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Archive for May, 2010

Council Member Paul Krekorian told participants at last week’s Valley Alliance of Neighborhood Councils meeting that he returned $800,000 of discretionary funds to the city’s general fund.  He said it represented virtually all such monies allocated to his office.

City Controller Wendy Greuel is asking that the city ends the practice of providing discretionary funds, some of which comes from the sale of city assets, with a portion of the proceeds going to the Council Districts where the assets were located.

This raises two questions:

  • If the city sells assets (i.e, parking structures, meters)  won’t a few City Council districts earn a windfall?
  • If Controller Greuel is truly committed to eliminating the process, shouldn’t she disclose the amounts she had at her disposal when she served in the Council?  It has been less than a year since she occupied the seat in CD2, now held by Krekorian. 

Don’t get me wrong: I am not suggesting Greuel spent the money inappropriately, but if she is going to take a firm position on this practice, she should open the books on how Council Member Greuel used the funds.

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I congratulate Council Member Smith for having the courage to cast a politically incorrect vote.

The City Council’s approval of an Arizona boycott is an example of politically driven reactionism.  Now, I don’t care if the Council wants to pass a motion condemning our neighboring state’s controversial immigration law, but I do care about the consequences of using economic leverage as a weapon against another sovereign state.

Boycotts can be a two-way street.  Did the Council even research the volume of bilateral trade between the two states?  Perhaps someone should consider the potential for business lost to companies in California.  That would be nice given the dire economy on this side of the Colorado River.  Arizona has economic problems of its own, much like California it was due to the collapse of the real estate market. We need to cooperate with our adjacent states to stimulate business, not suppress it.

But what about the perceived immorality of the new law?

The City Council and Cardinal Roger Mahony compared it to Nazism.

Oh, please.

The Wiesenthal Center weighed in on the comparison.  While the organization expressed displeasure with the language of the immigration bill, it took issue with the Nazi Germany connection. 

On the subject of comparisons, why doesn’t anyone ever accuse opponents of practicing Stalinism?  Uncle Joe’s systematic starvation of Ukraine led to 7 to 11 million deaths, not to mention millions of others murdered throughout the Soviet Union and occupied Eastern Europe.  It would be equally over the top to equate that with this matter, but our officials are playing for votes – there aren’t that many Ukrainians in LA (for the record, I’m half).  It would be another story if our Council were located in Calgary, Alberta.

Then there’s the matter of who the Council boycotts.  The track record is one of inconsistency. How do you justify boycotting Arizona but not China? 

Let’s see, besides its long history of human rights violations, there is China’s economically harmful practice of piracy. It costs the international economy, particularly California, billions of dollars.  Is the City Council going to boycott China?  Too late for that – the city gave approval for a Chinese electric car manufacturer to set up shop in LA. That should offset a bit of the piracy haul.  Perhaps we will grant the Somalian pirates a franchise to operate off of the harbor.  That would cut down on container shipments and help clean up the air at the port.

Janice Hahn’s plea to the Dodgers to close down their practice facility in Arizona is yet another example of political pandering at its worst.  I wonder if Janice will be watching the Lakers when they play on the road in the upcoming round of the NBA playoffs?  I think the feed will be originating from ……….Phoenix?

I think the Council needs to block the broadcast lest the airwaves turn us into Nazis.

Also, don’t turn on the TV.  Some of the power comes from Arizona.

Postscript:  Council Member Paul Krekorian attended tonight’s Valley Alliance of Neighborhood Councils meeting.  He was asked how he felt about the boycott.  Mr. Krekorian said he was not in attendance; therefore, he did not cast a vote.  However, he did state his position quite clearly:  although he believes Arizona’s law is bad, there was no need for the City Council to weigh in.

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Go to the election page and read the May 12th update concerning Michael McCue’s bid to reclaim his seat in the upcoming NC elections scheduled for May 27th.

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When the City Council approved a wage deal with the Coalition of City Unions last year, it abdicated any responsibility it had to protect the taxpayers.  In a city where over 80% of the general fund is related to compensation, to surrender the most important tool in the budget kit – layoffs – represents complete surrender to the labor unions.

David Zahniser of the LA Times pointed out the impact of the layoffs proposed in the mayor’s budget.  It will cost the city over $32 million due to the poison pill in the contract – so much as one layoff will trigger a series of deferred raises.  Pretty powerful poison.

Poison pills would be fine for James Bond in the event he were captured by SMERSH or SPECTRE. I’m sure he would prefer them over Goldfinger’s laser beam.

