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Archive for July, 2011

It is an understatement to say I have harshly criticized the management of the Department of Neighborhood Empowerment.

It’s not a personal issue.  I am acquainted with a handful of the department’s employees, past and present, and have respect for most of them.  There is a desire to do the right thing; what is lacking is the ability. That’s a management problem.

While there is talk of training programs for NC board members, no one is addressing the serious lack of skills downtown.  It is naive to assume that DONE can help implement system improvements when the staff is incapable of administering basic processes.

Failure is rarely more fundamental than what occurred last week.

An E-Blast was sent by the department to its NC distribution on July 25th. The blast contained a link to a budget template NCs should use to submit their budgets.

Fine, but the budgets were due ten days earlier on July 15th. What’s more, the link did not work.  When it was finally fixed, it brought you to a sign-on screen asking for a user ID and password.  Few were aware of a user ID or password to access the template. 

An accountant, who serves as the  treasurer for a neighborhood council, did gain access and put the template through the paces.  He found some serious flaws that would significantly limit its usefulness even if in the hands of trained personnel.

Rolling out a new feature requires a few basic steps anyone should be able to figure out. This includes pre implementation testing performed by users. DONE just threw it out there hoping it would stick.

This event is not the end of the world.  Budgets will eventually be loaded (to the extent they are submitted), but the lack of planning and even less understanding of the  objective is par for the course when it comes to DONE’s management. Expect confusion when the department tries to integrate actual NC spending with the budget data.

When the mayor’s office proposed to move DONE under the Community Development Department over a year ago, I was adamantly against it, as were almost all NC board members.  I am now having second thoughts.

Don’t get me wrong, I do not want DONE to lose its standalone departmental status, but what good is it if the department is incapable of standing alone? Its record of failure is documented by two separate audits, quite possibly the two worst back-to-back audit reports any department has received in the history of the city.  The same team is still largely in charge.  Expecting a different result in the years to come meets the classic definition of insanity.

CDD could have supervised and offered training and structure until such time DONE could walk by itself.  Just as courts appoint a conservator for those with diminished capacity and Major League Baseball stepped in to assist the Dodgers, it sometimes takes intervention by a third-party to right the course. 

In the case of DONE, a partnership between the CDD and NC Board Members might have been the best solution for restructuring.

It would be worth reading my article about a conversation I had with former City Controller Laura Chick over a year ago. Her thoughts about DONE and the role of the City Council in the chaos surrounding the poorly managed department echo my concerns.

Council Member Krekorian should have read it, too.  Better yet, he should have placed a call to Ms. Chick. He might have gained appreciation for the futility of dealing with the dysfunctional organization before issuing his weak package of motions.

I have been involved with the NC system since 2005 when I was first elected to the Board of NC Valley Village.  I have had the pleasure of working with many dedicated board members and stakeholders from around the city.  These are people who have sacrificed extensive personal time only to be largely ignored by City Hall.

We have reached a point where further reliance on DONE will bring the NC system down within a few short years. Board members and stakeholders need to unite and fight for autonomy rather than trust our elected officials and department bureaucrats to do what is right.  A conservatorship of sorts over DONE jointly managed by the CDD and the neighborhood councils might be the best compromise.

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No matter what compromise is reached over the debt ceiling, even if it’s after the deadline, the structural problem that will impact rates will still be very much intact.  That’s why I can’t get too excited over the posturing between the President and the party leaders in the House and Senate.

There is one benefit to the blood feud in Washington:  it may have induced some Americans to pay less attention to the activities of the Kardashians and devote a little time to what really matters – the future of our nation’s and the world’s economies.

Some economists, such as Paul Krugman,  have wondered why we even have a debt ceiling. I don’t agree with his reason as to why the current hand wringing came about, but his logic that another round of debate is unnecessary when Congress already authorizes spending, which implies execution of activities needed to support implementation, makes sense.

The credit rating of the United States will be impacted by the world’s perception of our commitment to spend responsibly over the long haul. Occasional large stimulus spending can be overlooked as long as the government can be trusted to return to sustainable fiscal operations.

But how does the government build trust when it can’t even show progress on the most fundamentally sound measures, such as raising the normal retirement age for Social Security to 70 or 72, withdrawing all US troops from Europe (save for our Naval presence  in Italy which supports the Sixth Fleet in the troubled Mediterranean region), or sunsetting programs that have outlived their usefulness?  How can we tackle the problems of Medicare funding when we cannot implement the most straightforward and defendable spending reductions?

That’s the question the rating agencies, investors and holders of US debt want answered.

The United States Economy is the most diversified one in the world.  It can absorb and recover from a lot of damage, just like a large ship that can stay afloat while taking on water as long as all of the watertight compartments hold.  When one finally breaks, buoyancy is lost and the ship will go down like a rock. 

The same holds for the economy – there is only a hairline difference between maintaining and losing financial buoyancy.  But what is the threshold? Does anyone really want to push the envelope and risk finding out?  Apparently the White House and Congress don’t mind.

When the line is crossed, it will not matter what party is in charge

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Rick Orlov of the Daily News cited a study by a USC Business School professor that recommends the elimination of the business tax.

Professor Charles Swenson claims that businesses will flock to Los Angeles if the tax were either cut substantially or eliminated, and existing companies would expand.

I can’t argue with the logic – lower taxes should induce some firms to relocate here.  Certainly, a business tax free environment would be enough to discourage some existing  companies from moving, but don’t expect a surge in business activity when other taxes in the state are among the highest in the nation.

