For someone who purportedly wants to lead the charge to fight homelessness, City Council member Felipe Fuentes is quick on the eviction trigger.

Acting as if he were LA’s version of the Soup Nazi, Fuentes told Sunland Tujunga Neighborhood Council, “No space for you!”

My colleague at Citywatch, Denyse Selesnick, did an excellent job of summarizing the timeline of actions leading up to Fuentes’ sudden notice to Sunland Tujunga Neighborhood Council that the locks to the facility they share with the councilman’s office would be changed on October 15th.  The NC will be denied access to its small, 300-square-foot office space. That’s next week; close enough to Halloween to constitute trick-or-treat, with emphasis on the trick.

The space arrangement goes back to former council member Wendy Greuel’s days, when STNC was part of CD2.  Her successor, Paul Krekorian, honored the agreement. The memo of understanding does state that 30 days notice must be provided to the NC in the event the space was to be re-purposed.

Replacing city-chartered STNC will be two independent non-profits: LA Family Housing and the LA Conservation Corps. So much for being part of the “city family” – a term local politicians often use to describe an invisible bond among the components of municipal government. Make no mistake: STNC is an official part of the city’s structure of governance. Fuentes appears to believe otherwise.

Now, I am not taking a position as to whether the two non-profits are more or less worthy to occupy the space. Nor am I arguing that Fuentes can or cannot act on the termination provision in the MOU.

What I am saying is an entity created under the city charter deserves better treatment. The space arrangement has been in existence for eleven years, plenty of time for the neighborhood council to become ensconced in its setting, with a track record of assisting the community (including the homeless, I might add), and acting as a conduit between the public and the council member’s office.

Pulling the rug out from under STNC is not only disruptive to its mission, it will likely take a large bite out of its annual $37,500 budget.  Unlike the non-profits who will soon occupy the premises, neighborhood councils cannot raise funds.

To add salt to the wound, Fuentes did not offer any assistance to relocate STNC despite having leverage with the General Services Department. Surely, there were other options as far as city-owned facilities go or services to facilitate an orderly relocation.

Why would the council member act so recklessly?

As Denyse Selesnick suggested, it may have something to do with several STNC members who openly supported Patty Lopez in her successful challenge to incumbent Assembly Member Raul Bocanegra. They did so as private citizens; not in the capacity as elected board members.

Bocanegra was Fuentes’ former chief of staff who helped his former boss by placing Fuentes on his office payroll while he was waiting to take his seat on the City Council – a much better deal than unemployment!

Bocanegra was upset by Lopez despite an overwhelming advantage in money and organization.  It was undoubtedly embarrassing  to both men.

It also challenged Fuentes’ reputation as a person who pulls the strings.

It is reasonable, then, to assume Fuentes acted vindictively.  There is no other logical reason for treating duly-elected, respected  civic volunteers so callously.

Yet another example of City Hall’s disrespect for the neighborhood council system.

Donald Trump first teased us with his tax plan, then disclosed a very vague framework of how it would lower taxes for most and reduce the deficit. His key assumption?  It would invigorate the economy and thereby promote growth in tax revenue.

While there is logic to the correlation between economic growth and lower taxes, the impact on the deficit is another matter.  No where did he offer any rudimentary analysis of how deficits would be reduced, much less by how much.  The Donald is supposedly wealthy enough where he could have engaged a think tank to model the plan and provide the public with some data to chew on.

But, no.

Just an example of political pablum designed to win votes from those easily seduced by the promise of lower taxes.

California State Senator Bob Hertzberg is doing his best Donald Trump impersonation with  SB8, a bill he introduced that would raise state taxes by $10 billion per year through a combination of subjecting most services to sales tax while lowering personal income tax rates – a regressive combination if there ever was one. The senator had the audacity to name the bill “The Upward Mobility Act.”

Euphemisms are usually concocted to divert attention from the true purpose of underlying actions, and Bob created a classic one.

According to the California Budget Policy Center update issued in April 2015, 36% of the state’s revenue came from sales tax in 2011.  48% came from personal income tax.  Any version of Hertzberg’s plan would likely close that gap.

My best guess is SB8 may not be as regressive as it appears, but, regardless, the additional $10 billion per year has to come from our pockets. But Bob, like Donald, is not sharing key details.

It would be nice to know what segments will bear the brunt of the increase.

I think he knows, at least he alluded to that when he suggested Governor Brown, who expressed skepticism of the bill, would like it if he knew the details.  As reported by the Sacramento Business Journal, Hertzberg said: “People are making assumptions on limited information and it’s just not accurate. The governor is a brilliant guy … I think he will like the proposal when he sees what it will look like.”