However, the pills are ill-advised when the interests of the city are at stake. In this case I wish we had handed them to the Council Members who approved the deal. 

Now, the Budget and Finance Committee appears to be ready to swallow them.  Chairman Parks announced an additional thousand layoffs will have to occur to offset the mayor’s overly optimistic budget assumptions for the sale of parking rights.

Although the compensation savings from the layoffs will be greater than the payout to the coalition employees, one cannot ignore the contempt for the taxpayers the Council showed when it approved the contract.   $32 million is a lot of change to leave on the table during tight economic times.

The Times article went on to quote CAO Miguel Santana: “If there’s one lesson we learned this fiscal year, it’s that the sooner we act, the less painful it is for both our workers and our constituents.” 

Interesting choice of words.  Who is Santana referring to as “constituents?” 

It can’t be the taxpayers. We are the only ones who have felt the pain so far.

According to the Times, Council Member Koretz thought the $32 million made sense when the layoffs were being pitched at 4,000, not the much smaller number being considered now.  One wonders where Mr. Koretz’ sense was when he voted for the poison pill.  He was probably sitting on it.

The damage is done.  There is no undoing the City Council’s capitulation to the civilian unions – again.

Before this is all over, we will all need some pills.

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Despite a trillion-dollar pledge to support the Euro and rescue Greece, along with other floundering EU members, there is no guarantee the plan will work.

It will take commitment by Greece and the other debt-ridden countries to overhaul their economic policies and change established social fabrics.  Unless aid recipients make a ninety-degree turn, the plan could amount to flushing money into the Mediterranean Sea.

I am not as concerned about the governments implementing austerity programs as I am about the citizens embracing the inherent life-changing elements.  Central governments can come and go in Europe much faster than can occur here.  The parliamentary form of government provides a quick and unforgiving means of disposing the ruling parties – ask Gordon Brown.

If the people of Greece (or Italy, Spain, Portugal and Ireland) don’t buy into the plans, you can expect them to toss their leaders through a show of no confidence.  Angela Merkel of Germany has already experienced the wrath of the voters in the country’s key Westphalia district due to her support of the bailout package – it may force her to form a new coalition.

Although Germany’s economy is relatively healthy, replacing Merkel with a leader less inclined to assist the poor countries in the EU could play hell with the Euro and send it sliding further.  Some say it could fall to $1.20 this year even if the bailout package succeeds.

Even that level spells trouble for the US.  Our nation (and state) are counting on exports to lift us out of the recession and restore employment losses – sorry, no one is calling for anything beyond restoration in the next few years.  We need the dollar to be competitive;  a plunging Euro will hurt us dearly.

California and Los Angeles will not be able to cope with a prolonged continuation of the recession unless they make structural changes along the lines the EU is insisting on from Greece.  No one – the Legislature, City Hall or government labor unions – have shown willingness to change. 

Would the Feds come to our aid as the EU is with Greece?

Possibly, but that could bring many other aspects of the economy down in the process.  It’s a lose-lose proposition, not to mention the outcry it would create in the other states. 

The next two months will determine if we have the substance to resist government as usual.  Sacramento and City Hall will wrestle with their budgets, but what solutions will they offer?

We cannot count on others to extricate us.

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I wrote an article over a week ago concerning how the Mayor was proposing to decimate the City Attorney’s budget.  The article also included a reference to Controller Greuel’s budget.  I noted that her cut was only half of Trutanich’s.

Wendy called me last Sunday to provide me with her perspective.  I always appreciate responses from elected officials – whether they agree or disagree with my positions.  Laura Chick did the same several weeks ago.

As outspoken as I am on issues, I truly respect elected officials who do not hesitate to weigh in.  It is only fair that I relay their thoughts to my readers.

I was critical about Wendy’s perceived silence over her budget cuts, suggesting in so many words that she did not want to ruffle the mayor’s feathers.  She pointed out that she was proactive in protecting her department’s budget, saving it from the draconian cuts incurred by the City Attorney ( Trutanich subsequently recouped half of his cuts).  She shared her memo to the mayor with me.

We used the opportunity to cover other ground.

Greuel denied being influenced by the IBEW.  She explained she did not ask for the union’s support when she ran for Controller.  In her view, the IBEW was involved because it disliked her opponent Nick Patsaouras.  I told her that candidates have to take responsibility for their backers – whether they were courted or not.  It is important to distance oneself if the connection is undesirable.

