Los Angeles County Grand Jury
2010-2011
Findings & Recommendations
6 findings
F1:
Total CalPERS and retiree health UAAL, including and Pension Obligation Bond debt, equaled $116.6 million as of June 30, 2009, which is significant.
F2:
A significant portion of this liability is related to OPEB, or retiree health benefits provided to City employees. As of June 30, 2009, the UAAL for OPEB equaled $49.1 million, or 42.2% of all unfunded retirement obligations in 2009.
F3:
OPEB liabilities are growing rapidly. In part, this is because the City has chosen not to fund its Annual Required Contribution at the levels recommended by actuaries. In FY 2008-2009, the City contributed only 34.2% of the requirement; and, in FY 2009- 2010, the City contributed only 30.2% of the requirement. In FY 2009-2010, this represented a funding shortfall of approximately $2.7 million. Since 2007, the City has also not funded the full amount of the ARC for the MMRP closed plan.
F4:
The policy to fund these benefits on a pay-as-you-go basis is striking because the City has unique pension funding authority authorized by the voters when they approved special property tax levies in 1946 and 1952. Revenue from this levy were sufficient to nearly fund the full cost of the CalPERS Annual Required Contribution in FY 2009-2010. As a result, the City only needs to fund the OPEB, MMRP and POB debt from discretionary resources.
F5:
With the exception of attempts to reduce the City’s pick up of the employees contribution to CalPERS, the City appears to have done very little to reign in the cost of the retirement benefits that it provides. A blue ribbon committee in 2006 recommended revenue solutions to cope with the City’s “pension-funding shortfall,” 282 A 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY and subsequent steps by the City Council have involved adopting a resolution to pass through the portion of property tax revenue collected by the Redevelopment Agency from the special property tax levy.
F6:
The City has moved forward aggressively to pre fund its OPEB obligations, being one of only 14 out of 70 OPEB cities to do so in the County. While the City’s most recent actuarial evaluation from 2008 reported a funded ratio of only 45.2% on $5.8 million in liabilities, recent finance reports show that the cash balance in the fund has grown substantially to $3.4 million as of January 31, 2011.
Additional Recommendations
2
Not linked to specific findings.
R1:
Monterey Park’s City Council adopt policies to fully fund the ARC for both the MMRP and OPEB retirement benefit plans for employees in order to ensure future funding of benefits and earn investment income which would discount the annual required contributions
R2:
Monterey Park’s City Council direct its City management to explore alternatives for reducing retirement benefit costs, including possible additional revisions to the amount of the employee contribution pick up paid by the City and alternative employee cost sharing arrangements for retiree health benefits. REQUEST FOR RESPONSE California Penal Code Sections48 §933 (c) and §933.05 requires a written response to all Recommendations contained in this Report which shall be made no later than ninety (90) days after the CGJ publishes its Report (filed with the Clerk of the Court). Respond to: Presiding Judge Los Angeles County Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street, Eleventh Floor, Room 11-506 Los Angeles, CA 90012 All responses for the 2010 - 2011 CGJ Report’s Recommendations must be submitted to the above address on or before the end of business September 30, 2011. Responses are required from: Recommendation Number(s) Responding Agency 1 City of Monterey Park 2 City of Monterey Park 48 Reference California Penal Code Sections §933(c) and §933.05 at the beginning of this 2010-2011 CGJ Report 2010 – 2011 PHASE II: SECTION 5 HERMOSA BEACH POLICE SAFETY PLAN SUMMARY The Hermosa Beach Police Safety Plan is one of 3 plans the City provides to its employees through CalPERS. In 2009, this plan had the highest contribution rate in the County at approximately 57.9% of salaries for the employer and employee share of pension benefit costs for uniformed personnel. The City also contributed to a defined benefit retiree health plan for these employees at a rate of approximately 5.3% of salaries, for a total retirement contribution rate of 62.2% in that year. Pension contributions are projected by CalPERS to increase by an additional 8.0% by 2012, increasing the total effective rate for uniformed Police Department retirement benefits to 70% of salaries by that year if retiree health rates remain static. This growth in contributions is also occurring with the Miscellaneous and Fire Safety plans for Hermosa Beach. Also administered for the City by CalPERS, the Miscellaneous employee effective contribution rate was 27.1% of salaries in 2009 and could increase by an additional 2% by 2012.The Fire Safety employee effective contribution rate was 51.9% in 2009, and could increase by an additional 3% by 2012. In total for the 3 plans, CalPERS projects that the City will be required to contribute $4,149,982 on base salaries of $12,751,612 in FY 2011-2012, or approximately 32.5% of salaries excluding retiree health benefits. The City has recognized the significance of the funding difficulties that it faces and has initiated several strategies to reduce costs including proposals to labor unions to modify pension formulas. However, the City is not proposing to reduce or eliminate the City’s commitment to pick up the 7% (Miscellaneous) and 9% (Safety) employee contributions for CalPERS pensions at this time. The City is considering the issuance of Pension Obligation Bonds (POBs) to take advantage of current lower interest rates on borrowing. In recent analysis, bond advisors have estimated that POBs would save an estimated $329,818 over 8 years. PURPOSE The Hermosa Beach Police Safety Plan was chosen by the CGJ for in-depth review, based on the high annual required contribution for pension and retiree health benefits, amounting to over 62% of pensionable salaries in 2009, and expected to rise to over 70% of pensionable salaries by 2012.
