I occasionally watch Shark Tank.

Some of the concepts the contestants pitch are novel. The panel of experts dispense their advice with confidence, which is occasionally laced with a little arrogance.

It’s an intelligent show. One can learn a thing or two about both the rewards of entrepreneurship and its pitfalls.

But lest you think that the panel, which includes the likes of Mark Cuban, are infallible, think again.

Panelist Barbara Corcoran started as a waitress and turned a $1,000 loan into a multibillion-dollar real estate venture, that according to her website.

However, there are times when even the best experts are probably too far removed from their day-to-day business ventures – understandable given the stakes they have in play, but no excuse not to rely on other experts, in other professions, to cover their backs.

Ms. Corcoron’s bookkeeper was scammed into believing that an e-mail request to wire $400,000 in payment to an overseas’s real estate company was sent by Ms. Corcoran’s executive assistant.

The bookkeeper apparently asked a few questions, the answers to which seemingly aligned with his/her boss’ business interests abroad. The bookkeeper sent the wire request to the bank and, presto, the funds were immediately sent.

The e-mail address of the executive assistant contained an additional character; the bookkeeper only realized it was a scam after informing the actual assistant. The sender used a Chinese IP address; the funds are unlikely to be recovered.

If Ms. Corcoran had been the CEO of a publicly traded corporation, she would have been fired. The event indicates internal controls are so fundamentally flawed at her firm that one might doubt if she even understands the term.

Segregation of duties was obviously absent; it shouldn’t take a CPA to figure that out. Even simple approval levels for large transactions must not have been in place. Written documentation for the transaction’s validity should also have been required. Didn’t her external accounting firm review cash controls?

A person’s success in business does not necessarily transfer to assuring the existence of appropriate management practices.

Remember that when anyone approaches you with an investment opportunity, even if he or she is a well known TV celebrity.

Krekorian, Koretz and Ryu: The Flying Circus caucus of the Burbank Airport Noise Task Force. Never confuse them with the Wright brothers or Chuck Yeager.

I apologize for being flippant, but after attending all but the first Noise Task Force meetings at the Burbank Airport Marriott and observing their biased behavior, it’s only fair. Let’s not forget – Ryu and Krekorian endorsed moving flight paths north even before the public hearings began. Koretz has openly expressed his support of the move over the course of the meetings.

The three council members have pandered to their constituents aligned with two major advocacy groups from Studio City and South Sherman Oaks – UpRoarLA and Studio City for Quiet Skies. These groups are demanding that departures from Burbank and Van Nuys Airports avoid their neighborhoods and, instead, fan out north of the 101. In their minds, the noise and pollution do not belong in their neighborhoods, but are OK for others.

Krekorian seems to think CD2 does not extend north of the 101. He has not made any effort to reach out to that part of his district, the area which would be adversely impacted if the flight paths are redirected that way. Those neighborhoods are denser and cover more ground than those closer to Ventura Boulevard. Many more people would be subjected to noise.

The testimony of Captain Gary McMullin, a Southwest Airlines pilot who knows the skies above the region like the back of his hand,stripped the veneer from the specious alternatives proposed by UpRoarLA and Studio City for Quiet Skies. The two groups back Operation Twist, an ill-conceived idea proffered by Dan Feger that would have planes turning sharply after take off and hugging the 101, then turning north. Feger is a retired career business administrator for the airport – neither a pilot nor air traffic controller.

McMullin’s analysis was derived using information from FOQA (Flight Operations Quality Assurance). It is a program that crunches raw flight data through a series of algorithms designed to detect potential threats to safety. It is the gold standard crash investigators use to determine cause.

Almost everyone agrees departures have generally shifted south by one-third of a mile over the last two years. The reasons often cited are atmospheric conditions, plane loads or efficiency. Some of the hillside residents are accusing the FAA of authorizing the movement.

According to the FAA, the complex and extensive nature of Southern California airspace, which covers an area from San Diego to Point Magu, the Inland Empire, Palmdale and the San Bernardino Mountains, makes it difficult to analyze changes.

