A Balanced Plan To Fix LA

Transcription

1 A Balanced Plan To Fix LA 1 May 5, 2014

2 What is the Coalition? Formed in ,000 City workers represented 65% of the Civilian workforce 55% of our workers are Special Funded Policy partner with City above and beyond traditional labor relations Drove savings costs with City when Wall Street crashed the economy 2 Your footer comes here Your date comes here

3 Coalition Savings The Coalition Partnered with the City during and after the Recession and agreed to unprecedented cost savings in the form of: 1. Reduction of the City workforce through ERIP and attrition, paid for by Union members 2. FLEXCARE plan design changes 3. Increased Employee Pension Contributions 4. Delayed Increases 3

4 Millions ERIP and Hiring Freeze Savings $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 Estimated Annual Savings to City Taxpayers $456 $462 $472 $415 $

5 Millions Early Retirement Incentive Program -$17 Estimated Total Annual Cost to Employees -$17 -$18 -$18 -$17.8 -$18 -$18 -$18 -$18.3 -$18.2 -$18.5 -$19 -$19 -$19 -$

6 Millions FLEX Benefits Plan Design Reductions $45 $40 $35 Coalition Driven Civilian Healthcare Savings $38.8 $30 $25 $20 $25.0 $15 $10 $5 $0 $9.7 Coalition Agreement Goal 2 Calendar Years FLEX Citywide Savings Coalition Savings Share (65% of workforce) 6

7 Millions 6% to 11% Pension Contribution $76 Estimated City Savings and Coalition Member Cost $75 $75.3 $74 $73 $72 $73.3 $72.8 $73.9 $71 $71.3 $70 $

8 Non-Health Benefit Rates Per Employee 90.00% 80.00% 70.00% Add/Delete Rates By Employee Type 80.00% 60.00% 50.00% 40.00% 47.94% 30.00% 20.00% 28.06% 10.00% 0.00% DWP Rate Sworn Rate Civilian Rate 8

9 Austerity, Services, and the Budget Ryan Hudson, M.P.P. Research and Policy Analyst SEIU Local 721 9

10 Cubic Yards Austerity Impacts 250,000 Street Services: Debris Removed 200, , ,000 50, Source: Comprehensive Annual Financial Report For The Year Ended June 30, 2013

11 Millions Square Feet Austerity Impacts 25 Street Services: Land Cleared Source: Comprehensive Annual Financial Report For The Year Ended June 30, 2013

12 Total Austerity Impacts 140,000 Street Services: Trees Trimmed 120, ,000 80,000 60,000 40,000 20, Source: Comprehensive Annual Financial Report For The Year Ended June 30, 2013

13 Hours of Traffic Control Austerity Impacts 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Transportation: Intersection Traffic Control Source: Comprehensive Annual Financial Report For The Year Ended June 30, 2013

14 Total Austerity Impacts 150,000 Transportation: Abandoned Vehicles Abated 130, ,000 90,000 70,000 50, Source: Comprehensive Annual Financial Report For The Year Ended June 30, 2013

15 Total Austerity Impacts 120, , ,000 Sanitation: Flood Control Catch Basin Cleaning 90,000 80,000 70,000 60,000 50, Source: Comprehensive Annual Financial Report For The Year Ended June 30, 2013

16 Millions City Spending $500 $400 $300 $200 $100 $0 -$100 -$200 Average Yearly Change in Governmental Activity Appropriations Pre vs. Post Recession $451 -$ Average Growth Rate Average Growth Rate 16 Source: Comprehensive Annual Financial Report For The Year Ended June 30, 2013

17 Millions City Spending $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $- Capital Spending $935 $641 $491 $524 $363 $ Source: Comprehensive Annual Financial Report For The Year Ended June 30, 2013

18 Millions The General Fund The General Fund at Year-end $350 $300 $250 $200 $150 $100 $50 $0 -$50 18 Source: Comprehensive Annual Financial Report For The Year Ended June 30, 2013

