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Sochi on rails

Last week’s tragedy along an at-grade crossing in Oxnard adds to the growing list of accidents involving trains and motor vehicles. Fortunately, no one was killed in this latest one, but there were severe injuries.

In almost all cases, these incidents are due to carelessness, recklessness or criminal acts. Given human nature, recurrences are inevitable. However, the possibilities can be greatly reduced with right-of-way improvements that eliminate at-grade crossings.

Some projects designed to do just that are underway, but they cover only a fraction of what needs to be done.

Funding is tight, which means the work will be piecemeal.

What is needed is a systemic approach that not only addresses safety concerns, but improves the efficiency, timeliness and comfort of commuter rail travel.

Measure R2, a half-cent sales tax increase is being planned for the November 2016 ballot. The measure would attempt to raise $90 billion over 45 years. At $2 billion per year, improvements will be slow in coming and, although increasing safety, may not have a perceptible impact on efficiency, timeliness and comfort. We will still be left with a mishmash system juggling passenger and freight service on shared tracks. Not a very attractive option for commuters.

While our local and regional transportation needs are being underfunded, California is doing everything possible to push ahead with High-Speed Rail.

Stop and think of the relative demands – ask yourself: how often do you commute locally versus travel to and from Southern California to the Bay Area? Over the course of the year, how long does you car idle on our clogged freeways and streets? Quite a bit more than the time you spend on the 5 or 99 traveling through the San Joaquin Valley.

Why are we throwing away $68 billion to supplement existing satisfactory alternatives for our infrequent north-south trips? By the way, commercial aircraft and cars have been becoming more efficient and safer. For example, since 2000, domestic airline fuel consumption has improved 40%. Within a decade, hybrid and electric vehicles will comprise a major share of the automobile market.

The State should stop HSR and cut off further funding. Instead, a bill should be introduced to fund rail improvements designed to create a well-integrated network of commuter trains and subways in all major metropolitan areas.

It’s about getting value for the money. $68 billion could create far greater benefits if applied to projects that move people through our major cities, rather than from L.A to San Francisco – or from Bakersfield to Madera. Less gasoline burned; less congestion.

HSR is political pork and payback for California’s oligarchs. It is a project straight from Vladimir Putin’s playbook.

We do not need Sochi on rails.

I only hope the members of the LAUSD Board of Education do not receive e-mails from Nigeria which offer “risk-free” financial opportunities. If that occurs, the school system will be bankrupt in short order.

You see, the current Board has no concept of due diligence or stewardship.

When a big-ticket project is put before them, it will receive the stamp of approval without regard to budgetary considerations and with no plan to evaluate progress.

For example, why not approve $90 million for a new payroll system? Let’s push forward. We are certain it will work; just tell us when it’s ready for implementation and push the start button. It cost another $37 million to fix the disaster that followed and disrupted the lives of many teachers.

A more contemporary example is MISIS – the replacement for ISIS (and who wouldn’t want to replace anything named ISIS!). Its cost of $130 million dwarfs that of the payroll system. This article, published by the Institute of Electrical and Electronics Engineers, a respected worldwide organization with over 400,000 members, provides a good chronology of the inept oversight and management that was the trademark for implementing the system. It may cost another $100 million to overhaul it and undo the errors to vital student records.

There are other examples of costly SNAFUs; you will find them in one of my earlier articles.

The reaction to major failures by the Board is usually of the day-late-and-dollar-short variety.

Board Member Tamar Galatzan wanted an audit of why the rollout of MISIS was such a calamity. Excuse me, Ms. Galatzan, didn’t you and your colleagues think of authorizing an independent audit of the testing and results prior to implementation? That’s what is supposed to occur prior to the launch of important systems.

According to Howard Blume’s article in the LA Times, her reaction about the future of MISIS was, “But it might take us a little longer than we had expected or hoped to get there.”

Not a word of concern about the cost.

I attended a Neighborhood Council meeting where Galatzan appeared, purportedly in her capacity as a sitting LAUSD Board Member. She has been trying to make the rounds of NCs in her district lately. I am sure it is a coincidence that these visits fall close to the upcoming election on March 3rd.

I and other stakeholders asked her about the LAUSD’s history of failures.

Her answer: “We were lied to!”

I have no doubt administrators lied.

The sad truth is that those entrusted with any organization’s finances have to assume there is risk of misinformation, if not outright lies, when it comes to assessing performance and results before rollouts. The LAUSD Board does not get it. Did they not learn from earlier failures or from the well-publicized debacle of Kathleen Sebelius’ mismanagement of ACA’s implementation? They are disconnected from the real world. They are unaccountable and do everything to downplay the loss of many hundreds of millions of dollars – funds that could have been applied to address worthy objectives.

