Original Story: latimes.com
What does $200 million buy in Los Angeles these days? The Playboy Mansion, for one.
The legendary Holmby Hills estate where Hugh Hefner has worked and made his home for four decades is on the market for the nine-figure sum, making it among the priciest residential properties for sale in the United States. A Los Angeles real estate lawyer is following this story closely.
As part of any sale, the 89-year-old Hefner will be allowed remain in residence for the remainder of his life, media reports said.
Among the major works of architect Arthur R. Kelly, the stone-clad Gothic Tudor-style mansion was built for department store scion Arthur Letts Jr. in 1927. Playboy acquired the estate of more than five acres in 1971 for around $1.1 million.
"At the time Hef and Playboy purchased the home, it was the largest real estate transaction in Los Angeles history," Gary Gold of Hilton & Hyland, an affiliate of Christie’s International Real Estate, said in a news release. Gold holds the listing with Drew Fenton, also of Hilton & Hyland, and Mauricio Umansky of The Agency. A St. Petersburg custom home builder specializes in providing custom homes with a warm, comfortable living environment that is functional yet elegant.
Within nearly 20,000 square feet of interiors are 29 rooms including chef's and catering kitchens, a game room, a wine cellar and a screening room with a built-in pipe organ. The master suite occupies parts of two floors.
The mansion is also among a select number of L.A. properties to have a zoo license.
Grounds where the Midsummer Night’s Dream party unfolds each summer feature a menagerie of aviaries and arboretums holding a collection of exotic birds and monkeys. Albino peacocks and other animals roam freely through rolling lawns and various gardens.
Other amenities include a gymnasium, a tennis court, an orchard and the infamous swimming pool and swim-in grotto. There's also a four-bedroom guesthouse.
At $200 million, the Playboy Mansion listed price tops that of Palazzo di Amore, the gated Beverly Hills estate developed by entrepreneur Jeff Greene that came to market at $195 million last year. The 53,000-square-foot estate has since seen its price cut to $149 million. An Innisbrook custom home builder provides one stop shopping for the design and construction of your new luxury home.
Le Palais Royal, a 60,000-square-foot, Versailles-inspired Beaux Arts mansion in Hillsboro Beach, Fla., returned to market in November for $159 million -- a $20-million increase in price from what it originally listed for in 2014.
Showing posts with label Los Angeles. Show all posts
Showing posts with label Los Angeles. Show all posts
Thursday, January 14, 2016
Monday, October 13, 2014
LIVING ON THE BARE MINIMUM
Original Story: latimes.com
There's little room for surprises in James Collins' monthly scramble to manage rent, bills, debts and gas.
The $250 repair bill for his fiancee's engagement ring didn't fit the budget. So he asked the jeweler if he could add the repair cost to his one-year installment plan for the ring. No problem, an employee told him last month.
But when he returned a week later, a manager vetoed that decision — and kept the ring as collateral on the bill.
"I still have this bill, I don't have the ring, and I don't know when I'm going to get the $250 to get it back," Collins said.
Such are the daily trade-offs in one of the nation's most expensive cities with one of the largest shares of working poor. Collins, 42 and a father of two, makes $9.95 an hour, just above the state minimum, as an activities coordinator at a nursing facility in Watts. On the day he needed $250 to repair the ring, he had less than $30 in his checking account.
More than a third of private-sector workers in Los Angeles make less than $13.25 an hour — the new minimum wage proposed by Mayor Eric Garcetti last month. City Council members supporting the bill would like to further boost the floor to $15.25 an hour by 2019.
"More and more companies are moving to the minimum wage as their main worker's wage," Garcetti said. "That has kind of undermined that promise in America that if you work hard, you will be able to support yourself."
The political push to raise wages will be as controversial in L.A. as it is nationally, and researchers continue to squabble over whether and how much it would help low-income workers — or hurt the businesses that employ them. What's clear is that the measure would affect far more people in Los Angeles than in any other city considering a minimum wage hike.
With its huge population, high poverty rate and high cost of living, Los Angeles is among the nation's most impoverished cities. About 567,000 workers in the city earn between $9 an hour and $13.25, according to a study, requested by Garcetti, from UC Berkeley's Institute for Research on Labor and Employment.
