the Department and its Ratepayers with almost $15 million of tenant improvements, an expense normally the responsibility of the landlord, in this case the City of Los Angeles. 

The City is also attempting to extract an additional $5 million through higher than market rents.  

However, it appears that DWP is being slammed for an additional $20 million as market professionals and several DWP employees have indicated that the Department needs only half the contracted space to house the 550 employees who are scheduled to occupy Figueroa Plaza.  This would require DWP to adopt space planning techniques similar to those used in the private sector. 

Of course, if DWP had adopted proper space planning techniques for its 1.6 million square foot headquarters building, then this ten year, $63 million lease would not be necessary.  But past attempts by DWP to modernize its historic 50 year old headquarters building were shot down by the previous mayor and the Garcetti led City Council.    

By the way, the concept of proper space planning also applies to the City and its more than 32,000 employees. And just imagine how the tens of millions in annual savings could be used to repair and maintain our lunar cratered streets or house the homeless, alleviating the need for an increase in our taxes.  

This ten year, $63 million lease for 124,250 square feet of City owned office space was the creation of the Municipal Facilities Committee and its members, the City Administrative Officer, the Chief Legislative Analyst, and Mayor Eric Garcetti, as it was looking to off load the expense of this office space that was vacated by the Lewis Brisbois law firm as a result of the DaVinci Fire on December 8, 2014.   

In November of 2015, the City was prepared to move the Housing and Community Investment Department (“HCID”) and its 600 employees into this office space.  It intended to finance the tenant improvements and relocation from the leased Garland Building by issuing debt and recouping any debt, operating, and maintenance expenses by hitting up HCID’s special funds. 

But the HCID relocation plan was scrapped when Garcetti’s office realized that it would be easier to dump the surplus office space and the cost of the tenant improvements onto DWP and its Ratepayers, “saving” the City and its General Fund $63 million over the next ten years.  This was despite pushback from DWP’s management.  

The terms of this unfavorable lease need to be reviewed and analyzed by an independent third party in conjunction with the Ratepayers Advocate.  Any opinions and findings, along with all backup material, must be shared in a timely manner with the Ratepayers and the public before the lease is discussed by the politically appointed Board of Commissioners. 

This deal also serves as a call to reform the relationship between DWP and the City.  This would require an ordinance that requires that any transaction between the Department and the City be subject to a thorough analysis by the City, the Department, and the Ratepayers Advocate.  This analysis would also be shared with the Ratepayers and the public.  

Of course, this uneconomic deal that further soils the reputation of our Elected Elite raises the question of how many other stinkers have been approved by the Mayor, the City Council, and the politically appointed Board of Commissioners that are not in the best interest of the Ratepayers. 

(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].)

-cw 

LA WATCHDOG--At its meeting on Tuesday, the Garcetti appointed Board of Commissioners of our Department of Water and Power will consider the adoption of a ten year, $63 million lease for 124,350 square feet of office space in Figueroa Plaza, a City owned office complex located at 201-221 North Figueroa Street in DTLA.    

This 25 year old property, purchased by the City in 2007 for $219 million, consists of two 16 story towers comprising 615,000 of office space and is located north of the Central Business District and about a quarter of a mile west of DWP’s headquarters on North Hope Street. 

LA WATCHDOG--The politically appointed Board of Commissioners of our Department of Water and Power recently approved two money losing water recycling projects that will result in DWP blowing $93 million of Ratepayer money.  This amount represents about a quarter to a third of the recently approved five year, 25% increase in our water rates. 

These Board decisions (with only one the five Commissioners voting NO on both deals) were made without relying on any financial analysis prepared by the Department.  Nor were these two projects compared to other alternative water saving investments that may have higher rates of return.  To the contrary, I supplied the Commissioners and DWP management with a cash flow analysis (based on the Department’s assumptions) for both recycling projects that showed that these two uneconomic water recycling projects were stinkers. 

But the politically appointed Commissioners were only following the wishes (orders) of Mayor Eric Garcetti (photo above) who, through his Executive Directive No. 5 (Emergency Drought Response – Creating a Water Wise City) dated October 14, 2014, established a goal of reducing the purchase of imported water by 50% by 2024.  This will require increases in local supplies through conservation, the remediation and replenishment of our aquifers, and increases in our local supplies through the recycling of wastewater and storm water. 

