LA WATCHDOG

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.

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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? 

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(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. 

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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].)

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LA WATCHDOG--The reform and restructuring of the governance and operations of the our Department of Water and Power is intended to make our utility more nimble and efficient so that it is better able to address the increasing complex operational, organizational, technological, management, financial, and regulatory challenges it faces and will continue to face in a rapidly changing and increasingly complex environment.  At the same time, our engineering focused DWP must earn the trust, confidence, and respect of its 1.5 million Ratepayers by developing into a more customer centric and efficient enterprise.  

There are three areas of reform that have been discussed at multiple meetings throughout the City: 1) a more independent Board of Commissioners designed to limit the interference from the City Council and the Mayor, 2) improved contracting and procurement policies to eliminate overly burdensome overhead and layers of bureaucracy and red tape, and 3) the establishment of a DWP Human Resources Department for the Department’s 9,000 employees, separate and distinct from the City’s slow moving Personnel Department and City’s cumbersome civil service regulations. 

While there has been considerable discussion about the three areas of reform, there has been no meaningful discussion of the Transfer Fee/Tax because of the class action litigation alleging that this fee/tax is illegal because it violates Proposition 26 (the Supermajority Vote to Pass new Taxes and Fees) that was approved by California voters in 2010.  However, Councilmember Felipe Fuentes suggested that the Transfer Fee/Tax, which provided $267 million to the City’s coffers this year, be capped at its 2010 level of $221 million.  

On the other hand, a better idea would be to ask the voters to phase out the Transfer Fee/Tax over a 10 year period and waive the repayment of the $1.5 billion of illegal transfers made since 2011.  But to win over the voters, City Hall must be willing to reform its budget policies by agreeing to place on the ballot for our approval or rejection a charter amendment that will require the City to Live Within Its Means.** 

There also appears to an appetite by City Hall to hit up the Ratepayers to support other initiatives that are not part of the core mission of the Department. 

At Tuesday’s meeting of the City Council, Councilman Mitch O’Farrell, Chair of the Arts, Parks, and River Committee, proposed that DWP (read Ratepayers) subsidize the utility bill of the Department of Recreation and Parks to the tune of $20 million a year.  Mayor Garcetti also proposed to lower the rates for the Los Angeles Unified School District, DWP’s largest customer. 

While Recreation and Parks and LAUSD provide important public services, the Ratepayers should not be required to foot a portion of their utility bill.  This is not our responsibility.  Rather, these poorly managed government entities should feel the pain of the full impact of the recent $1 billion rate increase, just as we Ratepayers are forced to do. 

There are also others on the City Council and in the environmental community who are pushing the One Water agenda which would essentially put Ratepayers on the hook for financing a good chunk of the City’s $8 billion stormwater and urban runoff plan over the next 20 years.   This would deprive Angelenos of the right to approve or reject this massive project.   

There are others who want to expand the Department’s green agenda for the Power System without giving any consideration to the impact on the Ratepayers.  As it is, we are going to be hit with a $1 billion rate increase over the next 5 years plus another $150 million in new DWP related taxes.    

City Council President Herb Wesson has taken DWP reform under his wing, conducting a number of open meetings of the Rules Committee which he chairs.  He has also indicated that he intends to meet with labor and environmental groups, hopefully in open and transparent sessions where the public will be able to listen in and participate.  

We have yet to see any definitive ballot language.  This is disturbing since the ballot language needs to be determined within a month in order to be on the November ballot.  And as we all know, the devil is in the details, especially when it involves the politicians and their cronies who occupy City Hall. 

The reform and restructure of our Department of Water and Power will be a tough sell to the voters who do not trust or respect DWP and City Hall.  Rather than trying to do too much which will only complicate any ballot measure, the City Council and the Mayor (who has yet to come forward with any definitive thoughts) are strongly advised to follow the old KISS adage: Keep It Simple, Stupid.

+++

** The “Live Within Its Means” charter amendment, if approved by the voters, will require the City to develop and adhere to a Five Year Financial Plan; to pass two year balanced budgets based on Generally Accepted Accounting Principles; to benchmark the efficiency of its operations; to fully fund its pension plans within twenty years; to implement a twenty year plan to repair and maintain our streets, sidewalks, and the rest of our infrastructure; and to establish a fully funded Office of Transparency and Accountability to oversee the City’s finances and operations.

+++

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

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LA WATCHDOG & POLL--More than likely, our Los Angeles Times will have a new owner as Gannett, the publisher of USA Today and the largest newspaper publisher in the country, has offered to buy Tribune, the owner of The Times and the Chicago Tribune, in an all cash deal for $15 a share, double the price of Tribune’s stock prior to the publication of Gannett’s initial offer of $12.25 a share on April 25.  

While Tribune’s newly installed, self-centered management and clueless directors may resist this very generous offer, most investors will be standing in line to sell their shares at this bonkers price.  At the same time, while Gannett is not an eleemosynary institution, our Los Angeles Times will be better off being free of Chicago based Tribune which has mismanaged The Times ever since Tribune acquired Times Mirror Corporation, the owner of our hometown paper, in 2000 for over $8 billion (including debt). 