Making adjustments to it is much like squeezing a balloon. Increased pressure on one side forces expansion on another. On any given day, one problem could set off a chain reaction effect through the system. No one should expect consistency.

Captain McMullins offered valuable technical insight, including what I think could shed light on why there has been a shift. Pilots must wait for tower clearance before they can turn north from their standard heading, a critical procedure because turning too soon could cause their planes to stray into arrival paths over the Sherman Way/Roscoe corridor. Radio communication has not changed much over the years. One controller can only converse with one pilot at a time.

It is possible, then, given that air traffic volume has increased by around 25% over the past two years, tower personnel cannot clear as many turns in a given amount of time. This does not represent a safety hazard, as strict procedures guide how the pilots fly, but could impact efficiency. Planes may have to fly farther south to ensure they do not cross the 101 prematurely.

Clearly, then, to perform a maneuver like Fager’s Operation Twist, would endanger those who live in the North Valley.

McMullins also addressed the fleet mix. All of the major airlines are flying the most advanced planes, all of them quieter than previous versions. The engine power is also automatically controlled to attain the maximum climbing rate. Not all private or corporate jets have the latest technology.

Taking off to the north and east from Burbank is not desirable because of the higher terrain. It should only be done under certain conditions – i.e., wind direction. Although departing planes should technically be able to clear the mountains, if an engine is lost, that may not be possible.

The FAA presented a 3-D analysis of arrivals and departures to/from Van Nuys and Burbank Airports. This clearly displayed the interrelationships of altitude, position and paths over a sample period of time, especially the dynamics of alternating departures and arrivals. It had the appearance of an aerial square dance, with clusters spinning in choreographed unison.

Some in the crowd heckled the presenters; others waved signs with the word “Lie” written on them. Aviation professionals all, I’m sure.

Any rational person couldn’t come away without appreciating the complexity of the system and the difficulties in managing it.

During the Q&A between the task force members and the presenters, Council Member Koretz told the FAA, “You fixed something that wasn’t broken.” He was referring to the .33 mile southerly shift. He is obviously assuming it was an orchestrated change without considering possible pilot/tower communication timing and other factors referred to earlier.

Is there an interim resolution?

I doubt it. If no one can definitively conclude how the shift occurred to begin with, the chances are slim an operational procedure can be developed to undo it.

One thing is for sure, the members of the Task Force and the two advocacy groups lack the background to offer or assess proposed solutions.

A panel comprised of aviation experts who understand the technology and science of flight should replace the existing one. They can report to an independent board, one free of local politics.

The objective of the FAA with respect to NextGen is to make the skies safer. But there will often be trade offs. Quality of life must be respected as much as possible on both sides of the Valley, but that’s not being encouraged by certain members of the panel.

Link to task force meeting:
Scroll down the bar to items 5a and 5b. 5b is the pilot’s testimony.

Valley Glen and NoHo, along with parts of Van Nuys, could be in for a rude awakening. Valley Village, would also be in the mix.

The only thing worse is a noisy rude awakening.

And that’s what the North Valley could experience if the residents of those communities do not get involved in the Burbank Airport Noise Task Force process. Portions of these communities already absorb some of the noise.

The crux of the issue is a shift in departure flight paths to one nautical mile farther south. As a result, residents of Studio City and Sherman Oaks have been enduring more aircraft noise than ever before. That is unfortunate, but the alternative solutions offered by groups representing neighborhoods south of the 101 would push almost all of the traffic north of the freeway. They argue that they were not warned of the shift, and it is only appropriate for the north to bear the full burden of the noise because residents there knew there would be air traffic when they bought their homes.

They have reason to be upset, but we all live within Burbank Airport’s market. Many passengers come from all over the Valley. It is only fair that the noise be shared as much as possible over the broadest area: from Mullholland Drive up to the buffer zone for arrivals (arrivals come in from the west and follow Sherman Way).