Despite their sorry record, it will be an uphill battle to unseat them on March 3.

If enough teachers get behind some of the challengers, there is a chance to force runoffs. I only hope the teachers and education activists will make a concerted effort to get out the vote.

When the City Council announced a “compromise” with Brian D’Arcy, boss of DWP’s labor union, over the scope and conduct of an audit covering two non profit trusts, my eyes rolled.

An audit with restrictions is not a legitimate audit.

I suggested a number of audit steps that City Controller Galperin could apply to make the best of a bad hand. Unfortunately, he was never given a chance. No surprise when you are dealing with people who do not believe in transparency.

An editorial in the Daily News provides an excellent summary of what Galperin was up against, so I won’t go into the details here except to say the objection D’Arcy’s people raised about the auditors’ extensive note-taking is enough to prove the union was never serious in its negotiations with the City Council. Kind of like Vladimir Putin’s strategy in dealing with the west over Russia’s interference in Ukraine.

Where does this impasse leave us?

The court has to rule on the union’s appeal of the decision that supported the city’s right to audit the trusts without restriction.

If the appeal fails – and it should – then the city will have leverage to conduct a real audit, including the power to subpoena anyone or anything.

But will the City Council go the whole nine yards if given the opportunity?

My guess would be no. After all, there was no sound logic in compromising to begin with. Why would the Council care now? It was obvious that politics trumped the public’s interests – D’Arcy’s history of directing millions of dollars to candidates for city offices saw to that.

Controller Ron Galperin and City Attorney Mike Feuer appear to be the only ones willing to push back. The Mayor,for whatever reason, seems to prefer standing on the sidelines despite being denied the right to appoint management representatives to the boards of the non profits .

It may take a while before the court rules on the appeal. Ron Galperin steadfastly wants to withhold the next $4 million installment. But there’s still $12 million in cash sitting in the trusts’ accounts we may be able to recover. The city should ask the judge to order the trusts’ assets frozen until the case is decided. It would be a shame if the funds were transferred beyond the reach of the city.

It is time for the Mayor and City Council to get on board with Feuer and Galperin to protect the interests of the residents and ratepayers. If they cannot do it on this issue, then what good are they?

Have you tried to schedule an appointment for a license renewal lately?

I received a renewal reminder in mid-January. The expiration of my license is March 18th.

Within a week after receiving it, I attempted to schedule an appointment at the DMV.  I tried several offices in the area – the earliest appointments were in early to mid-April.  Does me a lot of good.

I called Assemblyman Adrin Nazarian’s office for assistance.  The field rep confirmed my suspicion that the lack of timely appointments was due to the surge of applicants caused by the passage of AB 60, the bill authorizing the licensing of illegal immigrants.

Put aside the divisive politics for a moment.  When the legislature passes a bill that creates a reasonably predictable response – and certainly anyone in Sacramento could have figured AB 60 would send people flocking to the DMV – would it not make sense to staff offices accordingly, even extend hours into the evening?

Better yet, why not grant automatic 30-day extensions to those of us with the misfortune to have their renewals fall in this timeframe?

I suggested that to Nazarian’s field representative.  He doubted anything could be done.

“Why not executive action,” I asked.  Once again, he could not see that happening.

I guess Governor Brown is too preoccupied with laying track for HSR.

The rep did say he would pass along my suggestion to the Assembly Member.

My next stop – State Senator Hertzberg.

I will keep you posted.

State Senator Bob Hertzberg didn’t wait long after taking his oath of office to make a splash in the state’s  political scene.

He introduced SB8 – the Upward Mobility Act.  The name is more of a euphemism than a meaningful title.

Purportedly, his proposal is designed to stabilize the state’s tax revenue, a highly desirable goal. However, one would expect a somewhat revenue neutral effect from a plan marketed as a means to provide more steady and predictable income for the state. But Bob’s plan is designed to increase revenue by $10 billion per year. In other words, it is less a stabilization plan and more of a tax increase.

It begs the question: what segments would be hit by the tax and for how much?

Since it is a mixture of regressive sales taxes on most services and a general reduction in personal income tax rates, there will be a mixed bag of results.  Bob further muddied the water by saying the bill “examines the corporate tax structure to incentivize both business investment and the payment of a decent and reasonable minimum wage.”

