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Budget Front and Center as Los Angeles Selects New Mayor

LOS ANGELES — With less than a month left in the race, Los Angeles mayoral candidates Eric Garcetti and Wendy Greuel are both trying to prove they are the right candidate to help the city craft a long-term solution to its chronic budgetary problems.

The roughly 40 debates the candidates participated in over the course of the campaign against each other, and the three other candidates eliminated in the primary, covered a wide range of issues faced by the city of 3.8 million.

But the city budget is the big issue.

Termed-out incumbent mayor Antonio Villaraigosa helped set the table Monday by releasing his $7.4 billion budget proposal for fiscal 2013-14, urging the next mayor to freeze wages for police and firefighters and saying that the city would have a $15 million surplus in 2017 if no raises were given to police officers, firefighters and other city workers during the next mayor's term.

"My proposed budget does not provide funding for previously negotiated 5.5% pay raises set to go into effect next fiscal year on Jan. 1, 2014," Villaraigosa said in his proposed budget. "Similarly, the proposed budget reduces funding for civilian health benefits in an amount equivalent to a 10% employee health premium contribution."

The lame-duck mayor, whose term ends June 30, said he took those actions so that the next mayor and council could "be afforded the opportunity to renegotiate these employee benefits."

Chief Administrative Officer Miguel Santana warned city leaders throughout 2012 that employee compensation and pension liability issues need to be dealt with if the city is to have sustainable economic growth — and not end up back where it was in 2008 with a $1 billion deficit and some city council members warning of impending bankruptcy.

Through the elimination of 5,300 positions and cutbacks to city services over the past five years, Los Angeles has managed to whittle down that $1 billion deficit.

The city was partially aided this year from $96 million of unexpected revenue growth thanks to the improving economy, enabling the city to close the budget deficit without furloughs or layoffs and restore some city services, according to Villaraigosa's budget proposal.

Greuel, the city controller, and Garcetti, a city council member, are set to face off in a May 21 runoff.

They both have supported Villaraigosa's proposal to eliminate the final 5.5% in wage increases for civilian city workers set to go into effect Jan. 1, 2014.

Those raises were the final piece of 20% in wage increases implemented over a several-year period that were negotiated by the city council and the mayor in 2007.

Who Is Most Beholden to Unions?
While Greuel has been criticized for her endorsement by the employee unions at Los Angeles Department of Water and Power, both candidates have strong union ties that raise questions about just how far either would go in wringing concessions from city employee unions when contracts expire.

During a debate held Monday night on the University of Southern California's Health Sciences Campus in Alhambra, Greuel said pension reforms passed by the mayor and city council last year did not go far enough.

"They only impacted future employees — and we aren't hiring new employees," Greuel said. "We need pension reform for current employees."

Greuel said she would extract changes to current employee pensions at the negotiating table, enabling her to avoid union lawsuits because the state constitution requires changes to current pensions be made through negotiations.

"The reason we need to cut the raises, is because my opponent had the opportunity to renegotiate the raises approved in 2007, and he did not," she said.

Villaraigosa and the city council approved in 2011, when Garcetti was on the council, five consecutive raises for police officers and firefighters over 24 months.

The entire council approved 20% in raises for city employees over a several-year period in 2007, when Greuel was on the council and Garcetti was council president. Garcetti stepped down as council president last year; Greuel served on the city council from 2002 until 2009 when she was elected city controller.

Garcetti questioned how effective Greuel would be in negotiating concessions from city employee unions after most of them endorsed her in the campaign. He courted those endorsements also, however.

Garcetti said during the debate that pension reforms he helped negotiate as council president resulted in $83 million in savings.

"I have actually delivered," Garcetti said. "We cannot afford to just talk about our plans to negotiate salary concessions and pension reform, we need to implement them."

The debate's moderator, NBC4 political reporter Conan Nolan, said that Fred Pickel, the ratepayer advocate for LADWP, who revealed in a report last year that LADWP employees make, on average, 25% more than other city employees in similar positions, has asked that LADWP employees take a 10% across-the-board pay cut.

He asked both candidates if they would make 10% cuts to LADWP salaries as recommended by Pickel.

