Former Mayor Riordan Says Los Angeles Facing Insolvency

In this video interview, former Los Angeles Mayor Richard Riordan predicts that Los Angeles will be unable to meet its obligations to former and current employees within two to three years and will be forced to declare bankruptcy. He urges city leaders and employee representatives to make tough choices to reduce costs. And he calls on the city to attract business and spur employment.

 

In the brief interviews below, UCLA Anderson faculty offer suggestions for ways that Los Angeles can mitigate the problem. One point of agreement is that the city's future is closely tied to the recovery of the U.S. economy.

How Can Los Angeles Avoid Bankruptcy?

Dan Mitchell Notes Three Options for Cutting Labor Costs
"The crisis today in Los Angeles is that more was promised to employees than was contributed into the retirement and healthcare programs. You can't reduce benefits for those who have already retired. That's a legally binding obligation. But you can consider moving current and future employees to a less costly plan. It can still be a defined benefit plan, but with lower payments for years of service, age and so on.

"Or you can move to a defined contribution model going forward. These are basically tax-preferred savings plans. The employee usually has some say in how the money is invested. If you do well, the money grows enough to finance your retirement. If things don't go so well, then maybe you aren't going to do so well in retirement. The risk is on you. This is like 401k programs in the private sector.

"Another option is to raise the employee contribution to existing plans. Or you can have some combination of these solutions.

"How do you get there? Most organizations have collective bargaining contracts and there are various rules and procedures for how you go about negotiating. But you come to some agreement with the public sector labor unions about how this is going to be done. There have also been efforts to control spending at state and local levels through ballot measures. We could see some activity there -- but it might be best to quietly negotiate a settlement and keep it out of the political realm.

"In the 1990's, Orange County went bankrupt and it was a very costly process. It's full employment for lawyers. It also makes it very difficult if you ever need to go back to the credit market. You're going to pay a premium for credit. So both the direct costs and future costs discourage local governments from declaring bankruptcy. The City of Vallejo in the Bay Area declared bankruptcy during the recent downturn and people have noted how costly it was."

David Lewin Suggests User Fees
"Los Angeles will need to do some of the things that many other state and local governments are doing such as raising the retirement age, moving from defined benefit plans to defined contribution plans, increasing employee contributions to health care and changing the formulas for determining retirement benefits, including eliminating overtime pay from base earnings that are used for calculating benefits.

"A few months ago, several city unions representing some 40 percent of the city's employees, mostly people in low-paying occupations, formed a coalition and negotiated new agreements with the city that raised their contributions to pension and health care costs from about six percent to over 11 percent. These changes will affect the current workforce, not just new employees. This puts a stake in the ground for future labor-management negotiations.

"One other thing I would mention, but the city can't do this alone, is user fees. Other parts of the country have masses of toll roads and this has been the source of lots of revenue for lots of governments. Another option is to add a local surcharge of perhaps $.25 per gallon at the gas pump. Given the volume of traffic in Los Angeles, that initiative could have a substantial deficit reduction effect.

"You can also look at new local taxes, but user fees are preferable because they introduce the price system and people can make choices. That would be simple and straightforward, without changing tax codes or pension formulas.

"What we really need is more rapid economic growth and more employment. When you put people to work, they are earning and paying taxes. And if stock markets rise, things could look much brighter for the funds invested in retirement plans."

Romain Wacziarg Says Economic Growth is Needed
"There are two solutions to avoid bankruptcy. One is raising revenue and the other is cutting spending. Finding new sources of revenue is extremely difficult because L.A. is already losing its manufacturing base and it is losing people and businesses. So the only option is to cut services, a very painful option. L.A. has a huge budget and I think that's the only way it can sustain itself in the long run. Nobody likes to enact cuts to police and fire departments, libraries, welfare programs and things like that, but that may well be necessary to restore fiscal soundness.

"However it's not entirely clear that it is desirable to avoid bankruptcy. You need to understand what bankruptcy is. Bankruptcy is when you have a big stack of debt that you are no longer able to service. There's a bankruptcy judge who decides the priority level of the claims that are on a city and who will be repaid first or at all. Bankruptcy is not liquidation. It's not like there's not going to be a government or that public services will cease. Bankruptcy is like an orderly default. You might be better off going into bankruptcy rather than having to repay all this debt. However you still have to address the imbalance between expenditures and revenues going forward, which is not in itself affected by default.