They are primarily middle-aged workers supporting families, the Berkeley researchers found, relying on data from the U.S. census and other federal sources.
Contrary to stereotypes of minimum wage workers as teenagers or part-timers, nearly half of those who would be affected are between 30 and 54 years old. More than a third are supporting children. More than two-thirds work full time. Nearly half have taken college course work.
They hail from a wide variety of occupations. Many work in restaurants or retail positions. But others are professionals in healthcare, manufacturing or nonprofit organizations. They are bank tellers, telemarketers, library assistants and zookeepers.
Minimum wage workers often remain in the same jobs for years, with few chances for advancement or raises. They juggle several jobs to keep up with expenses, sacrificing sleep and time with family.
Often, they have no health benefits. If they do, many can't afford to pay for them.
"Right now, minimum wage is not a steppingstone," said Michael Reich, an economics professor at UC Berkeley who has studied the effects of raising the minimum wage. "It's a place where people are stuck for long periods of time."
A $2 raise in two decades
Bartolome Perez has worked at the same McDonald's franchise in South Los Angeles for 21 years. He started as a custodian, became a cook and later moved up to crew trainer. He's back to being a cook.
He started at $4.25 an hour — the minimum wage in 1993 — and now makes $10.75 an hour. After adjusting for inflation, that's a raise of slightly more than $2 an hour over the last two decades.
"Right now in my savings account I have $400," Perez said on a recent evening in a small two-bedroom duplex he rents with his wife, two daughters and a 10-month-old granddaughter. "If I divide that by 21 years, how much have I saved? And is that what a human being deserves, having spent a whole life working for a corporation?"
He said he has never had benefits, unless you count the free turkey a manager gave him one Thanksgiving. He supplements his income by working part-time as a soccer coach for the L.A. Unified School District.
Since last year, he's been active with other fast-food workers who have staged protests pushing for a $15-an-hour minimum wage.
His wife, Vilma, also works for the district as a cafeteria worker. After nearly a decade of part-time work, she was recently upgraded to full-time status. It's the first time she and her husband have had medical benefits in a quarter-century of living in the United States.
The family has gotten by on luck and medicine brought by relatives from El Salvador.
Perez has looked for other jobs through the years in other industries like food packaging. Some paid more; others about the same. He stuck with McDonald's because of the consistency.
"The problem wasn't with the jobs themselves, it was simply that they were not stable," he said. "They were temporary, and bills are not temporary."
The poor leading the poor
Every day, Yvonne Vasquez counsels those who are homeless, unemployed or struggling to get by on low salaries as an intake specialist at the nonprofit Skid Row Development Corp.
She makes $11 an hour and often reflects on how her circumstances aren't so different from those of the people she tries to help.
"If I didn't like the job, I think I'd hate the pay," said Vasquez, 38.
She has three children and lives with a long-term boyfriend in an apartment near Staples Center. "If we would ever break up, I would basically be homeless," she said.
Still, she's skeptical of Garcetti's push for $13.25 an hour. She has health benefits, sick leave and a job that allows her the flexibility to take classes at Los Angeles Trade Technical College.
Vasquez believes prices would go up if employers are forced to raise wages — so would she really get ahead? Smaller businesses and nonprofits like Skid Row Development might have to cut staff.
"Everybody sees the money, but they don't see the issues, the problems that would come with it," she said. "They'd probably hire someone more educated, maybe with a B.A. or master's, pay them three bucks more and let one of us go."
Employed and homeless
Nelson Rice is just entering the workforce at age 19, and already he can't keep up. After leaving home at 18 and training as a certified nursing assistant, he's had trouble finding housing he can afford.
He makes $10.10 working at a nursing home, but he's been homeless for nearly a year, bouncing among several youth shelters. He expects to remain that way until he gets his GED and a license to be a vocational nurse.
Recently, a group of young men saw him in his scrubs on the bus and attacked him, fracturing his jaw. They wanted money, and they assumed, from his medical garb, that he made more, he said.
