The City of Los Angeles intends to offer $1.325 billion of Tax and Revenue Anticipation Notes. The proceeds from these notes will be used to prepay the City’s $945 million contribution (almost a $100 million increase) to the City’s two seriously underfunded pension plans and to finance its day to day operations for the next 11 months.
These highly rated Notes are being offered to the public pursuant to an Official Statement, which, according to the Securities and Exchange Commission, needs to be true and complete in all material respects. This disclosure requirement also applies to elected officials, including Our Dear Mayor, Antonio Villaraigosa.
According to the All About Me Mayor as he takes his final victory laps around town, life in LA has never been so good. We have never been safer. He made major strides in mass transit and fixing our streets, filling more potholes than ever before. He improved the environment. He created more parks. And because of his bold leadership and willingness to make tough decisions that were unpopular with the powerful union leadership, the City has reformed its pension plans and will have a $5 million budget surplus in five years.
The Official Statement is considerably more restrained than Villaraigosa, but nevertheless is a marketing document designed to sell the Notes that are needed to finance our cash strapped City’s operations throughout the year. In particular, the Official Statement states that the City has made “significant progress in reducing the Structural Deficit and is now on the path towards fiscal sustainability.”
But the 132 page Official Statement is more of a data dump since it lacks a meaningful “Management Discussion & Analysis” section as is the case with corporate offerings of securities.
For example, there is no specific discussion or analysis of the impact of the eight year, $1.4 billion increase in salaries, benefits, and pension contributions on the City’s ability to perform core services such as the repair and maintenance of our streets and sidewalks.
Nor does the City address how it is going to eliminate the $700 million cumulative deficit over the next four years if the City’s labor unions for some strange reason do not agree to the concessions outlined in the Mayor’s proposed budget that was adopted by the City Council with barely a peep of skepticism.
Nor is there any discussion about how the City proposes to fund the $30 billion needed over the next 10 to 15 years to cover the unfunded pension liabilities (assuming a realistic investment rate assumption) and to repair our streets, sidewalks, parks, trees, and the rest of our failing infrastructure.
Nor is there any discussion of the City’s basic lack of liquidity that requires the City’s short term borrowings to be paid out over 11 months and why the City needs to “borrow” $20 million from other funds in December.
In the next week or two, Mickey Kantor’s LA 2020 Commission is scheduled to present a factual report on the status of City’s finances as well as its business environment and economy. But will this unrepresentative Commission* assert its independence from our Elected Elite and their self-serving cronies that occupy City Hall and provide us with the true facts and figures and a detailed, no holds barred analysis of the City’s perilous finances? Or will this Commission tip toe through the tulips and be an “Unholy Alliance” of all knowing City Hall ring kissers that view the wallets of the other 99% as their piggy bank?
We have a new mayor who appears to be more interested in governing than glitz and who is looking to fix our broken City. So what better time than now to air our dirty laundry and present new, fresh alternatives that will allow the City to engage in real budget, pension, and work place reform.
Mickey, we are counting on you. Do not let us down. While we are not Detroit, our future as a world class city is in doubt.
(* The members of the LA 2020 Commission have an average age north of 65, are for the most part home owners with an average household income of over $500,000, and, more than likely, toed the party line and favored Proposition A, a measure that was soundly rejected by 55% of the voters. There are no representatives from the Valley, Neighborhood Councils, the manufacturing, entertainment, or tourist industries, and, most importantly, the next generation of Angelenos that are going to be stuck with the bill for the follies of our current “leaders.”)
Jack Humphreville is the LA Watchdog writer for CityWatch, President of the DWP Advocacy Committee, Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and Publisher of the Recycler