A Plan to Save Jobs and Clean Up Vernon
The City of Vernon, located just south of Downtown Los Angeles, has less than 100 full-time residents and its motto is “Exclusively Industrial.” That motto took hold in the early 1920s when stockyards and meat packing plants were the backbone of the city. Later, major companies such as U.S. Steel, Alcoa Inc., General Mills, and the Studebaker Assembly Plant defined Vernon, until recent years when BCBG Max Azria, Farmer John, Tapatio Hot Sauce, True Religion Apparel Inc. and Papa Cantella’s Sausage became the modern face of this jobs Mecca.
Vernon offers a unique mix of benefits for industry. Its city-owned utility provides water and power rates below those of neighboring cities. Its zoning code allows for industrial operations that other local cities do not offer. Red tape is virtually non-existent and businesses have access to first-rate police and fire services. In total, Vernon is home to 50,000 jobs and a cumulative $4.5 billion annual payroll.
City Hall Thinks It Knows What is Good For Business
When L.A. City Hall thinks it knows what’s good for business, the business community usually ends up with a raw deal. As if Councilmembers don’t have enough of their own issues to grapple with—starting with the City’s own budget deficit—now they want to make hiring decisions for you. That’s right, the “Hotel Worker Right of Recall” proposal from Councilmembers Paul Koretz and Janice Hahn would require all 50-room or more hotels that close for renovation or reconstruction to offer former employees their former job when the new facility opens.
First of all, the City of Los Angeles should be 100 percent in support of owners who wish to upgrade their properties. Unless hotels invest in upgrades, they soon find themselves out of business or serving a clientele that generates less money to pay employee wages and benefits—also less money for city employees. No one wins under that scenario.
Hotels that close for renovation or reconstruction are in many cases under new ownership and usually are redesigned to reach a different market segment. Whether it’s a modest 2-star hotel or a luxury 5-star hotel, each establishment, along with a physical upgrade, wants to establish an upgrade in service as well. They do that by hiring a staff that is most qualified for the new jobs. That new staff may very well be their former staff, but not always. Just as newly-elected City Councilmembers seek to hire the best people for their new staff, rather than simply hiring the staff of the previous Councilmember, a private employer must be entitled to interview and hire the staff they deem best qualified to serve their customers.
Budget Deficit IV Now Showing in L.A.
When Hollywood produces a sequel, it is because the first film was a hit. This spring’s Budget Deficit IV, starring the City of Los Angeles, does not fall into that category. What started out as a PG rated show three years ago and gained little attention has turned into a horror movie that should scare every resident and taxpayer of Los Angeles.
Some of the actors in Budget Deficit IV would like to make us believe that while the plot is heavy with drama, calling it a horror movie is simply crying wolf. They assert that the villain in Budget Deficit I, II, III and IV is a character called the Great Recession and that if we are just patient, that villain will be swept away as the economy improves. Miguel Santana, L.A.’s City Administrative Officer, says that portrayal of the current budget deficit would be fiction.
Speaking to a group of L.A. Area Chamber members last Friday, Santana said the actual numbers for the past four years and the financial projections for the next four years tell a sobering story about a budget crisis that would have unfolded even without the Great Recession. Santana points to a long-term trend line of increased expenses for personnel, programs and retiree benefits that surely and steadily increased the City’s budget obligations every year and laid the foundation for a budget deficit even when the economy was growing robustly. The budget deficit tsunami is rushing in on Mayor Villaraigosa, members of the L.A. City Council and citizens of Los Angeles, and we can no longer avoid tough cost-cutting decisions.
How to Send Texas and Other States Back Home
The recent headline, "Texas isn’t rustling from State" in the Los Angeles Times implies that few California companies are picking up and moving their operations from California to Texas. That’s good news, but it is not the end of the story and it does not indicate that California can rest on its massive assets and assume that the world will beat a path to our door.
In any given year, very few corporations relocate their headquarters or major operations to another state. Corporate boards and CEO’s in California and elsewhere try every strategy possible before undertaking the costly and dramatic decision of moving to another state. Business CEOs are particularly concerned about the possible loss of existing employees and the value that these employees bring to the company.
What Happens When City Retirees Outnumber City Employees?
In the City of Los Angeles, the budget deficit for 2011-12 begins at $350 million fueled in large part by the rapidly growing cost of pensions and health care for retirees. Last week, Mayor Antonio Villaraigosa called for two significant reforms to keep the problem from getting worse. He called for raising the retirement age for non-sworn city employees to 65 and he urged the members of the Fire and Police Pensions Board to reject a 7 percent increase in the health care subsidy given to public safety retirees. The current health care subsidy for fire and police retirees is $1,025 per month and the 7 percent monthly increase would add another $4.8 million dollars to the City’s budget deficit. The Chamber and other business and community organizations joined the mayor in support of both proposals.