"I love L.A., but I can't even enjoy the city I was born in," Rice said, struggling to speak with his jaw wired shut. "It's not beneficial to me at all. It just stresses people out trying to make money."
Rice's situation also underscores one of the central challenges of raising the minimum wage within Los Angeles city limits. He works at a nursing home in Lynwood — just southeast of the city limit — meaning he wouldn't benefit from the wage increase unless political leaders there follow Garcetti's lead.
Experts caution that having different minimum wage laws across the 88 cities of Los Angeles County might drive low-skilled jobs out of Los Angeles proper.
"If they can move a mile down the road and cut their wage bills substantially, they will," said Christopher Thornberg, an expert on the California economy who is founding partner of Beacon Economics. "It should be at the state or county level, not at the city level. This may be OK for the county, but it's terrible for the city."
But will they cut my hours?
For many workers, it's not just low wages that cause financial pressure. It's also uncertainty about hours.
Zenaida Torres, 45, earns $9 an hour as a server at a Mexican restaurant in Boyle Heights.
She loves what she does, but feels overworked and exploited. Recently, she and several colleagues accused their employer of wage theft, and the restaurant agreed to pay a settlement.
But Torres said her hours were dramatically cut in retaliation — she's now able to work only on weekends, about 15 hours a week. She fears she'll be fired, and worries about whether she could find a better job.
Her feelings are mixed on a minimum wage increase. If the required pay goes up, employers might hesitate to hire her, she said in Spanish, through a translator. But more income would enable her to move into a larger apartment, allowing her 12-year-old daughter, Angelica, to have her own room.
Currently, the two squeeze into a studio in East Los Angeles. Her paycheck is quickly consumed by basic bills: $700 in rent; a 30-day bus pass; the phone bill. There's nothing left.
"I'm looking for different alternatives — a way to make money independently," she said. "Maybe I'll make crafts, sell food on the street, even sing — anything that can get me an income."
Will she leave me?
Collins, who works at the Watts nursing facility, has lived on a financial precipice for years.
In a recent Friday, he had about $17 left from the check he got a few days before. He needed to spend at least $10 to make it to a once-a-week course he's taking in the San Fernando Valley, 41 miles from where he lives in Long Beach.
He hopes to become certified as a social services designee, which might get him up to $12 an hour.
The gas might last three more days, he said. Then he'd have to borrow from his fiancee or co-workers.
Sometimes he thinks: "How do I hold on to this woman, if she's giving me money for gas?'"
A boost to $13.25, he said, would help. Maybe he wouldn't have to delay paying the insurance one month, and the utilities the next.
He might take his daughters out to eat, or buy health insurance through his employer.
Or get his fiancee's ring out of hock.
"I've come to the realization that I'll probably never have a house, never have a new car," he said. "I just want the security of knowing that I can get a one-bedroom, furnish it, and just pay my bills. I don't think that's too much to ask for out of life right now."
There's little room for surprises in James Collins' monthly scramble to manage rent, bills, debts and gas.
The $250 repair bill for his fiancee's engagement ring didn't fit the budget. So he asked the jeweler if he could add the repair cost to his one-year installment plan for the ring. No problem, an employee told him last month.
But when he returned a week later, a manager vetoed that decision — and kept the ring as collateral on the bill.
"I still have this bill, I don't have the ring, and I don't know when I'm going to get the $250 to get it back," Collins said.
Such are the daily trade-offs in one of the nation's most expensive cities with one of the largest shares of working poor. Collins, 42 and a father of two, makes $9.95 an hour, just above the state minimum, as an activities coordinator at a nursing facility in Watts. On the day he needed $250 to repair the ring, he had less than $30 in his checking account.
More than a third of private-sector workers in Los Angeles make less than $13.25 an hour — the new minimum wage proposed by Mayor Eric Garcetti last month. City Council members supporting the bill would like to further boost the floor to $15.25 an hour by 2019.
"More and more companies are moving to the minimum wage as their main worker's wage," Garcetti said. "That has kind of undermined that promise in America that if you work hard, you will be able to support yourself."