Please do share the details, Bob not only with the Governor, but with the public as well.

The senator has taken to social media to promote his bill. He cited an article in Forbes that complimented him for supporting the application of sales tax to services. The author correctly points out that higher-income earners pay more in gross sales tax, but fails to mention the disproportionate effect it has as income decreases. The article was not an endorsement of Bob’s bill – it supports a much lower sales tax rate on services and criticized him for keeping the already high rate unchanged.

The bill is dead for 2015, but Hertzberg will reintroduce it in 2016.

Trump will be out of the picture by then.

The tax stage will be all yours, Bob.

At least in California.

I’ve been buried with work and have not had time to write, but that did not stop me from reading Ron Galperin’s audit report on change orders at Los Angeles World Airports, DWP and other departments.

The overhaul of the Tom Bradley International Terminal at LAX is $415 million, or 68%, over budget. The variance could get worse. It’s fortunate that the managers responsible for the project and general management do not fly the planes using the airport, or a disaster similar to the Asiana Flight crash at San Francisco International would be the standard fare.  The pilots of that flight failed to monitor the instruments; LAWA failed to monitor the construction budget.

The audit report faults LAWA’s lack of a formal policy.

That’s being very kind.

Even without a policy, it is pretty hard to miss a budget variance of that magnitude. I think almost all of us would know if our household spending was as awry….and we would take corrective actions. Even a poorly run business would know if it were materially off target on a key line item or project.

What this points to is a fundamentally deficient management culture, one that is effectively unethical, even if not criminally so.

A publicly-held corporation would be compelled to disclose this information to the shareholders.  It would be unwise to hide such a failure, because the analysts would surely discover it.  Investors do not like nasty surprises.

Obviously, no one at LAWA thought to escalate the effect of the spiraling costs and bother informing the public. If Ron Galperin had not authorized the audit, no one would have known.

Or maybe they felt it wasn’t necessary to do so. After all, it’s not as if it would come out of the responsible managers’ salaries. It might not even impact their annual bonuses.

Relying on an audit to identify major deficiencies is like relying on a lung cancer diagnosis to determine that smoking has been bad for your health.

If the City Council and mayor are serious about a “back to basics” approach of running Los Angeles, they would not only take immediate corrective action, but some heads at LAWA would roll down the runway at LAX.

As I pointed out in an earlier article, there is potential for the 2024 Olympics to provide a substantial economic boost to the region.

The City Council will vote on a resolution to give the mayor power to enter a binding contract with the USOC. The contract would also make us responsible for any cost overruns.

I could accept such a condition if the organizing committee has broad powers to decide on the construction, renovation or repurposing of facilities. I accept the fact that the cost of security, traffic control and crowd management will be high, but the prospects of record-breaking revenues are high too, owing to a new TV contract after the current one expires as of the conclusion of the 2020 Games, and the likely mega-influx of Asian tourists – particularly from Olympic powerhouse China. But the cost of new venues could make or break the finances.

So, before the Council authorizes the mayor to proceed, there must be strict limitations, perhaps defined as a cap, on infrastructure costs. Our current major facilities are good enough for professional sports and Division 1 NCAA contests, so there is no reason to spend on big ticket improvements. We need to ask if an Olympic village is even necessary, as opposed to dispersing teams to college dormitories or hotel complexes, the latter approach becoming more popular for nations with elite programs.

It is also critical for the Council to consider the impact the games will have on general infrastructure projects throughout the city.  It would not be wise to have the DWP tearing up streets to replace water mains in the months leading up to the competition.

It gets down to drawing a line in the sand with the IOC and USOC, organizations who have proven themselves incapable of exercising or encouraging financial common sense, and who,  because they are playing with other people’s money, bear little risk if a city goes bust.

If our terms are deemed as too restrictive, too bad.  In time, more and more cities will push back and the ruling Olympic poobahs will finally get the message that the world has had enough.

Of course, they could always rely on nations run by authoritarian regimes to cough up sums they cannot afford.

How would Tehran and Pyongyang appeal to the public as future regular destinations? Maybe we can leverage them by having some nuclear weapons inspectors pose as athletes. Our team mascot could be a geiger counter.

The local press has lately focused on one key controversial element of the proposed DWP rate increase, one which the Mayor, City Council and General Manager Marcie “D’Arcy” Edwards would rather not discuss.

That’s the 8% transfer fee and the utility tax (10% paid by residential users and 12.5% by commercial entities). Together they will absorb around 20% of the gross increase and direct it to the city’s general fund, where it will be used for anything other than upgrading the neglected power and water infrastructure.