She reminded me that she received no union support when she ran against Cardenas for City Council  (by the way, I voted for her in that race).  That’s admirable, but it goes to show what a few years in office can do, even to those that run as reformers.

We were both concerned with how Parks is running the budget process.  He has not made an attempt to identify the core priorities of the city, as Wendy suggested is necessary in her op-ed piece in the Daily News.  Instead, he is doing the usual one-off, departmental interviews.  In other words, not seeing the forest for the trees. 

She also expressed support for pension reform in the op-ed.  I told her my concern is that people are talking about reform without actually pursuing it.  Wendy said she has been talking to representatives from business and labor searching for ideas.  She said her style is collaborative, not confrontational.  I can’t argue with that, but time is running short for the extensive changes that must be implemented.  As time passes, the unfunded liability grows.  If we wait too long, it will be too late to reverse the momentum.

In my view, employees need to contribute significantly more to the defined benefit plan.  New employees should be covered under a defined contribution plan with a partial match from the city.

According to Wendy, much of what she is trying to accomplish, aside from audits, is not receiving publicity – for example, fighting for her budget.  I have to admit, the media gave that scant, if any, attention.

She will always have a place to say what she wants in Village to Village.

That applies to any elected official.

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If public officials resort to fraud in the inducement, or withhold critical information on decisions before a legislative body, should there be consequences?

I think so.  That’s why I introduced a motion at the April 28th meeting of Neighborhood Council Valley Village asking the City Council to authorize the City Attorney to conduct an investigation of the DWP’s behind the scenes handling of last December’s IBEW labor deal and the series of rate increases it proposed in April.

The Neighborhood Council Valley Village Board agreed unanimously.

In my opinion, there was something missing in the proposals the utility Board presented to the City Council – critical data relevant to the implications of their passage.  The missing data concerned the financial condition of the DWP relative to its credit rating.

The absence of this information headed off any possibility of timely public debate concerning the soundness of the proposals.  I would wager to say that had the public known the DWP’s credit rating was in jeopardy, neither proposal would have made it for a vote.  The Council would have thrown them back at the DWP for further analysis.  For that matter, the Council did nix the original rate increase proposal, but only after the DWP changed its story in response to public outrage.

Pursuant to the motion, NCVV issued letters to Council Members Krekorian and Koretz; the text follows:

Much has been said about transparency, or lack of it, at the DWP. Council Member Eric Garcetti went as far as accusing the utility of lying after its attempt at framing the controversial series of rate hikes proposed in March as a funding source for green energy generation.

Mr. Garcetti may not be far off the mark in his assessment.  It was not until the City Council pushed back that the DWP changed its story, claiming the increases were necessary to protect its credit rating.  It makes one wonder – how long had the DWP known its credit rating was at risk of being downgraded?

There appears to have been no known market swing over the last several months – or longer – to account for a sudden realization that the ratios the credit rating agencies follow were deteriorating.  Since the internal analysts at the department must monitor the key parameters critical to the debt structure, it follows that the DWP was aware of a possible danger to its credit rating last December when it proposed the five-year labor deal, subsequently approved by the Council.

The disclosure of relevant facts when seeking approval for a major financial commitment, such as a significant labor deal or a rate increase, is not only advisable, it is absolutely necessary.  To withhold critical information, especially adverse information, is gross negligence at best and fraud at worst.

Neighborhood Council Valley Village Board of Directors voted unanimously on April 28 to request that you introduce a motion authorizing the City Attorney to conduct an independent investigation of what DWP management knew about possible exposure to a credit downgrade in the months leading up to the labor deal, and through the date when the rate increase was first proposed.

If such an investigation indicates critical information was withheld from the City Council, appropriate disciplinary action must be taken against those responsible.  The people of our city deserve both transparency and honesty.  Anything less cannot be accepted or tolerated.

You can view the actual letters by following these links:

https://phinvv.files.wordpress.com/2010/05/krekoriandwpletter5-3-10.pdf

https://phinvv.files.wordpress.com/2010/05/koretzdwpletter5-3-10.pdf

Austin Beutner wants to forget the past dealings between the City Council and the DWP.  That is unacceptable – managers and board members who either intentionally or inadvertently deceived the City Council need to be disciplined, if not fired.

How can we build a relationship of trust when no base for it exists?

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There have been plenty of people warning about the situation in Greece and its possible repercussions for the world economy. 

I penned my concerns earlier this week.  I closed by saying how fragile times are.

