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Tuesday, September 8, 2009

"Golden Handshakes" enable poor parks management decisions, policies, personnel losses

Besides possible City bankruptcy and other serious citywide issues, the implementation of Mayor Villaraigosa's expensive planned retirement package, aka "golden handshakes", will have a serious detrimental effect on the Department of Recreation and Parks, and Griffith Park in particular. Along with enticing the most skilled senior employees to retire, when coupled with the abusive management of Assistant General Manager Kevin Regan, the pricey retirement packages will encourage frustrated experienced employees and employees sick of the abuse to bail out. Regan's favorite targets appear to be the most productive employees - after all, if you don't do anything, then you don't draw attention to yourself - and the divisions most likely to be impacted are the ones Regan is rumored to ply his managerial skills upon the most: Forestry, Golf, Park Rangers, and Personnel, although reports of Regan's managerial abuse come from almost every part of the department.

As this digest has described before, the antics of Mr. Regan coupled with the passage of this package may result in the largest loss of experienced talent in the history of the Department of Recreation and Parks.  Since we first publicized this "hush-hush" internal issue, no significant management changes in either personnel or policies have been implemented by General Manager Jon Kirk Mukri, pretty much implying his support of both Regan and the impending catastrophic loss to his own department. Whether the support stems from a similar misdirected-punitive managerial philosophy, or simply from inability to act is unclear. We'd like to hear from those who know Mukri as to which they think is the case.

More on the ramifications from a passage of the "golden handshake" package comes from two articles in today's edition of CityWatch:

Pension Mischief and the Golden Handshake
LA Watchdog
By Jack Humphreville

Active Image$130,000 + is the value of the Golden Handshake that each city employee will receive if they sign up for the Early Retirement Incentive Program (the “E-RIP”). The City intends to finance this $293 million program by burdening the already seriously underfunded Los Angeles City Employee Retirement System (“LACERS”) with an additional $250 million in Unfunded Accrued Actuarial Liability. The City will also lay out $43 million in cash to finance the $15,000 cash incentive to each participating employee. The City … and the unions they count on to fund their election campaigns … propose to finance the $250 million liability over a 15 year period beginning in two years. 
On July 1, 2011, the plan calls for increasing the retirement contribution for each remaining city employee by 0.75%, not the 1.07% determined by the experts.  As a result, LACERS is short changed by about $100 million according to the Report to the Ad Hoc Committee dated September 1, 2009 (the “Report”). The Report, in a major concession to the City, since prudence would dictate no amortization period, recommended a “reasonable” amortization period of five years.  However, this would require a contribution rate of 2.86% of payroll as compared to the 0.75% rate contemplated by the Early Retirement Plan. The 15 year amortization … or pay back … was not considered “reasonable” by the Report, but was only “acceptable.”

This 15 year amortization schedule results is a negative cash flow to the retirement system for the first seven years, is not consistent with the recommendations of the Government Accounting Standards Board, and would result in significantly higher interest payments ($180 million) by the City.  The Report also questioned, with good reason, the City’s ability to successfully manage the “backfilling” of positions vacated due to the E-RIP.  In classifying the long period as not desirable, the Report said, “The backfill rates are difficult to monitor, difficult to enforce, prone to circumvention, and can be negated by higher than expected salary increases or superseded by new ordinances during the long 15 year period."

Another major consideration is that the City’s contribution to the employee retirement program is going to increase by about $450 million next year, contributing to the projected budget deficit … your city budget … of over $1 billion. This in itself raises significant questions about the City’s credit worthiness and whether LACERS should even consider participating in the E-RIP at all. Given all the questions surrounding the E-RIP, it is amazing that a committee of LACERS Board of Administration voted not only to participate in the E-RIP scheme, but to do so with a 15 year amortization schedule, contrary to the five year recommendation of the Report. This appears to be a blatant violation of their fiduciary duty to LACERS participants and their beneficiaries and may expose the Board Members to liability for negligence.  Put another way, Mr. Holoman, would Magic Johnson Enterprises engage in such a scheme? 

