Moody's Downgrades Los Angeles From Aa2 To Aa3

It's getting ugly outhere.

Moody's Investors Service has downgraded to Aa3, from Aa2, the rating on the City of Los Angeles' general obligation bonds.

Moody's stated:

The downgrade primarily reflects the continued erosion of the city's historically better-than-average willingness and ability to quickly rebalance its budget mid-year. This is a particularly important rating factor for Los Angeles since its balance sheet has typically been relatively weak for the rating level. The downgrade also partly reflects the likelihood that the city's general fund reserves at the end of the current fiscal year could be materially weaker than we had previously expected, now that an expected transfer from the Department of Water & Power may be reduced. The loss of these DWP funds would, at a minimum, make the city's planned rebuilding of its budgetary reserves over the next few years more difficult, if only because it would likely be starting from a weaker position. Given the likely difficulty in rebuilding reserves according to the city's three-year plan--particularly in the current economic environment--our rating outlook for the city's general obligation and general fund ratings remains negative. The downgrade primarily reflects the continued erosion of the city's historically better-than-average willingness and ability to quickly rebalance its budget mid-year. This is a particularly important rating factor for Los Angeles since its balance sheet has typically been relatively weak for the rating level. The downgrade also partly reflects the likelihood that the city's general fund reserves at the end of the current fiscal year could be materially weaker than we had previously expected, now that an expected transfer from the Department of Water & Power may be reduced. The loss of these DWP funds would, at a minimum, make the city's planned rebuilding of its budgetary reserves over the next few years more difficult, if only because it would likely be starting from a weaker position. Given the likely difficulty in rebuilding reserves according to the city's three-year plan--particularly in the current economic environment--our rating outlook for the city's general obligation and general fund ratings remains negative.

Goldman Weasels Its Way Into Los Angeles Politics and Comes Out Smelling Millions Richer

Financial regulations have never stopped Goldman Sachs, so why should zoning regs.

Admittedly in a Private Property Society, private property owners would be free to do whatever the hell they damn well pleased on their own property. But in a world of government created power centers, it's only those who know how to influence the power centers, that have freedom, while the rest of us schmucks can just sit and watch from the outside.

At the start of the 21st century, Goldman Sachs has been the slick operator that finds the way to capture government officials for its own benefit. The latest example of this comes out of Los Angeles.

Last Friday,  the Los Angeles City Council voted  12 to 2 in favor of a change in zoning laws that handed the Goldman additional development rights on 111 acres of property it co-owns at Playa Vista.

According to LA Weekly:

The vote allows Playa Vista's final build-out phase to dispense with land-use rules that permitted just 100,000 square feet of commercial space — about the size of a single Costco warehouse — to allow about 2.6 million square feet of luxury housing, a smattering of senior housing and about 341,000 square feet of retail, offices and public buildings — significantly more square footage than is contained in Chicago's 92-story Trump International Hotel and Tower.

In pure dollar terms, the new rights substantially boost the value of Goldman Sachs' property — by $145.6 million, according to land-use consultant Bill Christopher.

After this play, expect more out of Goldman in terms of using and abusing the city. They appear to have dug their tentacles into the city big time. How deep?

The land which Goldman owns jointly with Morgan Stanley Real Estate Funds and union pension funds is known as Playa Vista. The president of Playa Vista is Steve Soboroff.

According to LAW, Soboroff participated in a "kitchen cabinet" that recommended Austin Beutner as Mayor Antonio Villaraigosa's new jobs czar, the new ultimate power position in Los Angeles.

Bottom line, Goldman's man in  L.A. was directly responsible for putting the city's new power player into his new position.

The Minimum Wage Must Be Lower For Goats Than Humans

From LaTi:

The denizens of the Bunker Hill high-rises can be excused from doing a double-take this morning as some new workers joined them in downtown Los Angeles. These workers are goats -- 100 of the bearded variety. The Community Redevelopment Agency brought the animals in the to chew on weeds and brush on a steep portion of Angels Knoll...

The goats will be in downtown for two weeks. According to the CRA, goats are cheaper for brush clearance than humans -- $3,000 compared with $7,500.

The goats are from Corona and will stay in downtown overnight, with a herdsman and private security, according to the CRA.

I wonder if there is a group of homeless who would work for $3,000? Probably. Thus, if there was no mnimum wage, you wouldn't see goats working for what truly destitue people need, money.



The story states that for humans to do the work it would cost $7,500. The minimum wage in California is $8.00. Assuming the entire $7,500 is spent on labor, this means 937.5 manhours are required to get the job done, under current minimum wage laws. If we assume that instead we hire homeless workers who work Monday thru Saturday 9 hours per day for a 54 hours per work week, ignore the minimum wage laws and assume that the job should be complete in two weeks (The same period it will take the goats to get the job done), then each worker hired will work a total man hours 108 hours over the two week period. It will thus take eight workers to get the job done. That's $375 per worker, if we assume they are paid a total payout of $3,000.

It comes down to paying workers for an honest two weeks of work, or using goats. Welcome to the impact of the minimum wage.