Today’s market plunge is further evidence of the great uncertainty we face.  Uncertainty calls for conservative assumptions.

I, along with many other local activists, have been critical of the rate of return assumptions used by state and local government pension funds.  Their overly optimistic outlook has been driven by politics, not common sense.  As a result, the unsustainability of government pension plans has been masked.  The unfunded liabilities will bring down the state and local governments.

Our politicians are impotent to do anything about it for fear of angering their selfish union sponsors.  They talk about pension reform, but do nothing about it.

All levels of government have been equally irresponsible in managing fiscal affairs.  We have been enablers by blindly returning the same people to office.

We can do something about it in November.  We won’t change the world overnight, but by dumping the spineless federal, state and local officials that currently represent us, we will be off to a good start. 

Voting is the most powerful weapon of change – not Molotov cocktails or rioting in the streets as we are seeing in Greece.  Let’s not be afraid to use the ballot box.

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A major decline in California’s April tax revenues has more than wiped out gains reported in the last few months.

According to an article in today’s LA Times : “For months, the Democrats who dominate the Legislature have hoped they would be able to balance the state’s books with the help of an upswing in revenue, delaying any substantial budget cuts.”

I assume there were many Republicans who felt the same way.

Obama’s “politics of hope” do not apply to budgets.  As ugly as the economic facts are, they must form the base of any forecast – not hope.  Hope has no place in the equation anymore than it does to someone playing the slots. Hope does not improve your odds or bring in more money.

I will never forget what an aide to the mayor said at a VANC meeting when the phone tax (Measure S) was on the ballot.  Her argument was that the city would not be able to function without the tax revenue.  I asked her if there was an alternative plan in the event the measure went down to defeat.  Her response – “we are hoping it passes.”  Quite an alternative – eh?

The state should not depend on court cases to close the budget gap either.  Tuesday’s court decision to allow Sacramento to tap local community redevelopment funds is estimated to bring in $2 billion, to the detriment of cities. The decline in tax revenue amounts to $3 billion.  Easy come, easy go.

Another interesting quote from the article was from Stephen Levy, director of the Center for Continuing Study of the California Economy: “One pillar of the budget solution just got destroyed, and there’s nothing that can happen between now and June that can get back the $3 billion.”

That statement is an example of the shortsighted forecasting of our elected officials, not just at the state, but the city as well.   The “pillar” was nothing but a column of sand based on spurious exuberance.

It is obvious that no one in Sacramento was considering seasonality of revenue nor factoring in what high unemployment was going to do to tax collections in April.

Will the state come up with a balanced budget in June?

I sure hope so.

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But not that Grease.

Will the crisis in Greece be the precursor of California’s fate – or LA’s for that matter?

A debt ridden country with a large heavily unionized government workforce – sound familiar? 

Just as in California, the unions in Greece are showing no willingness to participate in the rescue of the economy. 

In order to start receiving assistance from  the $146 billion loan package approved by European nations, Greece must make some deep cuts in spending and raise taxes. Those cuts include reductions to government compensation, including pension benefits and other perks.

According to the LA Times, “…workers have been mounting furious protests against the prospect of drastic government cuts. Officials are bracing for a general strike Wednesday over the new austerity plan, which includes higher fuel, tobacco, alcohol and sales taxes, cuts in military spending and the elimination of two months’ annual bonus pay for civil servants.”

A two months’ annual bonus?  That makes the IBEW labor deal look like an indentured servant arrangement.  The DWP workers should fire D’Arcy for not negotiating that in the contract.

I listened to a labor union leader on CNBC’s Europe Squawk Box last night (sorry, can’t find the video link).  He was defiant and unyielding.

If Greece cannot implement its austerity program and goes down, the likelihood of Italy, Spain and Portugal following suit increases.  Can anyone say “dominos?”

The parallel between the EU and the United States cannot be overlooked.  Although members of the EU are sovereign nations, they share the same currency – same as the states and territories of the USA share the dollar.  The United States cannot afford to allow a single state to become insolvent.  However, the situation is worse here – because of the massive federal deficit, a bailout of California (or New York, Illinois or any other sizeable state) is out of the question – it will send our economy into a tailspin, the current recovery notwithstanding.

States cannot declare bankruptcy.  California will have to make even deeper cuts and implement massive pension reform.  Even then, higher taxes will be inevitable, which could send a stampede of businesses and individuals running for the borders.

These are very fragile times.  We must demand action from our elected officials and labor leaders to fix the mess they created.

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