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The Villaraigosa Hangover 

Thanks to the mayor's $700 million union deal, L.A. faces a $216 million deficit next year. Here's what happened

Thursday, Sep 20 2012
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Thanks, Mayor Villaraigosa: The city 
    is looking at a $216 million deficit next year — 
    with $66 million for employee raises.

PHOTO BY PAUL HENNESSY/POLARIS/NEWSCOM

Thanks, Mayor Villaraigosa: The city is looking at a $216 million deficit next year — with $66 million for employee raises.

In the summer of 2006, about 4,000 L.A. city employees went on strike. Sewage treatment workers walked off the job. Pools closed. Two traffic engineers sabotaged the city's computer system.

For Antonio Villaraigosa, who had been elected mayor the year before, it was an important test. He was a product of the labor movement, but now he was the boss. Could he stand up to the unions?

He could. The strike ended after two days, and the city imposed a contract with only modest increases. The L.A. Daily News — which tended to be critical of public-sector workers — ran an approving editorial: "Villaraigosa of all people takes on the unions."

click to enlarge PHOTO BY PAUL HENNESSY/POLARIS/NEWSCOM - Thanks, Mayor Villaraigosa: The city - is looking at a $216 million deficit next year — - with $66 million for employee raises.
  • PHOTO BY PAUL HENNESSY/POLARIS/NEWSCOM
  • Thanks, Mayor Villaraigosa: The city is looking at a $216 million deficit next year — with $66 million for employee raises.

The praise was short-lived. The very next year, Villaraigosa handed a lucrative, five-year agreement to most of the city's civilian workers. Those employees made about $1 billion a year in 2007 — roughly a quarter of the city's entire budget. By 2012, they would get a lavish 25 percent raise.

The city was facing deficits even before the recession hit. When revenues plunged, the contract became an anchor around its neck, forcing furloughs and layoffs. City Hall balanced the budget by shuttering libraries, mothballing ambulances and halting repairs to buckled sidewalks.

In retrospect, the 2007 contract ranks among the worst decisions Villaraigosa made in two terms as mayor — perhaps the worst. He has told staffers that he deeply regrets it. And the full bill has yet to come due. Though the City Hall workforce has shrunk to levels not seen since Tom Bradley was mayor, the city still faces a $216 million deficit next year. Included in that figure is a $66 million bill for employee raises — Villaraigosa's gift to his successor.

"It's a balloon payment which the city cannot afford to make," says Supervisor Zev Yaroslavksy, who last month opted not to run for mayor. "When the next mayor takes office, they're gonna have a financial tiger by the tail."

So what happened to the mayor who was willing to take on the teachers unions and hold firm in the face of a strike? Many factors contributed to the decision, according to interviews with more than a dozen advisers and participants in the negotiations. Among them were the mayor's political ambitions at the time, including the idea of a run for governor in 2010.

But though the buck stopped with the mayor, the contract was a group decision, and it was marked by groupthink. The mayor and his advisers supported it — but so did Bernard Parks, the most anti-labor council member. So, too, did the three major candidates in next year's mayoral election: Controller Wendy Greuel, Councilman Eric Garcetti and Councilwoman Jan Perry. All three were consulted, and all three voted yes.

The summer of 2007 was the summer of Mirthala Salinas — then the mayor's new girlfriend. Though advisers say the end of Villaraigosa's marriage had no effect on his job performance, it took a heavy toll on his public image. He had long been considering a run for governor, but now he had to worry about re-election as mayor.

He would need support from labor for either venture — and he was already tangling with the teachers unions over control of the schools. A coalition of 19 civilian employee unions was threatening to strike if they could not reach a favorable deal, and several advisers worried about the possibility of a midsummer garbage strike.

Villaraigosa wanted to be firm with the unions. But he also believed that the best way to bargain was by building trust and pursuing common interests. He had seen how "mutual gains" bargaining had worked at the Metropolitan Transportation Authority, and was impressed.

So he hired Rhonda Hilyer, the MTA's consultant, to bring her methods to City Hall. Hilyer's "Resolve" program stressed moving past entrenched positions. To get there, participants had to get to know one another's personalities: Some people were big-picture thinkers, while others were focused on details. Each personality type corresponded to a color. Some people were "reds," others were "blues." Hilyer's firm, Agreement Dynamics, was paid $180,000 to train more than 200 people — mostly union leaders — to identify which colors they were.

This approach met with raised eyebrows not only among the unions but also within the City Administrative Office, the semi-independent office responsible for negotiating contracts. Not surprisingly, Hilyer's methods were not carried through. At some point, the union leaders reverted to positional bargaining, and the city negotiators went along.

"The [union] coalition defined the conversation quickly," one insider says. "We fell for it."

The unions wanted pay raises. Their better-compensated colleagues at the Department of Water and Power had just won a 16 percent increase over five years, and the union coalition wanted to do better than that.

Villaraigosa was not a budget expert, and he was not naturally disposed to getting into the weeds. He relied on his team to let him know whether the agreement was affordable. Some advisers also found the mayor distracted by political ambition.

At closed-door meetings of the city's Executive Employee Relations Committee, Garcetti and Greuel sat on either side of Villaraigosa. They, too, asked questions and probed the city's negotiators. No major differences emerged between the three of them. They presented a "thoughtfully unified" front, in the words of one witness.

The chief concession they extracted from the unions was the ability to reopen the contract in the case of an economic downturn. The city's negotiators seem to have believed, thanks to the trust-building work, that the unions would be cooperative if the contract were reopened. That turned out not to be the case. (Indeed: When the mayor asked for concessions this year, the unions compared him to Wisconsin Gov. Scott Walker.) The management side also wanted concrete "clawbacks" in the case of a revenue slump, but the unions refused.

Typically, a contract is only three years, but in this case, Villaraigosa and his team agreed to five, with significant raises backloaded in the third, fourth and fifth years. The city knew it could not afford 5 percent increases right away, but believed that by 2009, revenues would be growing quickly again. Though the real estate bubble had burst, the city still had a bubble mentality.

David Fleming, then chair of the L.A. Chamber of Commerce, warned Villaraigosa's staffers that they were making a mistake. "It was like talking to a bunch of deaf people," Fleming says.

"They knew where I was coming from, and some agreed," he says. "But they said that under the circumstances, politically, we can't cross swords."

The contract was described as a $255 million deal — but that severely understated the case. Since each year's raises were cumulative, the true five-year cost was more like $700 million. And that does not include the impact in later years, especially to pension benefits.

In a statement to the Weekly, Villaraigosa said that if he had known that the recession was coming, "I believe a different compensation package would have been presented and passed."

Greuel and Garcetti also issued remarks emphasizing the unpredictability of the recession.

Earlier this year, Miguel A. Santana, the city administrative officer, suggested eliminating the raises in the last two years of the contract. "It is now clear that this contract is not sustainable within current or projected revenues," he wrote.

But Bob Schoonover, president of SEIU Local 721, said in a statement that there's no way the unions will agree to that. They've already agreed to contribute more to retiree health care, he pointed out.

"They want to cut wages and keep slashing pensions," Schoonover said. "But there is nothing more city workers can give."

Reach the writer at gmaddaus@laweekly.com

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