19 Millions General Fund Liquidity $400 Total Cash Available for Discretionary Appropriation in the General Fund $350 $367 $300 $250 $200 $215 $222 $225 $254 $273 $150 $100 $50 $ Source: Comprehensive Annual Financial Report For The Year Ended June 30, 2013

20 Short Term Revenue Opportunity Fine Banks for Neighborhood Negligence We remain puzzled why the city has never enforced a neighborhood nuisance law that would have allowed it to collect tens of millions from Wall Street banks that failed to maintain foreclosed houses and thus contributed to neighborhood blight. We suggest a public inquiry and that the city begin enforcement now. 20

21 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% Long Term Revenue Opportunity Fix the Unfair Decline in Commercial Property Taxes Trends in the Total Share of Property Tax Payments % Commercial Residential Commercial Trend Residential Trend 21 Source: Los Angeles County Assessor Annual Report 2013

22 Strengthening Revenues Calculations by the Coalition project the City would collect between $129 million and $280 million annually in discretionary revenues General Fund revenues of this magnitude would allow the City to move away from its austerity position and reinvest in Los Angeles Communities 22

23 A New Conversation About Wall Street Lisa Cody, A.B.D. Research and Policy Analyst SEIU Local

24 Lack of Transparency Total Fees Wall Street 24

25 Breakdown of Wall Street Fees for 1 Year Finance Counsel Fees, Dealer Fees, etc. $4,400,000 Bank & Processing Fees $7,900,000 Swap Payments $4,800,000 Letters of Credit $17,900,000 Natural Gas Forward Contracts $23,100,000 Investment Management Fees $133,100,000 Bond Issuance $12,900,000 $204,100,000 Performance Fees on Private Investments? 25

26 Update on Fees $10.1 million more in banking & processing fees for a total of $18 million Estimates of Missing Fees City Treasurer invests $7 billion assets Estimated conservatively a fee of.15% of total assets managed bringing the total to $143.6 million Used investment reports from private equity and hedge fund firms to estimate total fees paid as a percentage of assets management fees plus performance fees Estimated performance fees paid per year by three Pension Funds $75.9 million 26

27 What are Performance Fees? Profit 80% to Investors (e.g., LACERS) 20% to Fund Manager (e.g., Apollo) 27

28 28 Private Equity Example Apollo Performance Fees Dwarf Management Fees

29 Estimating Performance Fees Paid by Pension Funds Three Private Equity Firms Apollo Fees 6% of Assets Managed KKR Fees 3.17% of Assets Managed Blackstone Fees 2.65% of Assets Managed Average Percentage Applied to Pension Funds Management and Performance Fees cost 3.94% of Private Assets Managed ($3.1 billion) Estimated Performance Fees for Pension Funds = $75,890,943 29

30 Areas To Explore For Savings Bank & Processing Fees $18,000,000 Swap Payments $4,800,000 Letters of Credit $17,900,000 Investment Management Fees (All Types) $143,600,000 $300,390,943 Performance Fees on Private Investments $75,890,943 30

31 Area of Potential Savings Bank & Processing Fees Bank & Processing Fees $18,000,000 $300,390,943 31

32 Credit/Debit Processing Fees Comprise 82% of that $18 Million Credit/Debit Processing Fees $14,760,000 $18 Million Bank Service Fees $3,240,000 32

33 Opportunity to Reduce Processing Fees Opportunity to terminate current contract in 2016 City should begin exploring options now either to release a new RFP to select a more competitively priced vendor or to renegotiate with current vendor Propose that the Council expand the report back in Exhibit H directing the Office of Finance to review credit card transactions and opportunities to renegotiate costs for the entire City, not just for parking meters Reducing the City s costs by one-third (of $14.76 million) would result in a savings of $5,000,000 per year 33