Both candidates said salaries at LADWP need to be reduced, but neither would commit to a 10% reduction.

Garcetti and Perry proposed the ratepayer advocate position and lobbied until the council adopted an ordinance creating the position.

Will CAO Keep His Job?
It's uncertain from either mayoral candidate's response if Santana, who as chief administrative officer has been a leader in crafting the austerity plan that helped the city close what was a $1 billion budget gap at the height of the recession, will still have a job.

Santana has been criticized by employee unions — with one union at one point even suggesting it would only endorse the mayoral candidate that agreed to strip the CAO of his job.

Garcetti has said that he will ask that all general managers reapply for their positions as a priority in his first 100 days as mayor.

During an interview following the announcement last Thursday of her 35-page blueprint to solve the city's fiscal issues, Greuel said: "The mayor is the one responsible for putting a budget forward and Miguel has been someone who has put the facts out there."

She added that she doesn't believe that he should be penalized for "stating the facts," but as mayor she would hold every general manager accountable including Santana.

Lisa Greer Quateman, a partner in the Los Angeles office of law firm Polsinelli, who has represented the city and the state on bond issues, said she doesn't know if the city selects a different CAO if it will impact the city's bonds or ability to issue bonds at low rates.

"I am not sure about the CAO, but I believe the debt manager position, [filled by Natalie Brill], has the protection of civil service, so there would be continuity in terms of Natalie Brill's position," Quateman said.

Though Greuel has managed to garner high-profile endorsements including former President Bill Clinton, California Sen. Barbara Boxer, former Republican Mayor Richard Riordan and most of the city's business organizations in addition to most of the unions, she claims to be a "better manager than a campaigner."

That was also Greuel's explanation during the debate as to why a USC/LA Times poll of city voters released Monday has Garcetti leading 50% to her 40%.

Her blueprint would increase the retirement age for "current" city employees, eliminate pension spiking and double dipping from employees who retire after 20 years and then return to work for the city.

"I support the proposals already put forth, but we have to do more," Greuel said.

She worked for the Clinton administration from 1993 to 1997 as the Southern California field operations officer for the Department of Housing and Urban Development. In that role, she says she helped to bring $1 billion to the city in the days after the Northridge earthquake that decimated the city in 1994.

During a campaign event held at Langer's Deli in MacArthur Park, Clinton said his first direct exposure to Wendy was after the Northridge Earthquake.

"We had a lot of work to do, and she handled HUD's part of it and the money that flowed in here — and I thought she did a terrific job," Clinton said. "I have seen her get things done. If everyone saw her the way I do, she would win."

All three candidates eliminated in the March mayoral primary, City Councilwoman Jan Perry, radio host Kevin James, and tech executive Emanuel Pleitez, have endorsed Garcetti. Like Greuel, he has a long list of state legislators supporting him, as well as seven of the current city councilmembers including Perry, the California National Organization for Women, and Cory Booker, mayor of Newark, N.J.

He also garnered support from 15 city unions including the United Teachers Los Angeles in the Los Angeles Unified School District, which is not part of city government.

"I have been president of the council. I have been acting mayor a number of times," Garcetti said. "My leadership is about getting things done. And all three folks, who used to be on the stage with us, have endorsed me. It's not about the list of people who have endorsed you."

He noted his district has been number one in job growth, crime has dropped by two-thirds in his district and he brought Hollywood, also located in his district, back.

It is about electing a leader most willing to make tough decisions — someone who will sometimes do the things that businesses won't like, and sometimes do the things that unions won't like, he said.

Among the general population, the polls have shown Garcetti in the lead, but there is little indication among municipal bond professionals as to whom they would prefer.

"Politics has become like religion and sex — very rarely discussed in a business context," Quateman said. "So people are not commenting much on the mayoral election. It's either fear of offending someone, or, and I think that this may be more likely, it's the comment that I made before — the issues are larger than the individuals involved."

Quateman said it's her sense that both candidates have the experience and tools needed to deal with the compensation issues, but the issues are larger than the individuals.

She added that the results of the election are not likely to impact Los Angeles bonds, because "both candidates bring a lot to the table in terms of experience and because the city's finance staff members are also experienced and are likely to remain in place."

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