Unfortunately, this aspirational, politically inspired Executive Directive was not accompanied by any operational or financial analysis, putting the Department in a very difficult and awkward position. 

The first project, the $20 million Griffith Park South Water Recycling Project, is located within the nation’s largest urban park and will supply 477 acre feet (156 million gallons) of recycled water a year to the Roosevelt Golf Course and the surrounding area.  Based on the Department’s assumptions for the purchase price of treated water from the Metropolitan Water District (“MWD”), this project does not recoup its investment until 2040 (23 years).  

Alternatively, it would take over 40 years for this debt financed project to repay a loan that had an interest rate of 5%. 

Furthermore, this deal is double stinker as it is a pet project of former City Councilman Tom LaBonge and the responsibility of the Department of Recreation and Parks, not DWP and its Ratepayers, since it located entirely within Griffith Park. 

The second water recycling project, the $73 million Elysian Park Downtown Water Recycling Project, will supply 2,561 acre feet (835 million gallons) of recycled water a year to Elysian Park, DTLA, Exposition Park, Boyle Heights, and other adjacent areas, once again reducing the need for potable (drinkable) water. But like the Griffith Park pet project, the DWP does not recoup its investment until 2040 and would not be able to repay the loan until 2057.  

The economics of these two projects assume that they will have a life of 30 to 50 years.  However, this may be a bogus assumption if the recycled water from the LA-Glendale Water Reclamation Plant can be processed into potable water (direct potable reuse or better known as toilet to tap) that can be introduced directly into our water system.  This would result in a “stranded” asset, resulting in an even greater hit to the Ratepayers. 

The debt laden Water System does not have the flexibility to sink cash into money losing projects as its ambitious $5.5 billion capital expenditure budget is already causing its long term debt and debt ratios to balloon to levels where it will endanger its coveted bond rating. 

While the aspirational goal of reducing our dependence on purchased water from Northern California and the Colorado River is worthy target, it must also be accompanied by a rigorous operational and financial analysis that results in the Department investing in projects that have positive rates of return and at the same time discarding the dogs.  Otherwise, Garcetti’s green policies will result in considerably less green in our wallets.  

[Note: On Wednesday, MWD, the major supplier of water to our City, issued a press release stating that its “stress test” showed that it had sufficient water supplies to meet the demands of its customers for the next three 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].)

-cw

LA WATCHDOG--Mayor Eric Garcetti and the members of the Herb Wesson led City Council must think we are absolute fools if they believe that we will vote to approve massive tax increases in November while they continue to neglect our City and trash our quality of life.

On Friday, the Rules Committee of the City Council will consider placing on the ballot a measure to authorize the issuance of $1 billion of bonds.  This money will be used to finance the building of more housing for the homeless.  

The County is also considering a yet to be determined $250 million tax to help fund its homeless initiatives, including, subject to Sacramento’s approval, a controversial “millionaire’s tax” of 0.5% on incomes north of $1 million. 

The County is also contemplating a $200 to $300 million parcel tax to fund the repair, operation, and creation of parks throughout the County, especially in underserved areas.  

At the same time, Metro will place on the ballot a permanent half cent increase in our sales tax to fund transportation related projects and operations.  This will increase our sales tax to a whopping 9½%. 

Over the next 40 years, this new Metro tax, along with the existing transportation taxes, will raise almost $300 billion, of which almost $25 billion will be kicked back to City Hall as part of the Local Return program.  

Despite a kickback from Metro of over $200 million this year, City Hall does not have a comprehensive plan to repair our lunar cratered streets and alleys, some of the worst in the country. 

Nor does City Hall have a detailed plan to repair our residential sidewalks in a timely manner. Rather, homeowners may have to wait up to 30 years pursuant to the court mandated Sidewalk Repair Program unless residents are prepared to pony up their own dough to pay for a substantial portion of the cost to fix their broken sidewalks and replant their trees.  

City Hall is also starving our Department of Recreation and Parks by hitting it up for almost $60 million a year as part of its “full recovery cost” program.  This represents a third of its General Fund charter mandated allocation.  As a result, our parks have deteriorated and the Department has embarked on an unpopular program to commercialize our parks. 