The political push to raise wages will be as controversial in L.A. as it is nationally, and researchers continue to squabble over whether and how much it would help low-income workers — or hurt the businesses that employ them. What's clear is that the measure would affect far more people in Los Angeles than in any other city considering a minimum wage hike.
With its huge population, high poverty rate and high cost of living, Los Angeles is among the nation's most impoverished cities. About 567,000 workers in the city earn between $9 an hour and $13.25, according to a study, requested by Garcetti, from UC Berkeley's Institute for Research on Labor and Employment.
They are primarily middle-aged workers supporting families, the Berkeley researchers found, relying on data from the U.S. census and other federal sources.
Contrary to stereotypes of minimum wage workers as teenagers or part-timers, nearly half of those who would be affected are between 30 and 54 years old. More than a third are supporting children. More than two-thirds work full time. Nearly half have taken college course work.
They hail from a wide variety of occupations. Many work in restaurants or retail positions. But others are professionals in healthcare, manufacturing or nonprofit organizations. They are bank tellers, telemarketers, library assistants and zookeepers.
Minimum wage workers often remain in the same jobs for years, with few chances for advancement or raises. They juggle several jobs to keep up with expenses, sacrificing sleep and time with family.
Often, they have no health benefits. If they do, many can't afford to pay for them.
"Right now, minimum wage is not a steppingstone," said Michael Reich, an economics professor at UC Berkeley who has studied the effects of raising the minimum wage. "It's a place where people are stuck for long periods of time."
A $2 raise in two decades
Bartolome Perez has worked at the same McDonald's franchise in South Los Angeles for 21 years. He started as a custodian, became a cook and later moved up to crew trainer. He's back to being a cook.
He started at $4.25 an hour — the minimum wage in 1993 — and now makes $10.75 an hour. After adjusting for inflation, that's a raise of slightly more than $2 an hour over the last two decades.
"Right now in my savings account I have $400," Perez said on a recent evening in a small two-bedroom duplex he rents with his wife, two daughters and a 10-month-old granddaughter. "If I divide that by 21 years, how much have I saved? And is that what a human being deserves, having spent a whole life working for a corporation?"
He said he has never had benefits, unless you count the free turkey a manager gave him one Thanksgiving. He supplements his income by working part-time as a soccer coach for the L.A. Unified School District.
Since last year, he's been active with other fast-food workers who have staged protests pushing for a $15-an-hour minimum wage.
His wife, Vilma, also works for the district as a cafeteria worker. After nearly a decade of part-time work, she was recently upgraded to full-time status. It's the first time she and her husband have had medical benefits in a quarter-century of living in the United States.
The family has gotten by on luck and medicine brought by relatives from El Salvador.
Perez has looked for other jobs through the years in other industries like food packaging. Some paid more; others about the same. He stuck with McDonald's because of the consistency.
"The problem wasn't with the jobs themselves, it was simply that they were not stable," he said. "They were temporary, and bills are not temporary."
The poor leading the poor
Every day, Yvonne Vasquez counsels those who are homeless, unemployed or struggling to get by on low salaries as an intake specialist at the nonprofit Skid Row Development Corp.
She makes $11 an hour and often reflects on how her circumstances aren't so different from those of the people she tries to help.
"If I didn't like the job, I think I'd hate the pay," said Vasquez, 38.
She has three children and lives with a long-term boyfriend in an apartment near Staples Center. "If we would ever break up, I would basically be homeless," she said.
Still, she's skeptical of Garcetti's push for $13.25 an hour. She has health benefits, sick leave and a job that allows her the flexibility to take classes at Los Angeles Trade Technical College.
Vasquez believes prices would go up if employers are forced to raise wages — so would she really get ahead? Smaller businesses and nonprofits like Skid Row Development might have to cut staff.
"Everybody sees the money, but they don't see the issues, the problems that would come with it," she said. "They'd probably hire someone more educated, maybe with a B.A. or master's, pay them three bucks more and let one of us go."
Employed and homeless
Nelson Rice is just entering the workforce at age 19, and already he can't keep up. After leaving home at 18 and training as a certified nursing assistant, he's had trouble finding housing he can afford.