Pull The Damn Traffic Lights!

Tom Vanderbilt reports:

The idea that made [Hans] Monderman, who died of cancer in January at the age of 62, most famous is that traditional traffic safety ­infra­structure—­warning signs, traffic lights, metal railings, curbs, painted lines, speed bumps, and so ­on—­is not only often
unnecessary, but can endanger those it is meant to protect...

As I watched the intricate social ballet that occurred as cars and bikes slowed to enter the circle (pedestrians were meant to cross at crosswalks placed a bit before the intersection), Monderman performed a favorite trick. He walked, backward and with eyes closed, into the Laweiplein. The traffic made its way around him. No one honked, he wasn't struck. Instead of a binary, mechanistic process--stop, go--the movement of traffic and pedestrians in the circle felt human and organic.

A year after the change, the results of this "extreme makeover" were striking: Not only had congestion decreased in the intersection-- buses spent less time waiting to get through, for example-- but there were half as many accidents, even though total car traffic was up by a third. Students from a local engineering college who studied the intersection reported that both drivers and, unusually, cyclists were using signals-- of the electronic or hand variety-- more often. They also found, in surveys, that residents, despite the measurable increase in safety, perceived the place to be more dangerous. This was music to Monderman's ears. If they had not felt less secure, he said, he "would have changed it immediately."

Downtown Los Angeles has the most totalitarian enforcement of pedestrian traffic laws in the country (probably the world). With no traffic from any direction anywhere, you are apt to get ticketed for crossing against the light, by motorcycle cops hiding from view.

If full totalitarianism comes to America, it will probably start in California.

Via Megan McArdle

How to Irritate the Mayor of Los Angeles...

...Ask him about basic economics.

I'm still in Los Angeles. After a morning meeting at the Omni Hotel, I headed out to grab a burger at Casey's Bar and Grille on Grand Street. As I walked through the California Plaza area, I noticed a half dozen or so cameras setting up. I asked one of the cameramen what was going on. "The mayor is going to give a press conference in just a few minutes about the water shortage and new laws that are going into effect because of it." "Jeez," I think to myself, "doesn't the mayor know that a shortage is just a case of mis-pricing in the market and that a free market price will end the shortage?"

Then, I say to myself, "I think I'll ask him."

So I wander closer to where the cameras are being set up and notice an area that appears to be where the reporters are gathering. I notice a woman handing out some type of papers to the reporters. I look at a building-type badge dangling from her belt that says in large bold letters, MAYOR. Since I hadn't read any news in the papers of Los Angeles Mayor Antonio Villaraigosa having any recent sex change operations, I quickly surmised that the woman was one of the mayor's aides.

Since I had now decided I was covering the Mayor's press conference for EPJ, I felt I needed one of whatever the aide was handing out to the other reporters. I approached the woman and said, "Can I have one of those?" She looked at me and for obvious reasons didn't recognize me as one of the regular beat reporters. She said, "Who are are you? Are you with the media?" I said yes and handed her one of my EPJ business cards. She looks and says, "Oh, OK." and hands me the papers. I considered this an official approval from the Mayor's office to ask questions at the event.

The papers listed all the new regulations that will take affect when the mayor signs the new water legislation.

It includes:

The ban on the use of water on hard surfaces, such as sidewalks (except for water brooms)

The ban on the serving of water to customers in eating establishments, unless water is requested.

A limit on outdoor watering to 15 minutes per water station.

The ban on washing cars without shut off mechanisms on the hose.

The banning on watering of large landscape areas that do not have rain sensors.

The requirement that hotels and motels inform guests of the option to reuse towels (yuck).

The allowance of an exemption for using gray water (double yuck).

So the Mayor arrives and gives a brief speech, blah, blah. It turns out that Los Angeles, the mayor informs us, will have an army of drought busters. 16 strong. The drought busters will patrol LA, to insure that no one, for example, waters their lawn for 18 minutes instead of 15. A series of warnings and fines have been designed for the drought busters to issue to uncooperative citizens.

Then someone from the Department of Water and Power spoke, more blah, blah.

Then question time. Two questions were asked and then it was my turn. I manged to work my way directly in front of the mayor and ask my question eyeball to eyeball:

Economics 101 teaches that a shortage is only caused by incorrect pricing of product. Why don't you just let supply and demand set the price for water and eliminate the shortage and eliminate the need for an expansion of the bureaucracy?

And I waved my hand toward the drought busters. The mayor's response?

A total 100% diss. He turned completely away from me and said, "Next question."

No, "That will take too long to answer at this conference."

Just a brutal, cold, turn and "Next question."

More questions were asked, and in one answer the mayor said, we are going to teach the kids in school about conservation." My knee jerk free market economic instincts took over. OMG, the kids, the kids! They are going to teach the kids commie anti-free market distribution methods. The mayor took half a breath, just enough for me to shout out another question: "Do you teach basic economics in your schools?"

Of course, the mayor ignored the question.

Who ever thought that asking a Mayor a simple question about basic supply and demand would irritate a mayor, and cause him to diss the questioner.