The City Council and the Jose Huizar led Planning and Land Use Management Committee are preparing to allow the campaign funding billboard industry to install intrusive digital billboards in many areas outside the designated sign districts.  But the light blight from these highly profitable digital billboards is an assault on our quality of life. 

The Mayor and the City Council are also selling us out to real estate speculators and developers by approving zoning variances for luxury residential skyscrapers that will result in increased congestion on our already clogged streets.  

There are also hot button issues involving small lot subdivisions, short term rentals (AirBnb), granny flats, mansionization, and the hillside communities that have inflamed the impacted residents.  

At the same time that the City is neglecting our infrastructure and failing to protect our neighborhoods, City Hall has no problem entering into a new contract with the City’s civilian unions that will eventually cost an extra $125 million a year. This will result in a structural deficit of over $100 million for the fiscal year ending 2020 as opposed to a previously anticipated surplus of $68 million, a swing of $169 million.  

And this does not include the impact of the “goal” of hiring 5,000 new City employees or the underfunding of the City’s two pension plans by at least $400 million a year as the City relies on an overly optimistic investment rate assumption of 7½%. 

The three ballot measures all have fatal flaws that will make it difficult for them to obtain the approval of two-thirds of the voters.  They are also the beginning of an onslaught of new taxes (including DWP, stormwater, and streets and sidewalks) that will have the cumulative impact of raising our taxes by at least $1.5 billion.  This is the equivalent of a 30% increase in our real estate taxes or a 3% increase in our sales tax to 12%. 

City Hall will put on a full court press to convince us to approve these taxes.  But City Hall’s reputation for neglecting our streets, sidewalks, and parks; for not respecting our quality of life; for selling out to the real estate and billboard industries; for its kowtowing to the City’s civilian unions; and for its unwillingness to really balance the budget will doom these ballot measures to failure. 

Who are the fools now? 

(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].)

-cw

LA WATCHDOG--On Thursday morning, the Rules Committee of the City Council released its recommendations for the reform of our Department of Water and Power.  This 2,300 word document addressed three areas of reform:  1) a more independent Board of Commissioners designed to limit undue interference and meddling by the Mayor and the City Council, 2) more efficient contracting and procurement policies that would free management from overly burdensome overhead, bureaucracy, and red tape, and 3) the establishment of a DWP Human Resources Department, free from the City’s civil service requirements, that would allow for hiring flexibility. 

The recommendations are a constructive start, but need to be refined over the next three weeks if the measure to reform the Department is to be placed on the November 8 ballot for our approval.  

One recommendation of the Rules Committee would require the Department to develop a “four year strategic investment and revenue plan (the “Plan”) for approval by the City Council and the Mayor.”  This would also include a robust discussion on our water and power rates.  While this planning process would give the City Council more authority over the DWP, it would also provide the Board and the management greater operational and financial flexibility as long as they stayed within the Plan’s guidelines. 

[Note: The City Council should take its own advice and develop a multiyear strategic, operational, and financial plan for our City!] 

Once the Plan is approved, the Board of Commissioners, the General Manager, and her management team should be given considerable authority to operate the Department without undue interference and meddling from the City Council and the Mayor.  This would include the elimination of the burdensome requirement that the Board and the Department clear agenda items with the Mayor’s office. 

The Rules Committee recommended that the seven part time commissioners (an increase from the current level of five part time commissioners) serve three year staggered terms.  But three years does not allow Commissioners enough time to learn the intricacies this $5 billion a year enterprise and would deprive the Board of important institutional and industry knowledge.  Rather, the term should be five years as outlined in Councilmember Felipe Fuentes’ January 22 motion that kicked off the discussion of the reform of our Department of Water and Power.  

The Rules Committee recommended that Commissioners could be removed by the Mayor with the concurrence of the Council or by a vote of 75% of the Council.  To the contrary, removal should be only for cause and not at the discretion of our elected officials. 

The recommendations appear to address the General Manager’s request that the Department be granted more freedom in contracting and procurement by amending the City Charter to allow the Department to enter into selected power contracts, leases, and design build arrangements with the approval of the Board of Commissioners, bypassing the need for a time consuming ordinances approved by the slow moving City Council. 