He makes $10.10 working at a nursing home, but he's been homeless for nearly a year, bouncing among several youth shelters. He expects to remain that way until he gets his GED and a license to be a vocational nurse.
Recently, a group of young men saw him in his scrubs on the bus and attacked him, fracturing his jaw. They wanted money, and they assumed, from his medical garb, that he made more, he said.
"I love L.A., but I can't even enjoy the city I was born in," Rice said, struggling to speak with his jaw wired shut. "It's not beneficial to me at all. It just stresses people out trying to make money."
Rice's situation also underscores one of the central challenges of raising the minimum wage within Los Angeles city limits. He works at a nursing home in Lynwood — just southeast of the city limit — meaning he wouldn't benefit from the wage increase unless political leaders there follow Garcetti's lead.
Experts caution that having different minimum wage laws across the 88 cities of Los Angeles County might drive low-skilled jobs out of Los Angeles proper.
"If they can move a mile down the road and cut their wage bills substantially, they will," said Christopher Thornberg, an expert on the California economy who is founding partner of Beacon Economics. "It should be at the state or county level, not at the city level. This may be OK for the county, but it's terrible for the city."
But will they cut my hours?
For many workers, it's not just low wages that cause financial pressure. It's also uncertainty about hours.
Zenaida Torres, 45, earns $9 an hour as a server at a Mexican restaurant in Boyle Heights.
She loves what she does, but feels overworked and exploited. Recently, she and several colleagues accused their employer of wage theft, and the restaurant agreed to pay a settlement.
But Torres said her hours were dramatically cut in retaliation — she's now able to work only on weekends, about 15 hours a week. She fears she'll be fired, and worries about whether she could find a better job.
Her feelings are mixed on a minimum wage increase. If the required pay goes up, employers might hesitate to hire her, she said in Spanish, through a translator. But more income would enable her to move into a larger apartment, allowing her 12-year-old daughter, Angelica, to have her own room.
Currently, the two squeeze into a studio in East Los Angeles. Her paycheck is quickly consumed by basic bills: $700 in rent; a 30-day bus pass; the phone bill. There's nothing left.
"I'm looking for different alternatives — a way to make money independently," she said. "Maybe I'll make crafts, sell food on the street, even sing — anything that can get me an income."
Will she leave me?
Collins, who works at the Watts nursing facility, has lived on a financial precipice for years.
In a recent Friday, he had about $17 left from the check he got a few days before. He needed to spend at least $10 to make it to a once-a-week course he's taking in the San Fernando Valley, 41 miles from where he lives in Long Beach.
He hopes to become certified as a social services designee, which might get him up to $12 an hour.
The gas might last three more days, he said. Then he'd have to borrow from his fiancee or co-workers.
Sometimes he thinks: "How do I hold on to this woman, if she's giving me money for gas?'"
A boost to $13.25, he said, would help. Maybe he wouldn't have to delay paying the insurance one month, and the utilities the next.
He might take his daughters out to eat, or buy health insurance through his employer.
Or get his fiancee's ring out of hock.
"I've come to the realization that I'll probably never have a house, never have a new car," he said. "I just want the security of knowing that I can get a one-bedroom, furnish it, and just pay my bills. I don't think that's too much to ask for out of life right now."
Friday, October 19, 2012
New Business Startups Face Greater Challenges in Bay Area
story first appeared on mercurynews.com
Relatively expensive housing, coupled with the high cost of living and doing business in the Bay Area, has made the nine-county region less hospitable to new companies than other big urban centers in California, according to a study released Thursday that urges improvements in what it describes as this area's burdensome regulatory climate.
Some businesses, like convenience stores and party stores have fared relatively well. Many of these type of businesses have a beer cave display cooler that meets their customers' needs in a special way.
Jon Haveman, chief economist with the Bay Area Council's Economic Institute, which produced the report said regulations need to be eased when trying to start a new venture.
The Bay Area lags major rivals such as Los Angeles and San Diego in jobs created by startup companies, the study determined.
The strengths of the region are reflected in household income and other factors, the report stated. The region has increasingly specialized in high-value industries such as professional, scientific and technical services, along with information services and products.