Under the proposals demanded by Studio City and Sherman Oaks, flights would turn to the west soon after take off from Burbank (before crossing the 101), then parallel the freeway before fanning out over the North and Central Valley neighborhoods. That’s around around 200 flights a day.

There has been much finger pointing at the FAA, that the agency is responsible for the current flight paths. I think the FAA did a decent job of defending its process at the November 6th hearing. No one has yet produced tangible evidence that the FAA was behind the shift.

Missing at these meetings are air traffic controllers and pilots. They surely could shed some light on what’s happening. It would be better than relying on subjective claims about the FAA’s role.

There have been articles in the Los Angeles Times and Daily News covering the controversy, along with local TV news, but almost all of the content has been from the perspective of the southern neighborhoods, including the Hollywood Hills. There’s a good chance that many residents north of the 101 are unaware of what might be coming their way.

If you are asking why Council Member Paul Krekorian has not communicated this possible development to Valley Glen, Valley Village and NoHo, it is because he endorsed The Studio City/Sherman Oaks proposals even before the first public meeting was held back in August! Yes, before he heard from his constituents who would be on the receiving end of a shift to the north, he appeared in a video on the UpRoarLA web site and where he pledged his unequivocal support for their proposals.

Rep. Brad Sherman (D-Sherman Oaks) stated back in March: “Communities in the San Fernando Valley deserve to be heard and have their concerns completely addressed.”

That is clearly not happening because most residents have been effectively excluded from the hearings.

At the conclusion of the November 6th Task Force meeting, I challenged Mr.Krekorian to state whether he planned to share the proposals with the northern part of his district. He replied, “They have you!”

The last time I checked, the Council Member is responsible for keeping all of his constituents informed, not just his southern base. I would be happy to handle it for him if he gave me half of his compensation.

I do not blame him for being upset with me – my articles have been critical of his handling of this matter – but politicians have an obligation to actively promote participation with their constituents. That can best be achieved by sharing critical information with all of them, especially when it involves quality of life issues. Apparently, Mr. Krekorian neither wants to face backlash from those who would be adversely affected, nor offend his base.

Valley Village Homeowners Association has reached out to its members, but Valley Village is the smallest community in CD2. NCVV also conducted outreach to its stakeholders, who largely overlap with VVHA’s population.

Our position has always been:

No one part of the East Valley should bear the full brunt of the noise; it should be shared by all areas south of the arrival path, without jeopardizing safety.

We support a cap on flights and penalties for airlines that flagrantly violate curfew hours.

The FAA should insist that the airlines transition to quieter engines over a reasonable time period.

This message was shared with Krekorian and Garcetti, along with Congressmen Sherman and Cardenas.

I encourage all constituents north of the 101 to attend this next task force meeting, which is scheduled for December 4 at the Burbank Airport Marriott, starting at 6:30PM and usually lasting until 9:30. Fill out a speaker card if you want to make a public comment.

If you want to have a say, you must participate!

The New HSR Dilemma

I’ve written several articles over the years critical of California’s high-speed rail debacle. The last one was in November 2017. I suggested that gubernatorial candidate Gavin Newsom might come to his senses and end the project. After all, he was once against it, but flipped lest he alienate his union supporters in the primary.

The election behind him, he did just that.

Sort of.

While effectively cancelling the biggest and most costly segments, he left the 150 mile Bakersfield to Merced connection untouched. Whether there will be enough funding to complete even that remains to be seen given the history of cost overruns and unreliable estimates.

I really do not think he cares. It is just to soften the blow to the project’s misguided fans and political allies who would have benefited from the money pit it was destined to become from the start. Governor Newsom will not be in office when even this segment hits the wall.

But let’s say it is completed.

There is yet another obstacle.

Proposition 1A stipulated that there could be no government operating subsidy- federal, state or local; the train has to run in the black. One has to question whether there is enough of a market in the Central Valley to generate asequate revenue to cover the fixed costs, not to mention the marginal costs. It is not as if fares can be raised willy-nilly to close losses. There is an inverse relationship between ridership and fares.