Findings & Recommendations
20 findings
F1:
The e-Subpoena system provides prosecutorial and defense agencies with an automated means to serve law enforcement officers. Currently, the following agencies use the system: a. District Attorney’s Office b. Alternate Public Defender (APD)1 The Los Angeles Public Defender is developing this capability.
F2:
The Los Angeles City Attorney and Long Beach City Prosecutor also electronically subpoena officers, but their requests are sent internally with their respective cities’ systems. To the CGJ’s knowledge, most other City Attorneys/City Prosecutors are using paper based subpoenas.
F3:
E-Subpoena is a means of delivering subpoenas to law enforcement personnel throughout the County electronically and receiving “proof of service” automatically. Prior to development of e-Subpoena, subpoenas were either mailed, hand carried or sent to the Justice Data Interface Controller (JDIC) printer at the law enforcement agency. This method was slow and did not provide the DA with proof that the officer/deputy was served.
F4:
The e-Subpoena process begins when a Deputy DA or APD inputs in their respective Case Management System (CMS) when an officer is needed in court on a specific date and time. CMS generates an electronic message to the officer. Although more complicated, this is essentially an e-mail. The message is sent to PIX, which then routes the message to the law enforcement agency. Depending upon the technology used by the law enforcement agency when delivering the message to the officer, a “proof of service” is returned via PIX to the originator when: a. The officer opens their e-mail b. The officer positively responds that they received it PIX provides the secure system for sending and receiving messages among agencies. The system is also used to notify an officer when they are no longer needed to appear and/or for rescheduling. JDIC-received and paper subpoenas are manually logged and tracked by the law enforcement agency, and no automated “proof of service” is returned to the originator. An overview provided by the DA describes the system benefits: a. More reliable than paper and regular e-mail b. Complete logging of delivery and receipt 1 The Alternate Public Defender is Court-appointed counsel for indigent defendants who cannot be represented by the Public Defender because of a conflict of interest. c. Improved control using case management systems versus ad hoc e-mail d. PIX ensures reliable delivery/return receipt and a standard interface to different law enforcement agency systems All DA, Public Defender, APD, and City Attorneys/City Prosecutors in the future can use the same message formats and delivery mechanisms.
F5:
E-Subpoena was started approximately five (5) years ago with LAPD.
F6:
Electronic notice of delivery and receipt occurs between PIX and the following agencies: a. LASD b. LAPD c. Long Beach Police Department d. Inglewood Police Department e. Culver City Police Department f. Montebello Police Department The last three (3) agencies on the preceding list use a third-party vendor that supply and maintain the technology for LEA delivery and receipt. At least one LEA reported that the implementation took one (1) month followed by a two (2) month period of running the systems in parallel. The biggest implementation problem encountered was officer resistance to change.
F7:
Additional benefits are: a. Electronic service reduces officer overtime from having to subpoena more officers than actually needed (blanket subpoenas) since the DA can now verify which officer(s) were served. b. With planned court closures, travel time as well as court overtime are reduced. c. Because the officer is positively served and will appear, the DA, Public Defender, and APD reduce their case continuance costs. d. Accuracy is improved through officer validation; the sender ensures that the correct officer is served. e. The law enforcement agency’s subpoena control personnel can review and manage multiple requests more efficiently. f. Risk of loss of JDIC-printed or paper subpoenas is reduced. g. Follow-up phone calls are minimized. h. Formal audit trail of service is provided. 24 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY i. Management follow-up and auditing statistics are available.
