Ever wonder how the City of Los Angeles came up with the estimate of $6 billion in savings over 30 years on the current version of the IBEW contract?
I’m still wondering since the detailed assumptions underlying the calculations have not been released.
So, I took it upon myself to take a stab at the largest component.
According to the Patch, the raise deferral from 2013 to 2016 amounts to savings of $385 million. That’s the net amount we will not have to pay to the well-compensated DWP workforce for three years.
The article goes on to say that the deferral will save $3.9 billion over 30 years.
It’s a very hypothetical calculation that appears to be based on the assumption of investing the $385 million at around 8.9% for the 27 years following the three-year deferral period.
Perhaps there are other factors as well, but the city seems reluctant to disclose them.
Ask yourself, who besides Bernie Madoff would guarantee 8.9% on your investment for 27 years?
City Hall, of course!
If you have access to the city’s underlying assumptions, please share them with me.