IN 2006 THE CITY OF LOS ANGELES posted an announcement in the tiny Metropolitan News-Enterprise paper. It proclaimed that anyone who wished to fight the transfer of almost $30 million from the Department of Water and Power to the city’s general fund had better act quick or the funds would be quietly transferred each year, ad infinitum.
It was, critics said, a case of slick lawyering. The City Council and Mayor Antonio Villaraigosa — accustomed to direct control over how to spend a special 5 percent fee padded onto residents’ water bills — wanted to ensure that those unfettered funds for pet projects, over which ratepaying households have no say, would continue to flow.
The reason for the Metropolitan News announcement: Villaraigosa and Council President Eric Garcetti had been formally put on notice that their behavior was illegal. A California Supreme Court decision said the money collected for water and power services must be used to run those services.
Today, two years later, that growing pot of 5-percent-fee money cannot be spent because the Howard Jarvis Taxpayers Association has filed as a defendant in the elegantly titled “City of Los Angles vs. All Persons.” But the tussle over this potential slush fund raised through DWP fees is part of a larger trend. With the national and regional economies tanking, the 15 City Council members and mayor are showering Angelenos with an ever-growing collection of fees, fines, taxes and special charges.
Some say the special cost hikes are unprecedented in Los Angeles in the past generation, and economists warn that City Hall is unwisely heaping charges on working-class and professional families at the worst possible time, just as they are getting slammed with layoffs, salary cuts and trimmed hours.
For economists like USC’s Ayse Imrohoroglu, the calculation is simple, even if it mystifies the City Council and mayor: “In an economic downturn … anything that reduces economic activity is a bad thing. Taxes and fees, wherever applied, will reduce that activity.“
From sewage to solid waste, camping fees to solar panels, parking tickets to towing charges, phone taxes to golf fees, stiff new costs are hitting hundreds of thousands of working households and small businesses that dominate L.A.’s teetering economy.
Says Joel Kotkin, Chapman University Presidential Fellow in Urban Futures, “I don’t even know why we have a City Council. Just dissolve it and save the money there. It’s not like they question things. You should just have Antonio directly report to the public-employee unions and developers — and see what they want.”
In May 2006, the City Council announced a trash-collection fee that Villaraigosa sold to residents by publicly promising it would go to hiring 1,000 new cops. In concert with that, the City Council has boosted the trash fee 330 percent, from $11 to $36.32.
The fee hike goes far beyond the actual cost of collecting and dumping trash. By this fall, it had generated a $137 million mountain of cash. But Villaraigosa’s vow that the excess funds would go to hiring cops proved untrue. An audit by city Controller Laura Chick has shown that Villaraigosa and Police Chief William Bratton spent only $47.2 million hiring new officers. Much of the rest went to raises and perks for the powerful police union.
Although no laws were broken in the failure to spend the money as promised, Chick says (in a careful parsing of the actions by her political ally, Villaraigosa) that the mayor “incorrectly stated that the fees would be used exclusively to hire new officers, which we [now] know is not the case.”
Greg Lippe, chairman of the Valley Industry and Commerce Association, a business interest group based in Woodland Hills, says the special trash charge is a prime example of City Hall’s shady tactics during this economic downturn. “What they do is get people scared,” Lippe says. “They get people by saying, ‘We need this money because otherwise you won’t be protected’” by the cops.
There’s much more to come. Soon, water rates will jump by $5.25 on a typical water bill, but costs will be far higher for those who regularly water their lawn. Former DWP president Nick Patsaouras, who is running in March for Chick’s high-profile seat as city controller, warns that under the current trajectory, power rates “will skyrocket 35 percent” in the next few years, pushing average bills from about $50 to $72.50.
Economists say a key selling point for graffiti-riddled, billboard-choked, overbuilt and increasingly unpleasant L.A. is its very cheap power, which is aggressively cited to woo businesses back. But in March the City Council is placing the so-called “Green Energy and Good Jobs for Los Angeles Act” on the ballot. Experts say it could pass, and that means that cheap energy, one of the city’s few remaining selling points besides its weather, could vanish. Residents and other ratepayers are expected to pay billions to cover the solar project, a hastily drummed-up idea which comes with no cost controls. (See “L.A. City Council Makes Solar Look Bad.”)
The plan would pay for 1,500 acres of solar panels citywide at an initial cost of about $3 billion to ratepayers. But it’s the loophole-filled fine print — the unspecified future costs needed to make the huge, experimental system work — that has economists and others getting anxious about the effect on economically hammered residents and businesses.
Patsaouras, normally an ardent backer of Villaraigosa, rails: “What they are asking the ratepayer to do is give a blank check at a time when the economy is its worst in 35 years. It is absolutely outrageous!”
Even the controversy-shirking L.A. Chamber of Commerce is sounding sour, with CEO Gary Toebben saying that the solar plan has created “skepticism out there … and not just in the business community.”
But at least voters get to make that decision next March. Not so with the revised 2008-2009 city budget, which has increased car-towing fees by more than 100 percent to $100, hiked parking tickets dramatically, and almost doubled city campsite fees to $10 per night at places like Camp Decker.
Larry Kosmont, president and CEO of Kosmont Companies, who publishes an “annual cost of business survey” that rates California cities on their success in wooing good jobs to town, has little faith that Villaraigosa and the City Council know how to reverse their habit of driving jobs out of L.A.
“Medium- to large-sized businesses have left,” Kosmont says. The city is almost entirely “an economy of small business” because so many others have fled.
The upcoming 2010 U.S. Census is feared to show that the Los Angeles middle class, on which City Hall heavily leans for its taxes, has been hollowed out, with professionals and highly skilled residents fleeing to Seattle, Portland and Las Vegas. Even the hated “big boxes,” a key source of city sales taxes, are avoiding L.A., according to Kosmont. “If you were to draw a map of large retailers, it would draw the borders of L.A.,” he says. A Costco store might face business taxes as high as $400,000 a month in L.A., while close-in suburbs like Glendale and Hawthorne might charge $1,000 to $100,000, he says.
A final tally of votes for Villaraigosa’s “gang tax” shows that, when asked to weigh in on paying for City Hall’s pet projects, L.A. voters can bite back. The failed Proposition A tax would have forced homeowners and businesses, regardless of income level, to pony up annual payments ranging from $36 to several hundred dollars, based on the number of “parcels” they owned. It would have raised about $28 million annually for Villaraigosa’s untested and vaguely defined antigang program.
“They had the gall,” says Kris Vosburg, of the Howard Jarvis Taxpayers Association, “the outrageous nerve, to put a gang tax on the ballot when they are sitting on tens of millions,” raised by showering city residents with numerous extra fines and charges.
In the next few weeks, key City Hall proponents of charging residents even higher fines, fees and surcharges, including council members Janice Hahn and Wendy Greuel, are expected to suggest a slew of creative new “revenue streams.”