Archive for June, 2009

There are so many issue piling up on my plate.  I didn’t need another one, but the City Council and Mayor deemed otherwise.

At least I will not have to comment extensively.  I have been beating the drum on the pension issue for many weeks.  Anyone who has been part of my distribution knows where I stand on the dangers of the unfunded pension liabilities at both state and city levels, not to mention growing employee compensation costs in general.

 The City’s latest attempt to deal with the deficit disturbs me to say the least.  I won’t reiterate all of the details contained in this article in the  June 25th edition of the Los Angeles Times, but I encourage you to read the entire story by following this link:  http://www.latimes.com/business/la-me-la-budget25-2009jun25,0,1596972.story 

There are a few paragraphs that are worth reading closely:

 The Los Angeles Area Chamber of Commerce sent Mayor Antonio Villaraigosa and the City Council a letter demanding that taxpayers receive more information on the financial consequences of the proposed five-year labor agreement with the Coalition of L.A. City Unions, which represents 22,000 workers.

Chamber president Gary Toebben warned in the letter that the agreement is poised to “deliver the kind of short-term political gain and long-term financial pain that has contributed to California’s fiscal implosion.”

With both funds experiencing large financial losses last year, the city’s required contribution is expected to increase annually from approximately $660 million next year to more than $1.6 billion by 2013-2014 — or more than a third of the city’s discretionary budget, according to a May 12 analysis by Acting City Administrative Officer Ray Ciranna. That increase “far exceeds any projected revenue growth” and is not sustainable, Ciranna wrote.

Sally Choi, who heads the City Employees’ Retirement System, said the city is required by law to complete an actuarial analysis of the early retirement plan. Choi said she has not seen such an analysis. “I’ve only seen what’s been reported through the unions and in the papers,” she said

Council President Eric Garcetti believes the increased employee contributions included in the proposed package would cover the additional burden created by accelerated early retirement.  But what about the overall unfunded liability?  Look at the projected increase in the City’s portion of the contribution in boldface above.

 Councilwoman Wendy Greuel called the plan the “quickest, most humane, most cost-effective way” to reduce the size of the city’s workforce.

Wendy is our rising City Controller.  As many of you know, I campaigned aggressively against her in favor of Nick Patsouras.  I questioned her financial competence.  As part of the City Council’s Budget Committee, she routinely ignored the warning signs of economic decline and its impact on revenues, not to mention the unsustainable employee benefits plans. It is a statement such as the one she made above that further validates my assessment of her.

How the Mayor and Council can even consider this package without a new actuarial study is proof of their incompetence, political cowardness and dependence on the unions. This is not even qualify as a budget patch, much less a plan.

Those of us in CD 2 have an opportunity to elect a sensible person in September to fill Wendy’s seat.  Please consider one of several alternative candidates.  The campaign will start in July, with forums following soon after.  Do not be persuaded by the slick mailers the big names and interest groups will unleash like a tsunami. 

As always, feel free to share my comments with anyone.  Let me know if you would like to receive previous comments I made on this subject.


Paul Hatfield, CPA

Treasurer, NC Valley Village

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Welcome to my new blog

If you want an unabashed view of local politics and issues, you have come to the right place.  You will find opinions and references covering  a wide range of subjects affecting us in Valley Village, all of Los Angeles, California and even Incline Village on the shores of Lake Tahoe. I welcome feedback and will consider your suggestions for this site.  I am also receptive to including your writings and links.  Do not hesitate to contact me.

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View of the lake from the Thunderbird Lodge

View of the lake from the Thunderbird Lodge.  Photograph by Paul Hatfield.

Those of you familiar with lakes in the East and Midwest know of the damage caused by invasive species.  Among the worst are quagga and zebra mussels.  They have also been showing up in Lake Mead.  They can foul water intake pipes resulting in costly maintenance.  They are no fun to walk on either.  The Tahoe Regional Planning Authority is being proactive in preventing their spread to the crystal clear waters of Lake Tahoe by using mandatory boat inspections.  These critters can attach themselves to boats, hide in bilges and survive for long periods.  Someone transporting a boat from Lake Mead could inadvertently introduce these species to Lake Tahoe by merely launching their craft.  The North Lake Tahoe Bonanza, the local paper on the north shore, provides excellent coverage of this and other dangers to the lake.

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Before I studied accounting, I earned a degree in economics from the University of Richmond.  I still use the knowledge and logic that course of study offered as much as I use the core fundamentals of accounting. 

During the second semester of my senior year at Richmond, I was searching for a relatively easy course; I found one- it was Economic Geography.  What made it even better was that it was part of the Education Department curriculum, not the Economics Department.  Those were the days when women represented a solid majority of the teaching profession.  It meant I would have a class predominately comprised of co-eds, an added bonus and a rarity in that era!

At the first meeting of the class, in a lame attempt to make my presence known to the many females in attendance, I asked the professor what I could expect to learn from the course.  He lowered his glasses, stared at me and said, “Mr. Hatfield, I know why you are attending this class.  To be frank, I don’t blame you.  I suppose you have earned a change of scene.”  Some laughter ensued and embarrassment overcame me. He then said, “It is possible that you may rise to a position of some relevance one of these years. If you do, I want to be sure you know that it is not wise to plant wheat in the tundra.”

That simple advice has stayed with me my entire life and ranks among the best I have ever received.  I only wish real estate developers had attended the same class.

The media regularly reports the growing foreclosure crisis and its consequences, especially in California where wide swaths of abandoned homes have become the norm in the far-flung developments that dot the “exburbs” of the Inland Empire and Northern Los Angeles County. These places share one thing in common- someone tried to plant wheat in the tundra.

You can build the finest homes, using the finest materials and workmanship, but still end up with a ghost town.  Large scale bedroom communities derive much of their value from accessibility to services and employment centers.  Those factors are important for retirement communities as well.  While much has been made of the role played by sub-prime loans and easy credit (deservedly so), these outlying developments would have eventually decreased in value- they were simply not economically sustainable. It would have taken an ever-growing economy, with employment opportunities shifting farther away from major cities, and affordable transportation to support the existence of these massive tracts.

Now we are left with modern versions of Bodie State Historical Park- abandoned structures slowly surrendering to the elements. It is ironic that Bodie is one of the many state parks facing closure; the same fate should be considered for its contemporary cousins.  Given the choice, I would keep Bodie open.  At least it has historical significance.

In addition to the physical decay our modern ghost towns face, there are health and crime issues.  Perhaps we should classify them as Tweekervilles.

There are long term financial consequences as well.  If we want to head off the related crime and health issues, 24/7 security and maintenance will be required, and for what benefit? We need security and maintenance in our cities, not in ghost towns!  It gets worse.  Federal stimulus funds will be used to rehab properties and offer them as affordable housing.  That is a noble objective but does nothing to cure the underlying, fundamental defect of location.  Where will the inhabitants work and how will they get there? These injections will simply amount to good money after bad. Let’s use the money where it will do some good, for example, rehabbing existing multi-family housing where the residents will have access to essential services and jobs.

So what should we do with the abandoned tracts, then?  Salvage the useable material where it is economically viable, relocate the remaining families and bulldoze the homes.  Let nature take care of the rest.  In the long run, this approach will be far less costly. Maybe someday we can dedicate one of the abandoned sites as a new Bodie and charge a fee to visit an example of man’s hubris, ignorance and greed. 


Paul Hatfield, CPA

Treasurer, NC Valley Village

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