So what will happen when the train cannot legally operate?

A federal bailout?

Regardless of who controls Congress years from now, the taxpayers in the other 49 states will not be receptive to propping up the product of California’s recklessness. They have their infrastructure priorities, too.

Before Newsom fully commits to the Central Valley line, he should engage reputable analysts free from political influence to fully understand the market there. Up until now, the focus has been on the ridership from each of the end points – The Bay Area and Metro L A.

CAHSR is now a short line with a different set of demographics driving it.

Don’t let politics get in the way.

Come Fly with Me

The unfriendly skies over the Southeast Valley got a little unfriendlier on October 18th.

A much anticipated public hearing dealing with the noise of departing jets from Burbank Airport was held at the nearby Buena Vista Library.

About 200 people filled the auditorium, plus more by an open exit door.  Representatives from the airport were in attendance, along with LA City Council Member Paul Krekorian and Congressman Brad Sherman. It was apparent that a large majority of the audience hailed from Studio City.

No one from the FAA was there, a major disappointment, but had the agency sent someone, it would have been the equivalent of Custer riding into the Little Big Horn Valley.  A different valley, this time, but the results would have been the same.

I can understand not wanting to face an angry crowd which has already staked out a position vehemently opposing the increase in departing flights over their neighborhoods, but there are times when one has to face an angry public.  Interestingly, Mayor Garcetti, who seldom faces an unsympathetic group, tried doing that the day before in Venice regarding homeless shelters; perhaps the FAA read this article . By the way, Garcetti was criticized a few times at the Burbank meeting for his lack of involvement on this issue and for being away in general.

Just as the controversy over where to place homeless shelters, flight paths contemplated by the FAA are drawing a passionate response.

There were those who adamantly opposed all but a few flights over their neighborhoods. That point of view primarily came from the residents who live in the hills.  They cited the acoustical effects created by the canyons and hillsides.

Almost all opposed the overall shift in flights to the south of the 101 and called for dispersing the paths over a wider area.

Some stated that real estate values have been adversely impacted.  All other things being equal, that is true, but it is the “all other things” that also impact prices.  Who would have predicted that Porter Ranch would be experiencing a real estate boom only a few years after the Aliso Canyon gas leak? But that’s what was reported in Sunday’s Los Angeles Daily News. The gas field is still there and there is no guarantee against a re-occurrence. There are many factors that go into purchasing a home, certainly noise is one of them, but convenience, architectural style, view, amenities and even zip code enter into the decision.

I suspect even if the FAA agrees to disperse flights, there will still be an outcry from parts of the Valley not previously impacted, but would be if the pattern changed.

One person proposed having more (not all) flights depart directly to the north….and there are conditions that apparently require it.  The rationale being that most flights are heading to destinations in that direction.  I imagine the North Valley, Santa Clarita, Sunland and Tujunga would want to weigh in on that.

There were suggestions for planes to gain altitude at a faster rate so by the time they turned into residential neighborhoods there would be more elevation between them and the ground below.  But that could create more noise for those neighborhoods relatively close to runway 15.

Personally, I have observed some flights out of Burbank with sharper angles of ascent, so it can be done. It is worth noting, though, that planes use the most fuel (up to 25% of the total consumption), and produce the most harmful emissions, during takeoff, according to an article in an on-line publication of the Worldwatch Institute, an organization which deals with sustainability issues.   Does that mean a steeper ascent would create more emissions over a concentrated area? Something to consider.

If the flights paths were dispersed over the Southeast Valley, there is still a question as to the location of the turning points.  Remember, the planes are not flying straight, but in arcs. The timing of the turns would affect the noise level for many Valley communities  to varying degrees.