The E-RIP is an ill conceived, self serving, overly complicated, Enron like scheme that the City cannot afford given its dire financial condition.  The LACERS Board of Administration should not approve the E-RIP in any form, but if it does so, with the recommended five year amortization term. Likewise, the City Council should not approve the E-RIP, but inform the mayor, his financial wizards, and the unions that the City cannot afford to pay departing employees $130,000 each, no matter how such payments are financed.  The City has some very tough financial decisions.  But raiding LACERS and delaying only makes the financial situation worse.  The delay alone costs the city about $12,000 a month. That’s your money folks! 

(Jack Humphreville is a publisher and the Rate-Payer Advocate for the greater Wilshire Neighborhood Council. Humphreville writes LAWatchdog for CityWatch.)

Weight of Unions Sinking LA Budget Ship

By Michael N Cohen

Active Image
Bernard Parks, L.A. City Councilmember from District 8, Chairman of the Budget & Finance Committee on Saturday spoke candidly with the Los Angeles Neighborhood Council Coalition in a nearly two hour Q & A session at their monthly meeting. Even Ron Kaye (Link to Kaye commentary and video clips), former editor of the L.A. Daily News, and sharp critic of city hall, complemented Parks on his understanding of the financial problems facing the city and appreciated his concern. According to Parks the city employee unions have crafted work rules and influence to stymie any rational chances to bring the budget under control. Here we are in September, he said,  and the unions have not allowed one dollar of the Mayor’s budget of shared sacrifice to be implemented. The city’s finances are rapidly becoming a dark comedy like the 1989 movie “Weekend at Bernie’s”.

Except the dead guy in our case is not Bernie but our City of Angels. City employee unions pretend that LA is still alive and well because they are determined to continue to have their really good pay and perks uninterrupted even though they are dragging around a corpse just like in the movie. The need to confer with individual unions and even individual employees with arcane civil service work rules regarding job protection and layoff essentially has taken the fine tuning of staffing and firing decisions out of elected official’s hands.

Enter the “bumping rule”. Parks said that even after several decades of being a city employee he was surprised at this one. When the Mayor and Council have determined that the layoff of several thousand employees … the least essential to running the city … is necessary, and those employees are so informed, they not necessarily laid off? Apparently an employee can go back to the department where they initially entered city employment and, depending on job class and seniority, “bump” another employee who would then be laid off.

When the smoke clears it is possible that none of the original employees have been removed from the city payroll.  So, for example,  mechanics and collections personal necessary to keep vehicles maintained or to collect fees owed the city could be out of work while less necessary workers stay on board. Parks said that this has happened in the past. The Councilman’s economic portrait clearly painted a city that is almost certainly near or at insolvency. Still it is unclear whether LA will be able to file for Chapter 9, the bankruptcy section for municipalities.

In Sacramento there is a bill supported by unions, AB 155, that would require a municipality to get approval of the California Debt and Investment Advisory Commission before filing.  Unions hope to prevent municipalities from filing for bankruptcy altogether or at least delay the process long enough to give them more leverage. The DWP employee union, IBEW, represents 95% of the employees and their pay, Parks said, is 40% higher than the rest of city workers, even though only a small fraction of DWP workers actually work with high voltage.

If you try to bring their pay in line with other city departments, he said, we could find ourselves without water and power.  So the rate increases will continue. All of this, according to Parks, because the Democratic Party in seeking to gain more control of State and Municipal government made this pact with public employee unions. They are legal monopolies.  To get elected and receive their funding and support in LA and many parts of the State you need a 100% pro-labor voting record. Parks knows what he’s talking about. During his recent run for LA County Supervisor the unions turned on the money spigot with independent expenditures and drowned  him. Parks offered a partial solution to undo the influence of employees by appealing to the business community to get more involved in changing the downtown culture.

(Michael N Cohen is a member of the Reseda Neighborhood Council and is a long time community activist in the San Fernando Valley. Views expressed are entirely his own.)