F8:
E-Subpoena results in fewer continuances/dismissals, swifter justice for crime victims, decreased criminal case backlog, and potentially reduces incarceration time and costs.
F9:
Different internet standards are used by various agencies and a third-party vendor. For example, messaging protocol and identification standards exist but are not used consistently by all departments. Currently, PIX must convert e-subpoenas into at least four (4) different technologies in order to send them to different law enforcement agencies.
F10:
Although the CGJ could not locate the source of the information, it noted from public statements that e-Subpoena resulted in significant savings to LAPD in court overtime. LAPD representatives explained that due to the different components of court overtime (number of cases filed, number of officers subpoenaed, etc.), these savings could not be calculated precisely.
F11:
Several departments reported that court affairs/subpoena control personnel time spent performing subpoena control was reduced by 50%, freeing personnel to work on other critical department functions. In addition, the volume of paper and postage was reduced 50-65%.
F12:
Less manpower is needed to generate mail and manually track each subpoena. In larger departments, less time is spent locating officers who have been transferred.
F13:
Less time is spent attempting to determine if an officer was served.
F14:
In this time of municipal budget constraints, whatever can be done to streamline the process and reduce court overtime is desirable.
F15:
Ten (10) cities within the County use the City Attorney/City Prosecutor to prosecute misdemeanors2. In cities where e-Subpoena is installed, some City Attorneys/City Prosecutors are still issuing paper subpoenas.
F16:
Several departments that have implemented e-Subpoena encourage their officers to check e-mail on their days off, although requiring that may violate Fair Labor Standards Act de minimus rules.
F17:
One LEA that has not implemented e-Subpoena was concerned about the actual direct and indirect costs of the system.
F18:
A concern raised was the situation where an officer is subpoenaed at the last minute. In these cases, the subpoena control officer would be required to contact the subpoena recipient regardless of whether the department was using paper copies or e-Subpoena.
F19:
At least one LEA was concerned that their city was behind the technology curve and may not have the infrastructure to handle e-Subpoena. The District Attorney prosecutes misdemeanors, as well as felonies, for the remaining 78 cities as well as the unincorporated areas of the County.
F20:
The following is a Table of law enforcement agencies receiving at least one hundred fifty (150) subpoenas from the DA during the period October through December 2010 and their e-Subpoena implementation status: LOS ANGELES DISTRICT ATTORNEY-ISSUED LAW ENFORCEMENT SUBPOENAS AGENCIES RECEIVING AT LEAST 150 SUBPOENAS FOR THE PERIOD OCTOBER THRU DECEMBER, 2010 No. e-Subpoena Agency Issued Status CALIFORNIA HIGHWAY PATROL 2,128 Interested PASADENA POLICE DEPARTMENT 988 GLENDALE POLICE DEPARTMENT 903 HUNTINGTON PARK POLICE DEPARTMENT 685 BURBANK POLICE DEPARTMENT 612 HAWTHORNE POLICE DEPARTMENT 604 Interested WHITTIER POLICE DEPARTMENT 593 SANTA MONICA POLICE DEPARTMENT 537 In process LASD - VARIOUS 515 Implemented GARDENA POLICE DEPARTMENT 501 DOWNEY POLICE DEPARTMENT 490 Interested EL MONTE POLICE DEPARTMENT 474 Interested POMONA POLICE DEPARTMENT 456 Interested ALHAMBRA POLICE DEPARTMENT 433 L. A. CITY FIRE DEPARTMENT 422 SOUTH GATE POLICE DEPARTMENT 421 Interested TORRANCE POLICE DEPARTMENT 403 MONTEREY PARK POLICE DEPARTMENT 366 WEST COVINA POLICE DEPARTMENT 364 L. A. UNIFIED SCHOOL DISTRICT PD 318 L. A. COUNTY CORONER 300 Interested EL SEGUNDO POLICE DEPARTMENT 274 Interested MONTEBELLO POLICE DEPARTMENT 271 In process L. A. COUNTY PROBATION 255 Interested SAN FERNANDO POLICE DEPARTMENT 216 MANHATTAN BEACH POLICE DEPARTMENT 189 BEVERLY HILLS POLICE DEPARTMENT 182 COVINA POLICE DEPARTMENT 176 MONROVIA POLICE DEPARTMENT 168 GLENDORA POLICE DEPARTMENT 163 SAN GABRIEL POLICE DEPARTMENT 163 BELL GARDENS POLICE DEPARTMENT 159 REDONDO BEACH POLICE DEPARTMENT 159 BELL POLICE DEPARTMENT 157 LAPD – VARIOUS 155 Implemented SOUTH PASADENA POLICE DEPARTMENT 154 26 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY
Additional Recommendations
18
Not linked to specific findings.