Examines? What meaning can one draw from a weasel word like that in the context of the subject? In this case, it implies a plug which will enable the state to increase revenue to $10 billion, or whatever level is ultimately targeted.

In other words, SB8 is a very open-ended and unpredictable proposal from the taxpayers’ standpoint.

I hoped to get some answers from watching Conan Nolan’s interview of Hertzberg last Sunday on NBC. None were provided. Bob did not offer any explanation, but Nolan did not even bother to ask what groups would bear the brunt of the $10 billion increase.

Certainly, Bob must have the information at hand.  After all, when you toss out a number – especially a large amount – there is usually some math and logical assumptions behind it – maybe even a financial model in an Excel spreadsheet!

The only thing our Senator has disclosed is how he would apply the money, which leads me to believe he has not got a clue as to how the tax increase will be apportioned, only that the tax structure will be manipulated in a manner to produce the desired revenue.

Bob said a new structure is necessary to power a 21st Century economy.

All well and good, but he defines that economy as based on the information and services sectors.  They are very important drivers of future growth, but his dismissal of manufacturing’s importance is extremely shortsighted. Too bad, because although it has diminished, manufacturing accounts for 25% of the state’s economic activity while employing only 8% of the population. It would appear there is room to grow this very productive sector. And believe me, productivity equates to more taxable income.

We need diversification to help create stabilization. Our dependence on the service sector is one of the problems we face today.  Many service jobs do not pay well and lack career paths.  Manufacturing jobs are ideal for middle-class workers who lack advanced technical skills needed in the information sector, but who are adept at mastering production processes. No tax strategy should be formed without diversification in mind.

Hertzberg wants input, but it would help if he were more transparent about the cost of SB8 to the taxpayers. He also needs to come clean and refer to it as a tax increase.

The Playa Vista Tech campus is an example of an effective model for creating business activity. It acts as a magnet that attracts cutting edge firms in the industry.

But will it create real growth, for both the city and the region?

Can this approach be adapted to blighted areas, long neglected by the city?

Mayor Garcetti made much of Yahoo’s announcement that it would move from Santa Monica to Playa Vista. He was particularly happy about the 400 jobs that came with it.

Really, though, these are not new jobs. They are coming all the way from far-off Santa Monica. Many of the employees probably live within the Los Angeles city limits and are unlikely to move from their present residences or change their shopping habits. Ultimately, some may choose to move to new housing in or near the Playa Vista complex, but that largely amounts to shuffling people around the region.

Yahoo is undoubtedly already paying Los Angeles business tax to some degree for its Santa Monica operation. Therefore, the business tax bump the city will receive may not be as significant as expected.

It is important to note that Yahoo is not moving its Burbank office. Burbank still beats Los Angeles for being business friendly.

Who will fill the space in Santa Monica left behind by Yahoo?

Of course, no one knows. It would be great if a replacement arrives from outside the region or state, but it is more likely to come from the city of Los Angeles, offsetting much of the advantage the city earned from the Yahoo move.

What we need to know is the composition and characteristics of the tech center’s new occupants. Is the mayor focusing on net new business for the region, or is he simply attempting to fill the campus with any tech company, from anywhere? The former provides definite benefits; the latter more or less shifts the economic impact in our regional economy, to the extent businesses are drawn from the local market.

It would help if Garcetti would share his objectives and ask for an independent analysis laying out the targeted net effect of the tech center for the city. Progress could then be tracked against the forecast. If the strategy just relocates existing businesses in the region, it is time to return to the drawing board.

Regardless, the basic concept is sound as long as it promotes real growth wherever it is implemented. It is also important to design clusters that cater to the middle class.

Why can’t the strategy be used to inject life into blighted sections all too prevalent in other parts of the city? For example, how about Valley Plaza in the East San Fernando Valley?

I fear the tired old mixed-use retail and residential concept being planned for nearby Laurel Plaza will ultimately be applied at Valley Plaza. We do not need another NoHo Arts District in the East Valley. Retail is not an economic engine – at least one that creates good-paying jobs. And the residential aspects do not come close to addressing affordable housing needs.

Let’s be bold and condemn the blocks south of Victory, north of Oxnard and east of Laurel Canyon all the way to the Laurel Plaza holdings. Re-zone the area to industrial and do whatever it takes to attract manufacturing. We can offer incentives just as the mayor did for Yahoo.

Los Angeles should look to Reno, Nevada for inspiration and ideas. The Biggest Little City has been on a roll these last few years, attracting Apple, Tesla and, just recently, Switch. Not only will these companies add billions of dollars to the Washoe Valley/Northern Nevada economy, many of the new jobs will be of the solid middle-class variety, the very type of jobs that are needed here to relieve unemployment among semi-skilled and skilled workers who were displaced by the recession.

