LA is at it again


LA is at it again

This is a wonderful article. The deficit in the City of LA has soared to $87 million and the city is quick to point out that the number is BEFORE one factors in the money the city may receive from a triple P lease of its parking operations. If that lease doesn’t go through, the city will add an additional $53 million to the deficit for 2010. This sounds strangely like extortion to little old moi. Do the deal, or we go down the tubes. Many of the city councilpersons are taking a hard look at the lease process after the ballyhoo in Chicago. They seem to feel that much money can be left on the table in these rushes to quick funding. Sounds like a blogger I know.

The money quote is this:

Santana (City admin officer) noted that if city departments follow through with their deficit-reduction plans, the remaining budget gap could be covered using the city’s unappropriated funds. But he noted that the city needs to complete plans to privatize the operation of nine city-owned parking garages. Santana said earlier that the contracts could generate millions for the city, with $53.2 million being earmarked to cover employee salaries and other expenses in the current fiscal year. The rest of the money would be used to replenish the emergency reserve fund; pay off about debts related to the parking garages; and help reduce the estimated deficit projected for the next fiscal year.

Note that the revenue would pretty much used up in two years. Then what are they going to do? Sell the streets, how about selling the police cars, or the fire trucks, or the water pipes or the parks, libraries, or LAX (By the way, some of these might not be a bad idea.) Do they think that in three years the money fairy is going to come down and click her ruby slippers and suddenly the problem will go away? These people are nuts.

They are selling off assets, money producing assets, to affect short term gain. It’s like those “rent is due” garage sales you see around the 15th and 30th of the month, renters selling off sweaters and small appliances so they can pay the rent for another month. Did it ever occur to them that they had a problem and that expenses had to be reduced? Maybe it was time to take in a roommate, or move to a cheaper place, or shudder, get a job.

The city of LA has huge unfunded pension plans that were put into place under pressure of the unions when property values were high, people were working, and money was flowing in. The gravy train would never end. Well, what do you know, it has.

It’s time to rethink the pension plans. Private industry does it all the time. Send out a letter with a check attached and tell people to get their own plans. Get out of the pensions business. It is the major problem at every level of government, from the Feds (Social Security) on down. Maybe we have to get by without so many agencies and vice mayors and social services. We simply don’t have the money.

Selling off money producing assets isn’t the answer. Some note that cities aren’t really configured to run parking operations. That may be the case. There is nothing wrong with contracting out the parking operations and giving incentives, even large ones, for successful operations. But cities need to make these deals on the short term (5-10 years) so they can change them when necessary.

It’s true that there is a lot of money in parking, and cities can use the money. However there is also a lot of money left on the table through shoddy parking operations.

Cities typically hire the low bidder to run their garages. That forces the operator to cut costs and shave margins to make a profit. A better deal would be to have a partnership where the operator participated in the profits this having an incentive to do the best possible job. But what do I know.


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John Van Horn

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