R1:
The LADWP’s governance needs clarification and simplification. A stronger, independent Commission system may be warranted. Establishing a single governing board, with clear authority and considerable independence from day-to-day political influences, is an appropriate place to start. Strengthening the governance structure is essential to ensuring reliable electrical supplies, low rates, and adequate payments to the City, as well as to maintaining Los Angeles’ leadership among the nation’s municipal utilities. The LADWP should return to a commission system that restores integrity by balancing independence and accountability. A plan to decrease political involvement by the Mayor and Council would allow the LADWP to operate for the benefit of the ratepayers. Consider separating the policy making function of the Mayor and Council from the operational responsibilities of the Board and General Manager. The Council and Mayor could set policies and communicate them in writing to the Board which, in turn, would transmit them to the General Manager. It would require the Mayor or Council not give instructions to individuals who report directly to the Board or General Manager, directly or indirectly. Board policies should set out the utility’s purpose and ends to be achieved. They should also designate what actions of the General Manager are considered unacceptable to the Board, both general and in specific. The General Manager may then make all decisions and carry out any activities not expressly prohibited by the Board, without seeking further approval.
R2:
Establish guidelines for Commissioner appointments, and reduce the politics of appointment, real or perceived. Examples of guidelines to be written and agreed upon might be to appoint Commissions based on specific levels of expertise (financial, utility operations, corporate governance, education level, or geographic representation). Also ensure that the candidates have the time, inclination and ability to stay the entire five years. It is important that “politics” (or political contributions) be taken out of the choice for Commissioners. There are a variety of ways to deal with this issue. One is to have a Citizens Council choose the Commissioners or have Commissioners themselves choose a replacement for a member whose staggered term is up. Another example might be to have the Mayor choose two (2) members, the Council chooses two (2) members and the Neighborhood Councils choose one (1) member. Whatever the approach, the perception and the reality must be that money does not buy a Commission position. 92 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY
R3:
Expect LADWP Commissioners to serve full five-year terms. LADWP needs a historical and continuous level of knowledgeable and experienced Commissioners who can make decisions primarily based on their independent judgment. The Commission may remain responsible to the Mayor and Council, but it should be insulated from undue political influences on normal LADWP business matters. To maintain independence and continuity, LADWP Commissioners should be expected to serve out their terms unless there is cause for their removal. They should not resign when succeeding Mayors are elected. An amendment returning to the previous Charter language allowing for removal by the Mayor with Council approval or for cause by a two-thirds vote of the Council, may be warranted.
R4:
Reduce the bureaucratic impact to the Department due to Mayor or Council involvement. While citywide coordination of the Department is an important function of the Mayor’s office, the current wording of Executive Order 4 is all encompassing. Regular, informal consultation with the Mayor’s office rather than formal ED 4 submittals would potentially speed up and improve the decision making processes of the Commission. Likewise, the threat of Prop 245 fosters bureaucratic delay, takes up scarce management time, encourages more paperwork to justify decisions and adds uncertainty to normal business dealings. Pension Issue and Impact of Employee Transfers Finding and Recommendation 5. Although there was originally some concern that personnel were taking higher paying jobs at LADWP for only a short time (pension spiking) in order to increase lifetime pensions, such does not appear to be the case. However, the number of transfers from the City to the Department may have a negative impact on the pension funding for the Department. The City has taken advantage of the Department’s ability to accept additional personnel and provide pension coverage to them (eventually through increased rates) by transferring up to 1600 employees in the last five (5) years. Those transfers were part of a larger effort to keep City workers from losing their jobs in departments hit hard by the budget crisis. While it is a noble goal to protect employees from layoffs, it is unfair to place the financial burden (both salary and pension costs) on the backs of the LADWP ratepayer. The Segal Company performed an analysis of the Reciprocal Arrangement between the Water and Power Employee’s Retirement Plan (WPERP) and the Los Angeles City Employee’s Retirement System (LACERS) due to the financial impact the Reciprocity Program has had on the WPERP during the period from April 1, 2004 through March 31, 2010. Currently, when a former City employee transfers to the LADWP the WPERP recognizes prior service with LACERS, provided the member agrees to have their employee contributions transferred into WPERP. Under the Plan’s Reciprocity Program, when a member transfers, full credit for service is established in WPERP, but only their employee contributions are transferred from LACERS to WPERP; employer contributions made to LACERS associated with their service are not transferred to WPERP. Since only employee