"Santa Monica raised its sales tax by a half point. Los Angeles could do that but you would see businesses and people leave. It's tough.

"Ultimately the only thing that will really help is if we have an economic boom so the tax base rebounds, property values go back up and people start spending money again. You can undo really bad things quickly with a little bit of economic growth."

Jerry Nickelsburg Says the City Must Attract Business and Encourage Growth
"Most major cities in California have some long-term structural problems related to their pension and entitlement programs, and Los Angeles is no different. Pensions and entitlements definitely need to be re-examined to ensure they are sustainable, both for the benefit of the city and the benefit of their employees.. But a re-examination followed by a restructuring as required is very different than suggesting that bankruptcy is imminent. We are currently at the end of a deep recession and the beginning of a recovery and extrapolating from the current revenue shortfalls to future bankruptcy assumes that the economic recovery is going to leave Los Angeles behind.  The evidence is to the contrary. The only question is how fast and how much revenue will that growth generate?

"Improvements in taxes, infrastructure and services are the essential ingredients in accelerating Los Angeles' economic growth. For example, the city needs  to ensure its tax structure is competitive with neighboring cities. Differentials in taxes and tax rates may discourage growth because businesses can choose to locate in a lower tax jurisdiction and still retain the benefit of locating in greater Los Angeles.

"On the infrastructure front there is currently work going on to make the ports more competitive and enable them to increase traffic when demand dictates. There is also infrastructure development at the airport, including the substantial construction and expansion of the Tom Bradley West International Terminal. In addition, the mayor has proposed a new funding source for re-paving a third of the city's roads and the city is implementing an acceleration of public transit construction. So, there is extensive infrastructure work in process, which will contribute to making Los Angeles a more attractive location for economic activity and to alleviating some of the current fiscal stress.

"The ability of the city to reform pensions and the tax structure, to foster additional infrastructure construction and maintain an appropriate level of city services will be the key to fiscal strength in the future.  While none of the current or required initiatives are certain to be successful, an overall strategy to foster growth will generate the revenue required.  Thus, the notion that Los Angeles will be bankrupt is predicated on a prediction that the city will be unable to manage itself and its future growth, and the evidence that this is the case appears to be weak at best.  Such a prediction does, however, present a warning as to what might happen were the very real challenges the City of Los Angeles faces to be ignored."

Comments

[Florida Insurance Services]

Hey man this is really a nice post i like it very much.

[iPhone App Development]

It was so interested to be able to compare what we experienced with what I am learning at Naz.

[Zhang Guang]

It's not like there's not going to be a government or that public services will cease.idzmj0808
http://www.gamegoldfast.com/gw2/buy-guildwars2-gold.php

[e-cigarette france]

Your blogging site is excellent. Thank you so much for giving a lot of both useful and interesting additional info.

[Business Qatar]

Los Angeles labor leaders are coming out swinging against former Mayor Richard Riordan's push to place an initiative on next year's ballot switching new city workers into 401(k)-style retirement plans.
Tyler Izen, president of the Los Angeles Police Protective League, on Tuesday challenged Riordan to three public debates on the merits of his plan before Dec. 7. That's the deadline Riordan has set to collect roughly 265,000 signatures to qualify his measure for the May ballot.

Business Qatar

[Workspro]

Former Los Angeles Mayor Richard Riordan's plan for cutting city pension costs took center stage at Wednesday's mayoral forum in Koreatown, with three of the four leading candidates in the March 5 election speaking against it during or after the event. Former federal prosecutor Kevin James was the only candidate at the forum, sponsored by the nonprofit Korean American Coalition, to speak in favor of Riordan's plan, which would move newly hired city employees into 401(k)-style plans, not government pensions.

Workspro

[personal dream blog]

Exceptional publish, you may have pointed out the right particulars, My spouse and i also conceive this is usually a good web site.

[taste food info]

It’s really a nice and useful piece of info. I’m glad that you shared this helpful info with us. Please keep us informed like this. Thanks for sharing.

[eEmeHdUT]

eEmeHdUT
eEmeHdUT http://www.gi31R563Fb43s2cKyTG4TW.com/
[url=http://www.gi31R563Fb43s2cKyTG4TW.com/]eEmeHdUT[/url]

[Bigger Breasts No Surgery]

I actually respect your piece of employment, regards for all of the useful articles or blog posts .

[personal blogs]

can it be the downloadable software package or maybe you be on the net now there while building the internet site?