Well, Mr Mayor, the great media outlet EPJ will not take being dissed, lightly.

I have held a corporate wide meeting with myself and reached the conclusion that we will now monitor for EPJ the complete mayoral policies of one, Mayor Antonio Villaraigosa, specifically with regard to economic policies and economic knowledge. It will be thorough, on going and deep. Further, I am pulling all copyright restrictions at EPJ on all posts that reference Antonio Villaraigosa. Anyone doing opposition research in any future election race against Villaraigosa is free to use any knowledge, information or dirt we uncover about him. Let's nail this clown.

I Felt It

I am on the West Coast this week, and in Los Angeles, today.

As most of you must know by now, a 5.4 earthquake hit the area just before noon. I was on an outdoor escalator near the Citibank Building in downtown Los Angeles. I was headed across the street via a pedestrian overpass toward the hotel I'm staying at, the Westin Bonaventure.

On the escalator the quake felt like a strong jolt, and the escalator snaked a bit, but it was very brief, perhaps three seconds. I didn't know for sure it was a quake until a minute or two later when I was back at the Bonaventure. In the lobby the televisions were on and remarkably the networks had already broken into regular programming to report the quake.

Guests now in the lobby, who were in their rooms at the time of the quake, said there was considerable swaying of the hotel. For my next meeting, I had to walk through the World Trade Center building, which is next to the Bonaventure. There was more a look of concern on those at the WTC. There were small bits of debris which clearly fell from the ceiling of the WTC. I then headed further up the hill and over to where many of the larger office buildings in LA are, office tenants were out of their buildings. These are 40 and 50 story buildings and the look on the faces of secretaries suggested it was more than a jolt on the top floors. They were clearly in a mild state of shock. One passerby was telling his friend that he was sitting in his chair on the 49th floor and he said the swaying and shaking was so bad that he was sure that if he would have tried to stand up he would have been knocked to the floor.

I overheard one girl tell her friend that she had to walk down the stairs from her 47th floor office. It took her about 7 minutes, she said. And she had to take her high heels off, carry them and walk barefoot. She said her calves were sore.

The most disconcerting part of the entire experience was the public address systems in the buildings. While, I was in the lobby of the Bonaventure, instructions were given, but the poor acoustics made it impossible to understand what the instructions were. The same thing occurred when I left the WTC building and entered the Bank of America building, instructions were being given out at the BofA building, but they were impossible to make out.

If there ever was an emergency where people had to be instructed quickly with emergency instructions, these PA systems would never be able to deliver the message to those in the lobbies.

News reports say the potential for a stronger quake to hit exists for a period of 24 hours after the first one. And, of course, there will be aftershocks--kind of like the mortgage crisis.

Big Mother Out of Control

A proposal that would place at least a one-year moratorium on new fast-food restaurants in a broad swath of neighborhoods, mostly in South Los Angeles, won unanimous support from a Los Angeles City Council committee Tuesday.

If approved by the full council and signed by the mayor, the law would prevent fast-food chains from opening new restaurants in a 32-square-mile area.

The measure, proposed by Chief Southern LA Mama, Councilwoman Jan Perry, whose 9th District includes much of South Los Angeles, defines a fast-food restaurant as "any establishment which dispenses food for consumption on or off the premises, and which has the following characteristics: a limited menu, items prepared in advance or prepared or heated quickly, no table orders and food served in disposable wrapping or containers."

The Business Crowd Is Spending In Downtown Los Angeles

This afternoon, I overheard a conversation between two bus boys in downtown Los Angeles.

One was walking out of Nick & Stef's, a first-class, four star, steakhouse in downtown Los Angeles, where he clearly worked. He excitedly calls over to the other bus boy, who is outside and hands him some money and says, "We made $47.00, today. Boy, business has been real good lately."

The Everyday Billionaire

Warren Buffett's partner, Charlie Munger, who has a net worth in the billions, frequents downtown Los Angeles. He has office space downtown at a law firm where he is a partner. A friend tells me he also hangs out at the California Club, which is also downtown, about a five block walk from his office. I have seen him walking from his office to the Club many times. I truly get the sense that as he passes through the semi-crowded streets, without a bodyguard, I am the only person who knows who he is. No one turns, no one looks at him. (In contrast, I have seen Donald Trump walk from his building on Fifth Avenue, everyone stops and looks.)

According to my friend, when Munger is at the California Club, he sits in a chair and reads one newspaper after another after another.

I have seen him sitting and eating breakfast at the downtown McDonald's, reading The Wall Street Journal.

Just last week, he passed by me and I introduced myself. He is in his mid-80's, but was as sharp as a tack. Interestingly, newspaper in hand, he again had no bodyguard and his clothes would leave you to believe he probably maxed out at 500k net worth, if that. He had on a red plaid shirt with thick orange and brown stripes. His suit jacket didn't match the suit pants he was wearing.

If you didn't know who he was, you would probably take him for a well off farmer, coming into town to get a problem with his car registration straightened out.