It seems like it was
just yesterday that Eric Garcetti beamed and preened as he boasted about how
the City Council had done such a great job of financial management that LA was
able to borrow a record $1.3 billion — a third of the operating budget — at
short-term interest rates so low it was virtually free money.
Actually, it was two
weeks ago that this remarkable feat was achieved by bludgeoning most city
workers — except notably DWP workers who keep getting pay raises — into
agreeing to pay 2 to 4 percent more for their health care in exchange for
guarantees the city will pay the soaring cost of insurance no matter how high
premiums go in future years.
Part of the deal
included deferring pay raises and overtime payments into the future rather
than face an unpaid furlough day off nearly every week.
In other words,
salaries were protected, which meant pensions of 75 to 90 percent were
protected and health care costs were capped by agreeing to put up more money
now to relieve the pressure now of a $500 million deficit.
Wall Street was delighted
and charged the city only .27 percent interest on the money needed to pay bills
this fiscal year while awaiting tax revenue to arrive.
But mortgaging the
future comes with a price and that became apparent on Tuesday when the city’s
credit was downgraded by Moody’s Investor Services,
making it more expensive for the city sell the $500 million in long-term bonds
later this month and the $300 million or so needed to tear down and rebuild
half the Convention Center to benefit AEG and its planned NFL stadium.
Councilman Bernard
Parks — the only member who even knows what is in the city budget — said the
downgrade “came as a surprise.”
Surely, he was
jesting. What did he or anyone think was going to happen when they guaranteed
pensions that are unfunded and lifetime health benefits no matter what
they cost and all they got was enough money out of workers pockets to get
through this year and maybe next before the bills start coming due?
Moody’s expressed concern over those soaring
worker costs combined with the city’s inability to raise taxes because voters won’t support any increases.
more difficult position compared to most of its large-city peers nationwide,
even those with similar economic challenges and modest financial
reserves,” the analysts wrote.
pension reform is having less people relying on the pension system,”
Santana said.
The City’s credit rating is vastly overstated.
Just look at our thrid world streets. Then consider the sorry state of our sewers, sidewalks, street lights, parks, buildings, bridges, and out infrastructure in general. And the City’s accounting systems are in the Stone Age, allowing the pols to cook the books.
But yes, the City’s credit is better than the State’s credit rating. But be careful, 40% of our revenue goes through the thieves in Sacramento.
I think credit ratings where we owe .27% city and .40% state show that we are in worse shape than any of us were ever told.
We spend money for votes like drunken sailors!!! All for the pols and a lousy job they are doing for the people.
Our political government is a catastrophe – it stinks. I understand why it is hard to get out the vote now – people are completely disillusioned.
LA looks more like Sao Paulo, every day.
LA politicians share the same ethics as Third World. It is someone else’s money to be used for their own personal gain. Get used to it.
The low rate for the ST borrowing simply reflects low short term risk – not confidence in the city’s management.
Moody’s takes the long view and doesn’t like what it sees.
I know they could care less about over-spending and having to borrow. It’s not their pocket-book.
Just an FYI: In July,1978 the DOE mandated the Energy Code. (today, City Hall calls it going ‘Green’) One part of the law, mandated all mfg’s to reduce the amount of energy/current a device uses, so we could begin to save energy for America. Well, over the years thru talented engineering, mfg’s did such a dramatic job of reducing those amps…..there was no need to built additional power plants.
So why the rush for rate hikes DWP???
The DWP presentation on why rate increases are needed emphasized the need to replace infrastructure: water mains and power poles. But the real costs are out of control labor wages and pensions. And the DWP tried to skirt discussing how much of our rates are transferred to the City of LA’s general fund for new levels of waste.
“But the real costs are out of control labor wages and pensions.”
What is even more obvious is that you and I probably could never get these high-paying and pensioned jobs. Relatives and friends are given
first choice. But thst is obvious, isn’t it?
All decisions seem to be slanted, not to customers and residents but to the DWP as an entity.
To July 14, 2011 8:03 AM:
So if you had one of those high paying cush jobs, would you then remain silent?
$1.3 billion — a third of the operating budget
and how much interest paid by the tax payer.. Wow!
Better get those SEATS FiLLED
@ david J barron on July 14, 2011 12:33 AM:
Your quote about energy reducing appliances being more and more efficient – “there was no need to built additional power plant” isn’t quite the whole picture.
First of all, what you are eluding to is called Demand Side Management (DSM) which was very popular in the 90s and is still part of most electrical utility planning including the switch to “Smart Grids.”
In Demand side management, if you obtain enough retrofit incentives such as lighting and appliances City-wide for both commercial and residential customers, you can absorb some growth in customers without a corresponding growth in electrical load deferring the need to add power capacity through purchases and additional power plants.
But even with all those innovations, in a good economy (and with the push for increased density), there will be load growth that will surpass the capacity.
In addition to that, you have two other factors:
1. The aging infrastructure that has reduced capacity and reliability.
2. Federal, State, and Local Government Mandates: For example renewable energy and green house initiative AB 32.
When the utility purchases renewable energy or builds (at a higher cost) it own renewable energy such as wind or solar, the utility (and ultimately the customer has to “pay twice.” That is because the utility still needs conventional fossil fuel (natural gas) power plants AND renewable power generation.
This is because renewable can’t be counted on for base load or spinning reserves (reliability requirements of regulatory agencies to maintain a stable electrical grid and supply).
I truly don’t know how we are going to get our base load energy. Now that we are learning that hydraulic fracturing (fracking) uses the injection of toxic chemicals and clean water into the ground to extract natural gas, hopefully our State and ultimately our Congress will enact a No fracking Act.
If you think that we have problems bringing in oil today, wait until the U.S. runs into greater water shortages. We are so short sighted – we are on a drought period for several years, and then we have one big rain year. And yet we allow drinking water to be used for fracking.
Please write to your elected officials and support their efforts to block fracking in California. It could be your water supply that they are damaging.
I know they could care less about over-spending and having to borrow. It’s not their pocket-book.
Just an FYI: In July,1978 the DOE mandated the Energy Code. (today, City Hall calls it going ‘Green’) One part of the law, mandated all mfg’s to reduce the amount of energy/current a device uses, so we could begin to save energy for America. Well, over the years thru talented engineering, mfg’s did such a dramatic job of reducing those amps…..there was no need to built additional power plants.
So why the rush for rate hikes DWP???
I know they could care less about over-spending and having to borrow. It’s not their pocket-book.
Just an FYI: In July,1978 the DOE mandated the Energy Code. (today, City Hall calls it going ‘Green’) One part of the law, mandated all mfg’s to reduce the amount of energy/current a device uses, so we could begin to save energy for America. Well, over the years thru talented engineering, mfg’s did such a dramatic job of reducing those amps…..there was no need to built additional power plants.
So why the rush for rate hikes DWP???
@Chris Rowe on July 15, 2011 1:09 AM
In answer to your question, how will we get base load power? – From fossil fuel power plants (natural gas).
These fossil fired plants are normally simple cycle gas turbines or combined-cycle gas turbines with heat recovery steam generators (boilers).
http://www.pbs.org/wgbh/nova/programs/ht/tm/3519.html?site=46&pl=qt&rate=hi&ch=4
Even though renewable energy is more expensive by itself, no one seems to be talking about the extra expense of keeping fossil fuel power around instead of it being fully replaced.
So to those so-called Environmentalists who speak about REPLACING fossil fueled power with “green energy” you either aren’t being honest or you don’t know what you are talking about.