[Ralph Lauren Polo]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters Ralph Lauren Polo http://www.loraabe.com/ Ralph Lauren Polo

[coach outlet]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters coach outlet http://coach.me.pn/ coach outlet

[Seo Tools]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters Seo Tools http://scrapebox.over-blog.com/ Seo Tools

[Louis Vuitton Replica]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters Louis Vuitton Replica http://www.itbagonsale.com/ Louis Vuitton Replica

[cheap oakley sunglasses]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters cheap oakley sunglasses http://www.sunglassess365.com/ cheap oakley sunglasses

[cheap ray ban sunglasses]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters cheap ray ban sunglasses http://www.2013sunglassessale.com cheap ray ban sunglasses

[christian louboutin shoes]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters christian louboutin shoes http://www.louboutinheelshop.com/ christian louboutin shoes

[michael kors outlet]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters michael kors outlet http://www.michaelkorseoutlet.org/ michael kors outlet

[celine bags]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters celine bags http://celine.yoshi-tsugu.com/ celine bags

[Prada Handbags]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters Prada Handbags http://prada.darumaotosi.com/ Prada Handbags

[lacoste outlet]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters lacoste outlet http://www.lacosteoutletbox.com/ lacoste outlet

[群发]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters 群发 http://www.jitesi.com/gscraper/explain/ 群发

[BELT HERMES]

Former Mayor Riordan Says Los Angeles Facing Insolvency - Management Matters BELT HERMES http://belthermes.freevar.com BELT HERMES

[myfhtot]

Snapbacks for Cheap inside that savorily roast small sheep have already been eaten up by him near half.While naturally waiting person to just don't already praise highly for thisastonishing good appetite of archbishop, the archbishop let go of the knife and fork in the hand, satisfiedly drank off at hand that cup red

pandora bracelets retailers Ping Shi Shu, I……What am I?Once Ping Jie Guai's eye turn over and stared his one eye, follow my old man's house, the beggar occupies to ask you.Is helplessBottom, naturally have to follow him, arrive at a concealment valley in the mountain range of Kun Lun in.Born way:Ping Shi Shu, do you

cheap nba jerseys not see thing, don't comment on at all of qualifications.Yes! the blind person go away.The blind person also comes to join in the fun.……The shell Er Di Nuo the ear is very working, the outside is that disorderly issue, sheunexpectedly heard one silk half wisp.Listen to a Zhao this time

adidas metro attitude that the Yi wants to try oneself's capability behind, favourdollar the absolute being sends in addition to a body, his dollar the absolute being has already mutually matched with heart light, a Qiao then becomes purple glory and on all sides protects own meat body.Wave-bomb deaf Long!The red small

ncaa basketball jerseys china just was sent to do a Cape Dou here private, because he is a llama person, so just can enjoy need not to wear the special treatment of Liao Kao.Receive to too by coincidence live with him in the same the indoor, accordingto receive to say too much, this guy just comes to half for several months, don'

Wholesale Vintage NHL Jerseys of oneself's tribe from now on?The boon Lai section asks a way.Under majority of circumstances can't thus, although the food for powderacquaints with mutually, can really raise fighting strength,this equally will also bring trouble, among them the biggest trouble, undoubtedly would be to judge award

Cheap Authentic Soccer Jerseys starting to wear is my teacher,is which elder generation live as recluse here?The log cabin spreads an old voice, cold hum a way:Are you the pupil that the wood starts to wear?Naturally see the other party indeed as expected is a C the people, listen to a tone lane not return to have an origin with

Oakley Jawbone Sunglasses Outlet this matter baffles the various absolute being for a long time.However the first mankind don't know how to make use of sorcery, although is spoiling of various absolute being son, far compare the evil sex living creaturesthat the various absolute being creates to want small and weak get many,

Cheap Camo Realtree Jerseys want to attain original effect with those inferior materials, the root is impossible.The sea space Ai Luo disapprovingly says, he really knows this emperor Bi not is have intention to put a shape that belittles him.The sea space Ai Luo moreand more dislikes to the bad husband and wife of this

Houston Colts jerseys china aclear and crisp orotund way:BE what person killed a blood demon?Is public to echo to hope to go, sees the horizon lightning fast sort in afar fly come two green light, green light concealed go, appear two ways of beautiful as a fairies to pack woman.There is some excited tunnels in the Peng big