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Archive for May, 2011

If the Feds are looking to cast a wide net on bribery at LA’s Building and Safety Department, it seems logical they will not allow organizational lines to restrict the investigation.

Many FBI agents are CPAs. They are trained to look beyond the epicenter where fraud is discovered.  Fraudulent activities tend to have tentacles that reach into related areas, so just as competent CPAs will expand the scope of an audit once undesirable practices are encountered, it is almost certain a few other departments will undergo scrutiny.

But which ones?

Planning would have to be near the top of the list.  Controversial projects not only require safety inspections, plans must be approved as well. Developers or contractors who are bold enough to bribe BSD inspectors would probably not be bashful about approaching Planning Department officials with generous offers.

For that matter, any department that grants large contracts will come under some degree of suspicion if the FBI determines there is a culture of corruption in City Hall – God forbid!

If the scope of the investigation expands, one can only speculate as to the impact on the mayoral race. Certainly, City Controller Greuel’s competence will be challenged (not difficult to do under normal circumstances).

What about Austin Beutner? As the mayor’s roving departmental manager, a widespread investigation will cast a shadow over his abilities to serve the city as the chief executive.

Time will tell.

All of us need to follow this story.

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Memorial Day weekend traditionally marks the beginning of summer in the United States, especially in California.

So let’s get into the spirit with a traditional instrumental that evokes the sun and surf.

Let us not forget that Memorial Day has a reflective side to it as well.

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Governor Brown’s projected general fund budget for 2012-13 will grow by almost $12 billion, reportedly reflecting a rate of growth never before realized in the state’s history.

It is perfectly rational and necessary to project revenues, but it is irresponsible to forecast only the upside.

The recent news that revenue will be about $6 billion higher for the current year, while welcome, must be tempered by the impact capital gains had on the size of the increase

The market had an exceptional year bouncing off the bottom, but gravity will eventually take hold and pull it back down to some degree –  maybe not next year, but eventually. Corrections and recessions will always be a part of our future, so planning for them is an absolute necessity.

Once again, it appears as if elected officials are not looking beyond a year. 

Before earmarking anticipated revenue increases to restore programs, it would be wise to bank most of the increase for a couple of years – assuming the revenue continues to grow beyond next year.

There are limits to how much can be reserved.  Prop 98 requires the state to spend 40% of its revenue on education, probably one of the most ill-conceived propositions ever approved by the voters.

No one will argue that education should receive a large chunk of the budget, but mandating a specific share free of performance and cost control objectives is like loaning money to your ne’re-do-well cousin for his bait shop on Lake Lackalucka.

There will be other bubbles similar to what we experienced from the dot.com and real estate booms.  For certain, we are nowhere near out of the woods on real estate.

The sad part is most people will allow the state to continue down the narrow path it has followed for decades.

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No sooner had City Controller Wendy Greuel plastered email inboxes with another example of “her efforts to save taxpayer money” proclamations, it became apparent that her shock and dismay with the parking gold card program, which was designed to cancel parking tickets for those with City Hall connections, were disingenuous.

The mayor rebutted – Greuel helped author the program and was briefed on it, her denial amounting to crocodile tears. She even used the service while she served on the City Council.

This is a classic case of political cannibalism:  two unsavory officials willing to devour the other in order to escape culpability.  Bring out the toothpicks.

I’m sure the investigative reporters of the Times, News and Weekly will examine this delectable feast in more detail.

But what does this mean for the mayoral campaign?

Was Mayor Villaraigosa simply being defensive when he pointed the finger right back at Greuel? Does his countercharge provide a clue as to who he might (or might mot) be supporting in the 2013 race?

At a minimum, the mayor gave Greuel’s opponents some heavyweight campaign material to use against her.  It would be difficult for him to support her after effectively branding her a liar.

Will he back Garcetti for lack of a better ally?  It doesn’t seem to me that he would support Jan Perry.  It’s safe to say he won’t back Kevin James.

Beutner?  I can’t see Villaraigosa getting behind the most unexciting candidate in the race, even if he was one of the mayor’s appointees.

Yaroslavsky? I think egos would get in the way.

I have to guess that Garcetti appears to be the most likely beneficiary of the mayor’s machine – as long as the Council President avoids controversy.

For certain, Villaraigosa does not stand on the moral high ground in this scandal. That’s not where he is trying to come from, although that’s what he would like us to believe. No, he is simply not going to tolerate anyone embarrassing him – friend or foe.

In any event, we must all insist on answers from both Greuel and the mayor.

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Paul Krugman, a Nobel Prize-winning economist who writes a column for the NY Times, made several points in today’s Daily News op-ed section regarding the rebound in the domestic manufacturing sector.

All of his observations are correct: the declining value of the dollar has spurred manufacturing activity in the United States, but the job gains have been modest.  Pay and benefits for the new positions aren’t the greatest.  Unemployment is down.

It’s what he didn’t say that concerns me.

Underemployment is one of the most troubling aspects of this recession.  A Gallup Poll suggested that 19% of Americans were underemployed, that is working below capacity (i.e, 30 hours or less per week. The rate also includes unemployed persons).

Even as unemployment drops, I believe underemployment will remain stubbornly high. Companies have learned to get by with fewer full-time employees. That’s bad news for demand – and for a robust recovery.