The report also determined that the migration of businesses into -- or the defection from -- the Bay Area has relatively little impact on the region's job market.
On average, only 2.3 percent of new jobs created in the Bay Area in a given year is the result of companies that came from other parts of California, other states or other countries. Similarly, only 3.7 percent of the jobs that vanish in a year are the result of firms defecting from the Bay Area.
Instead, 55 percent of the new jobs created in the Bay Area every year result from companies that were already located in the Bay Area. And 66 percent of the job losses in a typical year come from companies that were already operating in the nine-county region.
Relatively expensive housing, coupled with the high cost of living and doing business in the Bay Area, has made the nine-county region less hospitable to new companies than other big urban centers in California, according to a study released Thursday that urges improvements in what it describes as this area's burdensome regulatory climate.
Some businesses, like convenience stores and party stores have fared relatively well. Many of these type of businesses have a beer cave display cooler that meets their customers' needs in a special way.
Jon Haveman, chief economist with the Bay Area Council's Economic Institute, which produced the report said regulations need to be eased when trying to start a new venture.
The Bay Area lags major rivals such as Los Angeles and San Diego in jobs created by startup companies, the study determined.
The strengths of the region are reflected in household income and other factors, the report stated. The region has increasingly specialized in high-value industries such as professional, scientific and technical services, along with information services and products.
The report also determined that the migration of businesses into -- or the defection from -- the Bay Area has relatively little impact on the region's job market.
On average, only 2.3 percent of new jobs created in the Bay Area in a given year is the result of companies that came from other parts of California, other states or other countries. Similarly, only 3.7 percent of the jobs that vanish in a year are the result of firms defecting from the Bay Area.
Instead, 55 percent of the new jobs created in the Bay Area every year result from companies that were already located in the Bay Area. And 66 percent of the job losses in a typical year come from companies that were already operating in the nine-county region.
Thursday, May 6, 2010
Los Angeles on Brink of Bankruptcy
The Wall Street Journal
Los Angeles is facing a terminal fiscal crisis: Between now and 2014 the city will likely declare bankruptcy. Yet Mayor Antonio Villaraigosa and the City Council have been either unable or unwilling to face this fact.
According to the city's own forecasts, in the next four years annual pension and post-retirement health-care costs will increase by about $2.5 billion if no action is taken by the city government. Even if Mr. Villaraigosa were to enact drastic pension reform today—which he shows no signs of doing—the city would only save a few hundred million per year.
Los Angeles's fiscal woes can be traced to two numbers: 8% and 5,000. Eight percent has been the projected annual rate of return on the assets in Los Angeles pension funds. Four years ago, we strenuously warned Mr. Villaraigosa of the dangers behind the myth of that 8%, only to be told by the city controller's office that our warnings were "based on faulty assumptions which are largely disputed."
How faulty were our assumptions? Over the last decade, the two main pension funds in Los Angeles have seen their assets grow at just 3.5% and 2.8% annually.
Five thousand is the number of employees added to the city's payroll during Mr. Villaraigosa's first term as mayor. According to California's Economic Development Department, when Mr. Villaraigosa took office there were 4.73 million jobs in Los Angeles and 252,000 unemployed people. Today, there are just 4.19 million jobs in Los Angeles and over 632,000 unemployed people.
The mayor can't control the economy, but he could have chosen to control spending to keep the size of government proportional to the size of the local economy. Instead he's done the opposite: squeezing the city's productive workers to fund the salaries, pensions and other benefits of government workers.
How have city leaders responded to the crisis? Pension officials have played accounting games, like smoothing the investment return over seven years rather than five years. This is designed to dilute the near-term effect of the financial meltdown at the expense of much higher payments later.
The City Council, wincing at the mere thought of layoffs, chose to shrink the work force through an early retirement program for city workers. This costly program, suggested by union leaders, will not be paid off for 15 years. And most egregiously, rather than laying off employees, city officials have shifted certain workers to agencies like the Department of Water and Power and the airport, which have their own funding.