34 Potential Savings $5,000,000 Bank & Processing Fees $13,000,000 $295,390,943 34

35 Potential Savings Swap Payments Swap Payments $4,800,000 $295,390,943 35

36 What is Wrong with these Swaps? City entered into swaps expecting to save $3.5 million per year Financial Crisis changed nature of assumptions upon which those deals are based Instead of saving money, the City will pay NY Mellon Bank and Dexia $4.8 million per year until 2028 In 2012, City paid these banks $26.1 to terminate portions of these toxic swaps NY Mellon and Dexia are reaping a windfall at taxpayers expense 36

37 Renegotiate Swaps with NY Mellon and Dexia with NO PENALTY New York Mellon Bank and Dexia need to either step up to the plate or need to be told to step away. If NY Mellon and Dexia refuse, the City should end all current business and exclude them from any future business Council should request that the City Attorney investigate whether the City has grounds to terminate or renegotiate the swaps based on new Dodd-Frank Rules Potential savings include $4.8 million per year until 2028 that is a savings of over $69 million 37

38 Potential Savings $4,800,000 Swap Payments $0 $290,590,943 38

39 Potential Savings Letters of Credit Letters of Credit $17,900,000 $290,590,943 39

40 Use Government Entities to Provide Letters of Credit Government Entities Earn Money Tens of millions each year with near-zero risk Letters of Credit are insurance policies on debt no money leaves the government entity unless the city defaults on its debt, which has never happened City Saves Money If government entities charged the City 1/3 less than it pays Wall Street now, the City would save $5,900,000 per year Wall Street banks would be left out of this business 40

41 Potential Savings $5,900,000 Letters of Credit $12,000,000 $284,690,943 41

42 Potential Savings Investment Management and Performance Fees Investment Management Fees $143,600,000 $284,690,943 Performance Fees on Private Investments $75,890,943 42

43 Renegotiate Fees and In-source Investment Management Aggressively renegotiate fees when using outside investment managers In-source financial advisors and private equity and hedge fund investment managers With 10% reduction in total fees City would save $22,000,000 per year 43

44 Potential Savings $22,000,000 Investment Management Fees $129,240,000 $262,690,943 Performance Fees on Private Investments $68,301,848 44

45 Proposed Total Savings $37,700,000 $300,390,943 $262,690,943 Total Fees Total Fees After Savings 45

46 Quality Jobs And City Efficiencies Molly Rhodes, Ph.D. Research and Policy Analyst 46

47 Economic Development Basic: Public Sector Employs 25% of Angelenos Management, scientific & technical consult. srvcs. 47 Management of companies and enterprises Colleges, universities, and professional schools LA Metro NAICS Industry (In thousands) Investigation and security services Legal services Depository credit intermediation Federal Government Grocery stores Offices of physicians Employment services General medical and surgical hospitals Motion picture and video industries Private Household Workers High-tech employment Restaurants and other eating places State & Local Government

48 Wall Street says our job losses hold back LA s economic recovery Total payrolls advanced but local government job cuts tempered the gains. City of Los Angeles = Biggest Employer Local and federal spending and payroll cuts remain a near-term risk making Los Angeles an average performer. 48 Moody s December 2013 Report Card

49 City Job Creation: Temporary Conditions Animal Service Licensing Canvas program Exploitation Building and Safety Clerks Trash Truck drivers DOT Crossing Guards DOT Parking Enforcement 49

50 50 Let BOSS Fix our trees, sidewalks

51 LAPD Civilians: Depletion of Critical Civilian Staff Administrative Staff 911 Operators 51

52 Jail Civilianization: Right Worker for the Right Job $150,000 $100,000 $50,000 $0 Budgeted Cost for a Jail Detention Officer: Civilian vs. Sworn Starting Salary Healthcare Cost Benefit Cost Total Budgeted Cost Detention Officer (271 budgeted) Police Officer II (4,780 budgeted) 52

53 Save money on Workers Comp: Alternative Dispute Resolution Program In litigation cost next year. Or ZERO. 53

54 54 Managed Hiring: BOSS example

55 Thank you to the B&F Committee for hearing our L.A. observations 55 Your footer comes here Your date comes here