While allowed by the City Charter, this practice is unconscionable and the transfer component may even be declared illegal by the courts.

In all, around $250 million per year for the last several years has been diverted from what would be a source of funds available to make considerable headway in long-overdue capital improvements. That alone makes the transfer morally unethical.  It is like siphoning cash from your kids’ college savings accounts to buy a new car.

Yet the mayor, his allies and Marcie Edwards like to call the tax and transfer a dividend.  They say we are the shareholders of the DWP.  We are simply paying ourselves.

I know of no other dividend where the recipient does not have the right to decide how to spend it.

In a recent op-ed piece in the LA Times, Gregory Lippe ( a Valley CPA) and Richard Moss (a former DWP Commissioner) suggested keeping the proposed increase free of any tax or transfer fee. This would allow the additional revenue to flow 100% to improvements.

The two gentlemen pointed to the mayor’s position that the increase has nothing to do with feeding the city’s budget.

Perhaps we should refer to it as a supposed position because the mayor has not shown any indication to end the levy on ratepayers’ payments.

It’s time for the mayor to show his true colors. Will he back Lippe’s and Moss’ very sensible approach?

Garcetti’s track record does not provide cause for optimism.

He has failed to make any reforms at the DWP.  His pick for GM, Marcie Edwards, co-whined a letter with Brain D’Arcy defiling Ron Galperin’s audit of the out-of-control non profit trusts, and she has yet to remove any manager associated with the costly failure of the billing system. It appears the DWP is on a path of business as usual – no accountability, no integrity.

Does this type of management warrant a 20% premium?

It is going to be tough enough assuring the increase will be spent wisely and used appropriately.

The Olympic Games have been devolving for many years into a grotesque spectacle of over-spending, if not virtually pushing some cities and nations towards bankruptcy.

The Athens Games exacerbated Greece’s already strained economy in 2004 with a loss of $14 billion and produced a landscape dotted with crumbling facilities.

Beijing left China with little usable infrastructure to show for its $44 billion outlay.

Russia’s $50 billion spectacle in Sochi fared better than Beijing’s games in the sense it resulted in lasting capital improvements, but one has to wonder whether the location will ever pan out into a popular destination, one worthy of the massive investment.  It’s a lot to spend on a city of only 300,000 people far removed from the rest of the country. It does not help that Putin is doing what he can to isolate Russia from the rest of the developed world.

The two most successful Games in history were held in the United States – Atlanta and Los Angeles, although Atlanta’s was marred by an act of domestic terrorism.

The Los Angeles 1984 Games succeeded beyond any standard of achievement, making $250 million on an investment of around $500 million. It was the first Summer Games to turn a profit since 1932 when they were held in ………Los Angeles.

The only new sporting venues – the velodrome and aquatic center – were heavily financed by corporate sponsors.

The legacy of these games was not unsightly ruins and Olympic-sized debt, but an endowment that still thrives today.  I’m talking about LA84.

But times are different.

The cost of security alone would be a budget-buster for many host cities and their national governments.

Also, the IOC has done nothing to discourage the senseless splurge by some governments who view the Games as a  a testimonial to their autocratic and corrupt regimes.

Boston, the United States entry for the 2024 Summer Olympics, seemed to be heading down a path to financial suicide, but an alarm rang in the mayor’s office when the city had to sign a contract that would make it liable to pay for any losses.  Give Mayor Martin Walsh a gold medal for having the courage to walk from the deal.

Considering the history of excessive and unconscionable costs, should Los Angeles dare fill the void left by Boston?

If any city in the United States can stage a successful and affordable Games, it is Los Angeles.

Record-breaking revenue would seem to be certain. The location, pleasant climate, diverse entertainment venues and beaches will likely attract a record number of visitors, including many from Olympic powerhouse China, a nation which made its debut at the Games in 1984. Back then, it was impossible for Chinese to travel abroad in any significant numbers. I would expect an armada of charter and scheduled flights carrying PRC citizens will land here this time around.

A surplus would almost be certain, too, if we insisted on managing the event our way, and not the IOC’s.

Just as in 1984, corporate sponsors will come through.  Various government entities would have to provide most of the security and transportation control, for which they should be reimbursed off the top of receipts.  Security for London 2012 came to an equivalent of $800 million and ticket sales were around $1 billion.

Don’t forget about our share of television money, which may also set a record.  NBC’s current contract to cover the games runs through 2020, so a bidding war will be likely among the major networks.  Existing production facilities and available technicians in Los Angeles should create efficiencies that translate to lower production costs, a consideration which will not lost on the bidders.