In order to pull the city back from the brink and put Los Angeles on the road to recovery, the following steps must be taken:
• Defined benefit pensions must be replaced with 401(k) accounts for new employees.
• Current employees must pay much more than 6% (or 9% in the case of public safety employees) of their salaries for their pension benefits. At a time when the city is contributing over 25% of payroll to the pension funds, this is only fair.
• Increase the retirement age to 65.
• Reduce city staff back to 2005 levels. Since the police and fire departments represent more than 80% of the city budget, they must also be forced to run more efficiently.
• Eliminate the $300 million spent on costly retiree health-care benefits. City workers who retire before they are eligible for Medicare enjoy health insurance subsidies up to $1,200 a month, courtesy of Los Angeles. We can no longer afford to subsidize these Cadillac plans.
As a result of his delays in responding to the city's fiscal emergency, Mr. Villaraigosa has squandered not just his career, but his relevancy. He continues to insist that bankruptcy is not an option for Los Angeles even as anyone who can count understands there is no other option.
Meanwhile, Los Angeles is still the best place to live—ask anyone who enjoys its beaches, mountains and climate. If the mayor wants to keep it this way, he'd better act now.
According to the city's own forecasts, in the next four years annual pension and post-retirement health-care costs will increase by about $2.5 billion if no action is taken by the city government. Even if Mr. Villaraigosa were to enact drastic pension reform today—which he shows no signs of doing—the city would only save a few hundred million per year.
Los Angeles's fiscal woes can be traced to two numbers: 8% and 5,000. Eight percent has been the projected annual rate of return on the assets in Los Angeles pension funds. Four years ago, we strenuously warned Mr. Villaraigosa of the dangers behind the myth of that 8%, only to be told by the city controller's office that our warnings were "based on faulty assumptions which are largely disputed."
How faulty were our assumptions? Over the last decade, the two main pension funds in Los Angeles have seen their assets grow at just 3.5% and 2.8% annually.
Five thousand is the number of employees added to the city's payroll during Mr. Villaraigosa's first term as mayor. According to California's Economic Development Department, when Mr. Villaraigosa took office there were 4.73 million jobs in Los Angeles and 252,000 unemployed people. Today, there are just 4.19 million jobs in Los Angeles and over 632,000 unemployed people.
The mayor can't control the economy, but he could have chosen to control spending to keep the size of government proportional to the size of the local economy. Instead he's done the opposite: squeezing the city's productive workers to fund the salaries, pensions and other benefits of government workers.
How have city leaders responded to the crisis? Pension officials have played accounting games, like smoothing the investment return over seven years rather than five years. This is designed to dilute the near-term effect of the financial meltdown at the expense of much higher payments later.
The City Council, wincing at the mere thought of layoffs, chose to shrink the work force through an early retirement program for city workers. This costly program, suggested by union leaders, will not be paid off for 15 years. And most egregiously, rather than laying off employees, city officials have shifted certain workers to agencies like the Department of Water and Power and the airport, which have their own funding.
In order to pull the city back from the brink and put Los Angeles on the road to recovery, the following steps must be taken:
• Defined benefit pensions must be replaced with 401(k) accounts for new employees.
• Current employees must pay much more than 6% (or 9% in the case of public safety employees) of their salaries for their pension benefits. At a time when the city is contributing over 25% of payroll to the pension funds, this is only fair.
• Increase the retirement age to 65.
• Reduce city staff back to 2005 levels. Since the police and fire departments represent more than 80% of the city budget, they must also be forced to run more efficiently.
• Eliminate the $300 million spent on costly retiree health-care benefits. City workers who retire before they are eligible for Medicare enjoy health insurance subsidies up to $1,200 a month, courtesy of Los Angeles. We can no longer afford to subsidize these Cadillac plans.
As a result of his delays in responding to the city's fiscal emergency, Mr. Villaraigosa has squandered not just his career, but his relevancy. He continues to insist that bankruptcy is not an option for Los Angeles even as anyone who can count understands there is no other option.
Meanwhile, Los Angeles is still the best place to live—ask anyone who enjoys its beaches, mountains and climate. If the mayor wants to keep it this way, he'd better act now.
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