My statement on behalf of Valley Village opposed concentrations over any single neighborhood (including our own) and urged the FAA, within the framework of safety, to fine flagrant airport curfew violators; to set a timeline for the commercial carriers to replace older 737s with the new and quieter – also more fuel efficient – 737MAX series; and put an immediate freeze on additional flights until the results of an EIR can be evaluated.

Everyone has legitimate gripes, but it would require the Wisdom of Solomon to carve up the skies in a manner that would please the general public.

I have not seen King Solomon’s name listed in the FAA or Burbank Airport’s organization chart, neither is he on any ballot for elected office.

There’s an air war brewing over the southeast San Fernando Valley.

In recent months, the FAA has altered departure patterns from Burbank Airport to take advantage of new technology (known as Next Generation Air Transportation System, or NextGen), designed to provide better separation of incoming and departing aircraft, as well as improve efficiency.

Many residents along the Studio City hillsides and adjacent neighborhoods have reported increased noise as some departures have shifted to a more southerly path, which takes them south of or over Ventura Boulevard.

I recall the outcry back in 1987 concerning a proposed addition of gates. There was a hearing at a local school attended by residents of Valley Village and adjacent areas.  They were concerned about the increased noise levels which would result from the expansion. My wife and I, at the time new to the neighborhood, were there, and shared the same concerns.

Since then, there has been a definite reduction in noise due to improvements in engine technology; however, it is still very noticeable.

The Studio City Residents’ Association is opposing the changes, as is Studio City for Quiet Skies, a coalition of residents. They claim their quality of life has been adversely affected.

They are asking that the FAA return departure paths back north of the 101, an area the organizers describe as a “natural noise corridor.”

It is rather audacious of them to describe the neighborhoods around the 101 in that manner, as if Studio City deserves special consideration over the rest of the southeast Valley.  If anything, SCRA and SCQS are throwing some of their own residents under the bus – or perhaps I should say, under the plane – those living generally north of Colfax Meadows have long been subject to some of the same noise levels as Valley Village and North Hollywood.

As a frequent flyer from Burbank Airport and a resident of Valley Village, I can say with certainty that many flights still traverse the skies north of the 101 or directly parallel to it. From the air, I have a clear view of my street as my flight banks to the north soon after we clear the runway. Details of the terrain below are close enough to be evident. From the ground, I can watch SWA parallel our street.

Valley Village Homeowners Association has informed our elected officials that we favor a shift of  departures to the south. Letters were sent to Representatives Sherman and Cardenas, and to Councilman Krekorian and City Attorney Feuer. We stressed that no one area should bear a disproportionate share of the noise;  that our interests are every bit as important as Studio City’s.

It is worth noting that Councilman Paul Krekorian and City Attorney Mike Feuer co-signed a letter to the FAA in support of the SCRA and SCQS position, but did not consider the overall impact to the greater community; that there would be some relief for other residents.

When we asked their offices if they could write on behalf of Valley Village, they said FAA issues are not within their scope.  That is a true statement, but why did they involve themselves then?

Burbank Airport, despite the inherent noise associated with airport operations, is a net asset to the Valley.  When it comes to flying regionally, it is the hands down choice over LAX for all of us this side of Mullholland.

This is not to say there are no concerns regarding the airport – for example, we must pay attention to the plans for the new terminal, advocate for soundproofing of schools, where needed, throughout the East Valley.

The FAA has the legal authority to implement flight path modifications in the interests of safety and efficiency, regardless of public or political input.

Perhaps, then, this conflict is all moot, but sharing the noise is only fair.

Give the senator credit. He keeps trying to peddle his “tax modernization” bill, altering subsequent versions to deal with the opposition or disinterest it has received so far. His rationale is that today’s state tax structure does not reflect the current nature of the economy, one that is based more on services than in the past, and is far more volatile due to its growing reliance on personal income tax.

According to the state’s analysisBeginning on January 1, 2020, SB 993 imposes the tax (on the receipt of the benefit of a service by a business in California) on a “qualified business,” defined as “a person, corporation, partnership, sole proprietorship, limited liability company and limited liability partnership engaged in business to provide a product or service for the purpose of producing income taxable under federal income tax law.”