High tech jobs are very desirable, but the city appears to be fixated on them at the expense of the middle class labor force. An unemployed manufacturing laborer will face a tough time, if not impossible barrier, to land a job in a tech cluster similar to Playa Vista’s.

We need to encourage and foster industries that form an employment path, one that enables workers to develop new and more competitive skills that will help them progress.

Otherwise, we can expect a continuation of the barbell effect the 2020 Commission feared. We will be on a path leading to a work force skewed towards burger flippers and application geeks, with very little in between.

How many burgers can a geek eat?

I was glad to hear Inglewood is in line for a new NFL stadium. The location sure beats the congested downtown site our City Council and mayor were trying to push.

Any major project – whether a stadium, commercial or residential – carries with it promises of new revenue and economic growth.

The promoters of the Inglewood stadium are assuming that the tax revenue generated would be more than sufficient for the city to reimburse the investors for required infrastructure improvements to the surrounding area.

Aside from whether it is fair to provide any form of assistance to the investors, can we really bank on estimated economic improvements developers and politicians put forth?

It depends in part on whether you believe commercial projects are similar to a zero-sum game concept – an improvement in one area produces an offsetting effect in another.

The answer has much to do with what I call discretionary substitution…..and few segments of the economy are as discretionary as entertainment. And the NFL, as any major sport, is pure entertainment.

For a broad range of residents, available dollars for entertainment are limited. Whether a family goes to Disneyland or a professional football game is a mutually exclusive decision for all but those with deep pockets.

Another factor is availability of free time. Many wealthy people do not necessarily have an abundance of it. They are rich in part because they devote significant time to their business affairs. The average family, on the other hand, is consumed with staying above water; their time is devoted to making ends meet.

As a result, there are trade-offs when it comes to what events or activities we choose to entertain us. To some extent, the discretionary spending deck gets reshuffled with each new product entering the market. There are still 52 cards, and the card values remain the same. The odds of winning at solitaire are unchanged. You substitute a Disneyland ace for one from the NFL.

Price points for major sports admissions are skewed heavily towards high-rollers. Corporations and other large organizations purchase blocks of tickets and use them to entice clients and as perks for key employees. But there are budgetary limits. Most companies want assurances of value in return as they would for any other form of marketing or compensation. It is very reasonable to assume that a company may replace ticket purchases for, say, Kings games for the NFL.

Where does that leave the Kings or other teams?

They will market the available seats to other buyers in the chain, who will make their own substitutions, and so down the line it goes.

What about the client or employee who receives a ticket gratis from a company?

Almost always, the recipients are on their own for concessions – a pretty expensive bite at any venue. That may translate to fewer nights out at a restaurant or movie.

For a new stadium’s positive economic impact to pan out, you need an abundance of deep pockets, something LA has. There are enough wealthy individuals and firms who will spend more than they otherwise would if the NFL comes to town, so I expect there would be an uptick in the region’s net revenue and economic activity if a team is secured.

Adjacent neighborhoods may realize an improvement in quality of life, as would certainly be the case in Inglewood, although there would be hidden costs as well.

But how much will the net benefit be to the local communities and the greater metropolitan area?

It will be important to discount projections to account for the ripple effect of discretionary substitution, as complex an analysis as one can attempt. Although extremely challenging, it is a task government needs to perform if it is to fulfill its due diligence obligations to the public. It is debatable whether local governments make an honest effort, if at all, to understand all of the key ins and outs.

Inglewood will probably come out a clear winner because the ripple effect will mainly hit beyond its borders. Los Angeles – both the city and county – could realize a modest benefit (allowing for costs of managing additional traffic and safety), especially if many fans visit from out-of-town and fill hotels, but little benefit should be assumed to the extent attendance and participation is drawn from the general population.

Property tax revenue would experience a big bump, and state income tax on the players’ earnings would not be chump change (that’s assuming the new team comes from outside the state). But how much of that will filter down from Sacramento to local governments?

Residents and stakeholders have to be on guard for gung-ho assumptions. It is important that voters in communities adjacent to Inglewood scrutinize the deal, too. After all, we share the same freeways, airport, and hotels. Emergency services overlap, too. Residential and commercial streets flow into each other – traffic is a shared liability.

I welcome the return of the NFL to our important sports market, but we better understand the deal to be sure it is as positive an addition to our greater economy as suggested by its supporters.

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