Krugman goes on to belittle attempts at bolstering the dollar.  We can certainly have a legitimate argument over when and how to support the value, but Krugman puts too much weight on the role a slumping greenback plays in bolstering manufacturing.

Indeed, the slip in the dollar’s value against other currencies works as a stimulus program for manufacturing, but it is potentially inflationary, too. Almost all domestic manufactured products contain imported components which will increase in price.

There is another danger to allowing the dollar to fall – interest on US Government securities will rise as foreign investors bid the yields up.  I believe we have been spared that in part due to lower growth resulting from the recession.

It is foolhardy not to have a strategy in place to gradually support the dollar. The nation’s already billowing debt and deficit will explode if the government is forced to pay more in interest.

I would expect more from a Nobel Prize-winner than to dismiss the long-term importance of a stable currency unit as an important component of our economic health, and to ignore the impact of underemployment.

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The Reverend Harold Camping is predicting the rapture and the end of the world at 6 PM on May 21. He made the same prediction back in 1994, but blamed its failure to materialize on a math error he made in his calculations.  I assume the good reverend failed the state standardized test for mathematics. He should have hired me to develop an Excel model to do the number crunching for him. I guarantee results.

For those of you who are not lifted to heaven by the rapture, here are some useful links and information:

Many of you have pets and it would be a shame if all they find of you after 6 PM on Saturday are the clothes you were wearing  when you were vaporized, so please do the responsible thing and register your furry companion for post rapture care:

http://www.aftertherapturepetcare.com/

Let’s face it – we are a car culture in LA.  There is a high probability you will be parked by a meter when the event occurs….and boy, are parking tickets expensive!  That’s why you need the city’s parking gold card.  You don’t want to face the final judgement with unpaid tickets on your record.  The gold card: don’t leave life without it.

Massive earthquakes are expected to usher in the rapture.  You can expect crevices to open up and swallow motor vehicles.  Well, don’t worry.  The city has already announced a pothole repair blitz for the weekend of June 4-5.  Just call 3-1-1 to report needed repairs to your street.  Of course, the number may have to be changed to 6-6-6.

We can expect total devastation in some parts of the city.  It might be welcome in some areas such as Laurel Plaza in the East Valley.  Nevertheless, follow this link to the CRA for information on redevelopment. Ask for Chris.

Lastly, I know many of you will be concerned about the state of our local government. Rest assured, the Antichrist will be sworn in as the new mayor and the Four Horseman of the Apocalypse will replace the City Council.  We can expect responsible governance.

You’ll still be able to reach all of our current elected officials – they will not be impacted by the rapture.

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If you are a company considering making a major investment, one which could define your cost structure for generations to come, it would be wise to tread carefully.  Arming yourself with as much information as possible would not only be advisable, but essential.

The same applies to individuals.  I would no more invest a sizeable sum in the commodities market than I would at a roulette table. 

Although there are no sure things in this world but death for all of us and taxes for some of us, some things are more uncertain than others.

I don’t invest in areas where I lack sufficient knowledge.  Likewise, I don’t take positions on matters of such complexity without listening to all sides.  Even then, there is no guarantee I would feel comfortable with taking a stand.

The members of Neighborhood Council Valley Village were asked to weigh in on what could be the most challenging intergenerational issue facing us, even greater than pension reform.

A representative of the Sierra Club asked the board to pass a motion in support of the DWP eliminating coal as a power source by 2020. Due to the constraints of time, her presentation had to be brief and could best be described as an executive summary.

It was good information and food for thought. However, to ask for a motion in support of the 2020 goal (or any goal, for that matter) with an accompanying letter of support to the City Council on an issue so complex, with cost ramifications that could strain an already financially challenged municipality, was disrespectful of the deliberative process NCs should follow.

It was as if an insurance salesman said “trust me and sign on the dotted line” while placing a contract with a prospectus in front of you.

I was surprised to learn that about eighteen other neighborhood councils had already passed similar motions at the request of the Sierra Club and sent letters of support.

I am fortunate to be a member of a neighborhood council that believes in the vetting process and does not rush to judgment on matters of this scale. There was a spirited discussion with members taking opposing positions. No motion was passed; no letter of support authorized.

When it was suggested that members of the NC DWP Oversight Committee make a presentation on the subject at another date, the Sierra Club representative said, as if issuing an adverse warning,  “they will simply oppose this position.” I guess transparency is not part of the club’s agenda these days.

Los Angeles and most of the developed nations will migrate to alternative energy in time.  Coal as a source could also be reduced through conservation and passive solar improvements. However, China, India and other emerging economies will thumb their noses at the rest of us and burn away.

There should be no hard and fast timeline. Technology improves over time – we can expect the same for alternative energy.  There is no need to lock a major segment of the city’s power generation capacity into applications still in the early stages of development.

It would not surprise me if the state’s objectives will be relaxed once the impact to consumers’ utility bills becomes apparent.  There will be pushback from the ratepayers.

Although fossil fuels will generally rise in price over the long run, the conversion to solar will not be as simple as “build the infrastructure and the rest is free.” Maintenance and replacement of components is still an unknown, not to mention the source of materials and manufacturing.  It is naive to assume the United States will be the leader in production in this very competitive world.

Note: I am a member of the Sierra Club and other environmental organizations, but I am also a ratepayer.

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