To assure a surplus, the Los Angeles organizers must stand firm against constructing new facilities. If our stadiums and arenas are good enough for UCLA, USC, MLB, NBA and NHL, they are good enough for the rest of the world.  Any costs related to sports infrastructure should be limited to clearing deferred maintenance and any technology upgrades to manage the events on the field or in the water. Temporary facilities will have to be constructed for certain sports and enhancements made to college dormitories to house the athletes, although the trend has been for many teams to stay in private facilities.

Our message to the IOC should be about financial sensibility.  Given the immense money pit forming in Rio de Janeiro, the IOC may be more receptive to the concept. If not, there will be fewer and fewer bidders for the Games in the years to come.

Thoroughly Modern Millie was a Tony Award winner.

State Senator Bob Hertzberg is rolling out his own sequel.  The only problem is the production cost.

Actually, the real problem is we will be the ones bankrolling it if Bob gets the green light. It is the most expensive tax scam concocted, more than California HSR.

I’m talking about SB-8. Bob’s name for it is the Upward Mobility Act.  Who can’t like something with a name like that? Leo Bloom and Max Bialystock would be proud of the deception used to promote it.

Hertzberg claims it is about “modernizing” our tax system, to align it with our service-sector dominated economy of today. He correctly points out that the current approach to taxation was developed back when the goods-producing sector (manufacturing, mining and agriculture) was the revenue driver.

However, his modernization logic is irrelevant and baseless.

Service providers and their counterparts in the goods sector pay income taxes, as they always have.  A dollar of net income counts the same for a service sector firm or provider as it does for a manufacturer, mining operator or farmer. It always has.  The size of each broad industry segment in relation to the other does not impact total income. Income, from whatever the source, is fungible, just like money.

Bob’s energy would be better utilized if he led the charge to cull tax breaks and government programs that have outlived their usefulness, as well as tackle the state’s very expensive employee compensation and benefits.

So why is he blowing smoke by falsely correlating the objective of SB-8 with the ever-changing nature of the economy?

Because he wants your money: $10 billion more per year of it.  No matter the noble purposes he has in mind for the additional taxes, it is going to cost a large segment of the population big time.

Part of the increase, perhaps a big chunk, will come from levying a sales tax on services.  No matter how you cut it, it will disproportionately  burden middle income taxpayers, who would pay it on vital services such as insurance, tax preparation, legal costs to defend themselves in court, communications, car repairs…you name it.  It is not too different in concept from the Stamp Act of 1765.

The sales tax rate has more than doubled since 1962. Let’s make an already regressive tax even more onerous by applying it to everyday services!

But wait!

Bob said there would be a reduction in income taxes across the board.

Let’s see – half of the state’s income tax revenue is paid by the top 1% of earners, according to the state’s Legislative Analyst’s Office,  very progressive to say the least. Perhaps Bob will reduce rates for middle-income taxpayers much more than for the wealthy, but even he recognizes the dangerous volatility associated with relying on the wealthiest segment to carry most of the income tax load. Such a move would magnify that dependence. On the flip side, a proportional cut to all brackets would greatly diminish income tax paid by the wealthiest.

No matter what, middle- and low- income earners, who pay relatively little personal income tax today, stand to benefit the least from an income tax cut. They have far more to lose than gain with SB-8’s strategy.

According to an article in the Sacramento Business Journal, Governor Brown expressed reservations about SB-8:

Politically, the idea of applying the sales tax rate to professional services would look like an attempt to “burden the ordinary folks.” 

The plan “may be logical with some green-eye-shaded accountants, but I don’t know that from the political point of view that is very viable”.

In response, Sen. Hertzberg said the governor had not seen the completed tax proposal and he thinks Brown would change his mind.

“People are making assumptions on limited information and it’s just not accurate. The governor is a brilliant guy … I think he will like the proposal when he sees what it will look like.”

If anyone is to be blamed for limited information, it is the senator, himself. Hertzberg introduced the bill back in December 2014.  That’s seven months ago, sufficient time to share with the public its criteria and mechanism….and maybe even an estimate summarizing how much of the $10 billion per year each segment of the population could be expected to bear. And he hasn’t even briefed the governor despite the wide-ranging implications of the bill?

He is behaving like a car salesman who withholds negative information about the product in hopes of inducing the customer to sign on the dotted line.

At least there is a lemon law providing some degree of protection for the customer who buys a shiny new car.

If SB-8 becomes law, good luck on getting relief.

SB-8 would be the largest permanent tax increase in the history of the state. It would require a voter initiative for final approval, but do not expect transparency in how it would be worded in the ballot. After all, it is all about modernization.


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