On Friday, the Fire and Police Pensions Board ignored Mayor Villaraigosa’s plea and thus added another $4.8 million to the City budget deficit. Put another way, the Fire and Police Pension Board forced the mayor and City Council to cut another $4.8 million in city services like street maintenance, libraries, parks and police and fire protection.
The City of Los Angeles has more than 30,000 retirees, nearly equal to the 32,000 employees on the active payroll. The City’s current pension plan coupled with annual cost of living increases for pensions and health care, make it impossible for the City to overcome its structural budget deficit without eliminating the public services that citizens pay taxes to provide.
L. A. Chamber Supports Gov. Brown’s Proposal for a Special Election in June
The Los Angeles Area Chamber of Commerce announced Friday at a news conference its endorsement
of Gov. Jerry Brown’s proposal to hold a special election in June to address
the State budget crisis with an equal combination of spending cuts and a
temporary extension of the tax increases put into place two years ago.
We believe that Gov. Brown’s proposal to combine dramatic budget
reductions with a temporary extension of higher rates on the State income tax,
sales tax and the motor vehicles registration fee is fiscally responsible.
Our first choice was to address the deficit through spending cuts only.
As we discussed this option at length, we simply did not feel that the basic
infrastructure of our State could be maintained if $25 billion in budget cuts
were put into place at this time. We know that extending the tax increases will
have a short-term negative impact on our members and the economy, but not as
negative as the dramatic reduction in education, infrastructure and social
services that would come from a $25 billion budget cut.
Business and Labor Join Together on Important Issues
It wasn’t an illusion. Last week, the presidents of the U.S. Chamber of Commerce and AFL-CIO appeared before Congress together — on the same side. U.S. Chamber President Tom Donahue and AFL-CIO President Richard Trumka became the "odd couple" at a Senate hearing on infrastructure. The two presidents jointly advocated for investment in "building roads, bridges, high-speed broadband, energy systems and schools." While they may differ on details, both leaders share the same goals — creating jobs and successfully competing in the global economy.
This week, the Los Angeles Area Chamber of Commerce and the L.A. County Federation of Labor testified before Congress toward the same goal. The same U.S. Senate committee held a field hearing in Los Angeles on Wednesday. We advocated for infrastructure funding to advance projects in L.A. County, especially the innovative 30/10 initiative. Our two organizations meet on a weekly basis with other stakeholders to push this transportation and jobs plan forward.
A Message to the City of Los Angeles: Pension and Health Benefit Reform Now or Bust
Last week, the City of Los Angeles received $50 million in bad news. No bidders are interested in leasing and operating nine city-owned parking garages. That lost revenue is in addition to an already $350-plus million dollar deficit in next year’s budget. Despite two years of budget wrangling (with good progress in some areas) the fiscal elephant in the room remains — the unsustainable pension and health care benefits for municipal workers.
Most residents and business taxpayers are surprised to find out that the City of Los Angeles offers 100 percent paid basic health care premiums for nearly all municipal workers, dependents, retirees and spouses or partners. For retirees alone, the cost to provide free, lifetime health insurance is $292 million a year and rising.
The issue is about employee benefits versus basic municipal services. It’s also about fairness. Many city residents struggle to fund their own retirements and pay their own family’s health care costs, yet they are providing city employees and retirees with a nearly 100 percent paid health insurance package. These benefits are fiscally unsustainable and blatantly unfair to millions of Angelenos.
Deasy – A Strong New Leader for L.A. Schools
Los Angeles and the state of California have never faced a more serious challenge regarding our education system. With our flat global economy, the success of our students has never been more important. Dramatic improvements to our education system must be made.
Last century, the United States had the highest college enrollment rate in the world, but by 2008 our standing had fallen to No. 16. Here in California, for the first time in our history, the current generation is expected to be less educated than its predecessor. Major cutbacks signaled this week in Gov. Jerry Brown’s budget add to the challenges local school officials face. This collection of issues calls for outstanding leadership. The Los Angeles Unified School District (LAUSD) Board of Education displayed that leadership this morning when it announced its decision to select John Deasy as the district’s next superintendent.
Dual Priorities for California: Jobs and a Balanced Budget
In a story that made headlines in every newspaper around the country, and perhaps around the world, Jerry Brown was sworn in to his third term as Governor of California this week. The eyes of our nation and the world are on Governor Brown and California because of our well publicized 12.4 percent unemployment rate and $28 billion budget deficit.
Governor Brown began his speech with the following statement:
“With so many people out of work and so many families losing their homes in foreclosure, it is not surprising that voters tell us they are worried and believe that California is on the wrong track. Yet, in the face of huge budget deficits year after year and the worst credit rating among the 50 states, our two political parties can’t come close to agreeing on the right path forward. They remain in their respective comfort zones, rehearsing and rehashing old political positions.”