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.
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,”