It is difficult to change a tax out of context and expect it to have the desired impact, especially when our sales and income tax rates are among the highest in the nation.

If we really want to reform taxes and improve economic activity – therefore, create more revenue for the state – we need to develop a predictable, understandable system that is easy to enforce and creates a broader tax base. Oh, and one that helps encourage private sector job growth.

Here’s my proposal:

Implement a flat income tax.  Everything above the poverty level would be taxed at the same rate.  There would be no deductions, credits, adjustments or exemptions.  Because of the poverty level threshold and the elimination of deductions, which would tend to impact the higher earning individuals, there would be a progressive slant to the structure.

Not allowing personal exemptions will certainly be unpopular among large families, but in this era, where demand for cleaner energy will drive up utility costs, it is time to stop subsidizing the Brady Bunch set.  Perhaps this might encourage family planning.  It will discourage the Duggars from ever considering relocation to California and might even encourage Octomom to abandon the state.

Eliminate the sales tax (except for taxes on gasoline).  Sales tax is the most regressive tax imaginable and California has the highest rate in the country.  Eliminating it would not only encourage consumer spending, but would benefit businesses who purchase supplies and other materials not used in the production of finished goods.

Impose a gross receipts tax instead of an income tax on businesses.  However, offer credits against the tax for companies that exceed hiring thresholds.  Companies that create jobs should get a break.

Real and personal property taxes would remain, including the car tax.

California ranks 49th in business friendliness.  If we want to increase employment, we have to overhaul our tax structure.

My outline is just that – an outline.  The devil is in the details.  What rate should we use for the flat income tax?  What hiring thresholds should we set to reduce the gross receipts tax?

This is a discussion that needs to start soon or we may never pull out of the trough.

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Ed Ayers, President of the University of Richmond, gave the keynote speech at the first major event of the Civil War Sesquicentennial.  The Battle of Bull Run, or Manassas as it was known to the Confederate side, was fought on July 21, 1861.

Doctor Ayers is a historian who is noted for his work on southern history, particularly the period around the Civil War.

The East Coast has been enduring sweltering weather of late, so the reenactors must have felt some of the misery of the actual participants.

The battle was unique in one sense – there was a carnival atmosphere that preceded it, with many residents of Washington City (as the Capitol was known in those days) riding down in carriages or on horseback to view what was expected to be a grand display.  Many brought picnic lunches. This may have been the first tailgating event in American history.

Sadly, the festivity gave way to dreadful violence and many of the spectators were swept up in the chaotic Union retreat.

For more on the Civil War, please read my series,  It is complete through 1861, with more on the way.

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The findings from two studies estimate the City of Los Angeles could earn $22 million annually if the downtown stadium proposed by Anschutz Entertainment Group (AEG) were constructed, according to David Zahniser’s article in the LA Times

Sounds great except that both studies were commissioned by AEG.

The project would also entail demolishing and rebuilding a portion of the Convention Center, which would be financed by the city and paid down with some of the additional tax revenue. It is not clear how that was factored into the analyses.

An AEG spokesman called the studies “independent” and suggested they confirmed the optimism expressed by the backers.

Many years ago, doctors commissioned by the tobacco companies used to appear in ads urging their patients to smoke because it was good for digestion.

The city is conducting its own economic analysis, but given the longstanding experience and relationship between AEG and City Hall, we may have to take those findings with a grain of salt.  Speaking of findings, AEG has no plans to make its reports public.

Let’s flip to the Business section of the Times where Michael Hiltzik reported on film subsidy findings.

Hiltzik states: “The great thing about hiring an economic consultant to support your position on a public issue is that it’s never hard to find one who will take your money to parrot your talking points.”

He was referring to consultants at the Los Angeles County Economic Development Corporation who claim that the $100 million annual production tax credit has been a huge success. According to the consultants, in two years the program produced $3.8 billion in economic gains and 20,000 jobs at a cost of $200 million.

The LAEDC study was commissioned by the Motion Picture Association of America (MPAA) whose role it is to lobby on behalf of the production companies. Objective?

Hiltzik writes that other states with film credits have paid more than they have taken in. Furthermore, the subsidies in California are paid on a first-come-first served basis.  He concludes that this method of processing means some dollars are given away to productions which would have stayed in the state in any event.  

However, his most critical point involves a lack of consideration for alternative uses of these monies.

Businesses use capital budgeting to assure they invest limited funds in projects with the best returns.

You will not find a comparable process at our state and local government levels.  There is no thought given to whether it is better to invest in razing and rebuilding part of the convention center as opposed to improving streets for better traffic flow, or reducing the almost century-long backlog of sidewalk repairs.

Would it be better to invest $100 million per year in educating engineers or filmmaking programs at our universities rather than hand out the money to whatever production company is next in line?

Is it possible that AEG and the MPAA will receive consideration not available to core projects related to transportation, infrastructure or education?

Without truly independent studies, we will never know.

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With the permission of Next Media Animation, here is an entertaining telling of Amazon’s battle with California over sales tax.

There is a political commercial preceding it, but feel free to cut it short.  I neither endorse nor oppose the message – the issue is not simple.

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If he stays healthy, Corp could be a surprise pick in the NFL draft.

http://aol.sportingnews.com/nfl/story/2011-07-11/put-these-six-college-sleepers-on-your-nfl-watch-list

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