The rate business will pay starts at .75% in 2020 and climbs to 3% in 2022, thereafter.

The current sales and use tax on goods will be reduced by .5% in 2020, then to 2% by 2022.

The state revenue impact has not been estimated.

Senator Hertzberg told an audience at a recent community breakfast that the end result would be revenue neutral.  As I reported earlier, it is advisable to check his math, since he considered additional taxes of $10B per year that would have been generated by his original bill to be revenue neutral.

SB 993 is as complex as any tax legislation can be, so any projection as to its revenue impact is premature, except perhaps in Hertzberg’s mind. If he has run the numbers -even at the 30,000-foot-level – that supports its neutrality, then why not share them?

Sales and use tax revenue has decreased from 61% of the general fund back in 1950, to 20% today, and the service industry has grown much larger than the agricultural and manufacturing sectors. But data published by the California Department of Finance show sales and use tax revenue has grown from $2B per year in 1970 to $37B today. So, while a much smaller share of the pie, it is a much larger pie. How big a pie do we need, or can we afford?

Let us not forget that service companies pay income taxes, too, along with sales taxes on purchased goods.  The growth of this sector, then, has increasingly contributed to the state’s treasury over the years.

So to say California’s tax collections have been limited by the shift in the economy’s constituent parts is misleading.

Understanding the sources of tax revenue is also important.

For example, take Subchapter S corporations. These are hybrid entities resembling partnerships but limit liabilities (as C corporations do). The net income is passed directly to the owners, not through declared corporate dividends.  The pass-through eliminates double taxation associated with C corporations (on the corporate tax return and again on the individual shareholders’ personal returns to the extent of dividends).

Partnerships and sole proprietorships also pass earnings on to the owners in a similar fashion, also avoiding double taxation.

The use of pass-through structures has increased significantly since 1980: in 2013,  U.S. income earned in the pass-through sectors accounted for 51% of total business income (C and S corporations plus sole proprietorships and partnerships), compared to only 21 percent in 1980, per the US Department of Treasury, Office of Tax Analysis Working Paper prepared in 2016.

As you can imagine, this muddies the waters in any kind of tax revenue source analysis. One needs to carve out the pass-through income reported on individual returns to compare apples to apples over time. Knowing the commercial portion of personal income is critical in assessing the effect of applying sales tax on services sold by businesses.

A sales tax paid on services received by S corporations and other pass-through entities  will effectively fall on the individual taxpayers who own them. Although they will be receiving a tax break related to their personal purchases under SB 993, they will absorb the impact of the services tax from their businesses. Not all business owners or S corporation shareholders are rich. As a result, Hertzberg’s plan could end up hurting middle-income residents.

Before levying a sales tax on services, one should consider if the companies require a disproportionate share of the state’s resources.  Do, let’s say, architectural firms require  more roads, power and water than those in manufacturing or agriculture?  We shouldn’t be applying additional taxes simply because there is an opportunity to do so. There should be demonstrable correlation.

We also need to understand how much in the way of state income taxes service companies have contributed relative to all sources over time…and how much more the share will grow. It does not make sense to discourage their business customers from buying their products, but that’s what the sales tax will tend to do, as well as add to users’ costs, particularly businesses without the resources to develop in-house alternatives.

The state can smooth out the volatility in revenue by carefully managing the reserve fund, socking away the surplus from good years, and drawing them down when things head south. Sacramento already has the means and process to do that. This would be preferable to layering another tax, one which will be very difficult to administer, on top of the existing structure. It just takes some competent management.

The benefit to the residents of lowering the sales tax on personal purchases of goods could be short-lived. County and city governments may see it as an opportunity to propose additional local sales taxes. The thinking being that few would mind paying an additional quarter-point or so if they are receiving a 2% break.

I am not saying a services sales tax is inappropriate in all cases, but let’s not make the service sector a piñata for the politicians to break open and grab the goodies.