It has been downhill ever since for The Times as the ivory tower know-it-alls from Chicago, armed with their MBAs and little else, dictated policy and cut costs, resulting in a LA Times that lost touch with Angelenos.  In 2007, the financial wizards that were running Tribune concocted a complicated leveraged buyout deal led by Sam Zell, a real estate magnate with a questionable reputation, which left Tribune with $13 billion in debt.  A year later, in December of 2008, an overleveraged Tribune filed for bankruptcy.  

Tribune emerged from a contentious bankruptcy in December of 2012, controlled by vulture capitalists whose wheeling and dealing resulted in the August of 2014 tax free spinoff of the Tribune Publishing, a newspaper company with dim prospects and almost $400 million in debt, from Tribune Media, a very profitable broadcasting company.  

At around the same time, Rupert Murdoch’s News Corporation and Gannett spun off their newspaper assets into publicly traded, debt free companies that were better able to transition from print publications to a more competitive digital world.  

About the only good news was that Tribune appointed Austin Beutner as Publisher of The Times in August of 2014.  His vision was local, to focus on the City, the County, and Southern California which included the synergistic acquisition of the San Diego Union Tribune.  But Beutner was canned in September of 2015 by Jack Griffin, Tribune’s power hungry CEO, who was unwilling to invest in local content or in developing a strong digital product. 

Beutner and other Angelenos made a run at returning The Times to local ownership, but they were rebuffed by Griffin and the Tribune Board of Directors. 

[sexypolling id="3"] 

In February, 2016, Jack Griffin and the Tribune sold 5.2 million shares to Michael Ferro, a Chicago internet entrepreneur, for $8.50 a share.  This $44 million investment resulted in Ferro owning 16% of the Company.  Less than three weeks later, he canned Jack Griffin and took control of Tribune.  

[Note: If Ferro sells his shares at $15, he will have a profit of $34 million, a return on investment of 75% in less than 6 months.] 

Since Ferro seized control of Tribune, he attended the Oscars, snagging tickets meant for the news staff, and blew the synergistic acquisitions of the Orange County Register and the Press Enterprise in Riverside because he was the smartest guy in the room and was unwilling to listen to experienced advisors who knew how to navigate the antitrust issues.  

This transaction makes sense for Gannett, even if it is a high price given the poor business outlook for the newspaper industry.  Gannett, a publisher of daily newspapers for the most part in small and midsized markets, will acquire the papers in LA and Chicago, two of the three largest markets in the country, as well as papers serving Orlando and Fort Lauderdale, Baltimore, and Hartford.  

We need strong local coverage, because without it, “we’re gonna have corruption at a level we never experienced,” according to Bob Schieffer, the trusted TV journalist who was the moderator of Face the Nation (CBS) for 23 years.  And we all know that we cannot trust City Hall whose occupiers and their cronies are more than willing to sell us out to the real estate speculators and developers and the leaders of the City’s unions.  

We need to make a deal with Gannett, that in return for subscribing to the paper and its web site and supporting its advertisers, it will provide us with strong local coverage.  This support may also involve setting up charitable entities to sponsor journalists covering the City and its proprietary departments (DWP, LAX, and the Port), the County, LAUSD, our failing infrastructure, and underfunded pension plans. 

We need a vibrant Los Angeles Times, one with an institutional memory, properly staffed with inquiring journalists who are willing to spend the time protecting our interests from predatory politicians who have no respect for our wallets.  At the same time, the Times needs our support and our money. 

While we may not agree with The Times on all issues, the paper has helped defeat ballot measures that would have nicked us for billions.  These include its opposition to Measure B, Mayor Villaraigosa’s 2009 solar plan that was a payback for IBEW Union Bo$$ d’Arcy’s generous campaign contributions, or the ill-conceived effort in 2013 to increase our sales tax by a half cent to a mind boggling 9½%. 

Put another way, a few bucks here and there for The Times will save us billions if the Mayor, City Hall, and the newly constituted Board of Supervisors were to have its way.

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

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

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

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

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

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

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

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

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

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

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

-cw

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

-cw

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

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

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

Sources of cash for these slush funds include the Street Furniture Fund (advertising revenues from bus shelters), Oil Pipeline Franchise Fees, the Real Property Trust Fund (50% of the sale of surplus property in a Council District), and AB 1290 Funds (tax increment funds associated with the dissolution of the corrupt Community Redevelopment Agency).  There are also fees from Lopez Canyon Landfill, Sunshine Canyon Landfill, and the Central LA Recycling and Transfer Station that never see the light of day. 

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

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

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

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

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

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

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

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

●●●

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

-cw 

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

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

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

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

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

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

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

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

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

Ouch! 

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

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

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

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

-cw 

P

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

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

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

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

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

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

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

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

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

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

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

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

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