The biggest disappointment is that the Rules Committee was not able to follow through on Fuentes’ motion to “authorize the Department to oversee its own hiring functions and remove the Department from its obligation to follow civil service rules.”   While reform was endorsed by the Union Bo$$ d’Arcy’s IBEW Local 18 (a scary thought to some), this motion ran into a buzz saw as the leaders of the City’s civilian unions were vehemently opposed to the Department establishing its own Human Resources Department, free from civil service.  Rather, they are demanding that the City “meet and confer” which will allow the City unions to demand concessions from the Department in return for their approval.  

This collective bargaining may result in an impasse that will most likely result in litigation if the City Council has the gumption to take the side of the Ratepayers and pursue the establishment of a Human Resources Department that reports to the management of DWP.  

According to insiders, this is a continuation of the bad blood between the City’s civilian unions and IBEW Union Bo$$ d’Arcy as the civilian unions have contract envy and resent d’Arcy’s justified opposition to the 2009 Early Retirement Incentive Program that allowed 2,400 senior City employees to retire early at a cost of over $300 million to the City (and its taxpayers). 

In the meantime, the Rules Committee should recommend that the City’s Personnel Department devote considerable resources to DWP and establish an fully staffed office at DWP to serve the Department’s needs, similar to the successful arrangement with the City Attorney.  Furthermore, the Department should be allowed to have 10% of its work force be exempt from civil service so that it has the flexibility to hire staff to fill positions in IT, customer service, purchasing, training, and other important departments. 

The Rules Committee has conducted an open and transparent process, taking input from many constituencies. This compares to the process with Measure B in 2009 (Mayor Villaraigosa’s ill-conceived solar plan) and Proposition A in 2013 (the permanent half cent increase in our sales tax).  Both were rejected by the voters. 

We have two to three weeks to rework and refine the Rules Committee’s recommendations, during which time we need continued transparency and flexibility.

(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].)

-cw

LA WATCHDOG--If we are to hold the senior management of our Department of Water and Power accountable to the Ratepayers, the City Council, and the Mayor for the efficient operation of this complex, asset-intensive $5 billion a year enterprise that is transitioning its power and water systems to meet overly aggressive environmental mandates, then the management team must have the flexibility and authority to make operational decisions without undue interference from the City Council, the Mayor, the leadership of the City’s unions, and other self-serving special interest organizations. 

There are two operational reforms that will allow DWP to be more nimble and efficient.     

The first operational reform would allow DWP to establish its own Human Resources Department to oversee its 9,000 employees, allowing the Department greater flexibility by removing its reliance on the City’s slow moving, overly bureaucratic Personnel Department and its burdensome civil service rules and regulations.  This would result in increased accountability as Human Resources would report to DWP’s General Manager, unlike the current situation where the Personnel Department is not accountable to DWP management. 

Furthermore, the personnel and hiring policies needed for the successful operation of the nation’s largest municipally owned utility are significantly different than those of the City given the engineering background and specialized skills required by the Water and Power Systems. 

The second operational reform would permit the management greater discretion in its procurement and contracting process, eliminating time consuming bureaucratic delays as contracts work their way through the DWP and the City’s cumbersome bureaucracy.  This reform would eliminate the Mayor’s micromanagement of operational contracts and increase the contracting authority of the General Manager to more realistic levels of $5 to $15 million depending on the type of contract. 

Over the last month, City Council President Herb Wesson and his Rules Committee have held at least four open meetings discussing the reform of our Department of Water and Power, including unprecedented evening meetings in the Valley and South Los Angeles, where numerous people and organizations have had a chance to air their opinions and recommendations and engage in discussions with the Council Members.  (Thank you, Herb.)  But we have yet to see any Committee action or instructions to the City Attorney which will leave us with very little time to review, analyze, and comment on the proposed ballot measure. 

There are also the issues involving the role and independence of the Board of Commissioners, the potentially illegal 8% Transfer Fee from the Power System which supplied the City with $267 million this year, and the impact on the Ratepayers of efforts to have DWP subsidize the operations of various governmental entities (LAUSD and Recreation and Parks) and even greater environmental mandates. 

While these financial and governance issues are very important, they should not overshadow the need to reform the Department’s Human Resources function and the Contracting and Procurement policies so that the Department may operate more efficiently and we, in good faith, can hold the General Manager and the rest of her management team responsible for their management decisions.

(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].)

-cw