contributions are transferred, WPERP incurs an additional unfunded liability when an employee transfers to LADWP from the City. (The Department makes a 110% contribution into WPERP after the employee contributions have been transferred from LACERS. This has the effect of providing immediate employer funding for part of the actuarial loss caused by the transfer but that contribution may eventually impact rates.) The Segal Company found a large unfunded actuarial accrued liability (UAAL) as a result of these transfers. The total of the increases in UAAL, determined as of each valuation date due to the 1,331 members whose service and employee contributions has already been transferred to the WPERP as of March 31, 2010, is approximately $128.4 million. These amounts, accumulated with 8% interest to July 1, 2010, total $152.4 million. The average age for these members, years of service and average employee contributions transferred are 41.3, 6.9 years and $28,400 respectively. In addition, The Segal Company received partial information for 292 members that were identified by the Retirement Office as transfers but whose service and employee contributions were not yet transferred to WPERP as of the end of the observation period. The UAAL as of each valuation date due to these members is about $30.5 million. The average age for these members, estimated average amount of service and average employee contributions to be transferred are 40.7, 7.8 years and $37,900 respectively. The grand total of the increases in UAAL for LADWP accumulated to July 1, 2010, including both groups, is about $183.1 million. Worried about the cost of those transfers, LADWP officials moved to suspend full retirement benefits for any new worker who comes to the utility from another City agency. The City Council vetoed that measure.
R5:
The City and LADWP should come to an agreement to rescind the reciprocity agreement until such time as the number of employees transferred back and forth between the City and LADWP reaches equilibrium. Personnel should only be transferred as required by LADWP and then only with full financial contribution to the pension fund. 94 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY Succession Planning Finding and Recommendation 6. Succession planning does not take place within LADWP to any meaningful extent. Given the high turnover of senior management, it is essential that the next several layers of management have the necessary tools, including trained professionals as replacements, to accomplish their functions. Additionally, there are many positions that will be in need of replacement in the next several years; and succession planning will assist the Department in meeting those needs. This is a City-wide concern. The Los Angeles City Controller conducted a performance audit regarding the City of Los Angeles’ hiring practices and determined that “The City of Los Angeles does not strategically plan for its workforce needs.” In a department where so many people who serve the citizens of the City are eligible to retire in the next several years, this is also an intolerable situation for LADWP. It is difficult in a civil service environment to accomplish succession planning for specific positions. Because employee selection in the City of Los Angeles is based on a well established civil service system in place for well over 100 years, LADWP relies on the Civil Service Commission and the City Personnel Department to assist in meeting their hiring needs. Although filling entry-level positions is important, succession planning to fill supervisory and managerial positions is even more important and must be a priority for the Department. Once identified, a substantial amount of training and leadership development will be required. The key is the successful transfer of technical and operational knowledge to adapt to the current environment. According to the Department, as of January 1, 2010, approximately 40% of LADWP’s workforce was fifty (50) years of age or older. Within the next five (5) years, approximately 20% of the workforce will be eligible for retirement. LADWP must determine how to continue to deliver its services in the future with decreased staff due to upcoming retirements. To ensure that LADWP has the appropriate resources and positions needed to meet the business goals and objectives, there must be a sufficient number of candidates available to be considered for each job classification, especially those that are critical or have been difficult to fill. This issue alone will require collaborating internally as well as with the Personnel Department’s various divisions to consider ways to address this, such as allocating positions, consolidating job classifications, submitting examination requests and pursuing regular and executive recruitment activities. Additionally, a specific manager may not identify a replacement prior to departure. This does not provide an opportunity for training in the specifics of any job. Personnel are thrown into a job situation that may be new to them and, given all the other personnel scheduled to depart, the institutional knowledge necessary for effective performance may not be available. A change in the civil service rules may be necessary on at least a temporary basis to allow personnel to train their replacements. The Department has responded to some of these challenges by creating a Workforce Planning Group within the Human Resources Section of the LADWP. This is a good beginning to ensure that services continue to be provided to the citizens of Los Angeles. The Department’s Human Resources Manager appears to have a strong grasp of what is required to accomplish this goal and has developed a well thought out initial plan. But the process will need more resources than the current four (4) individuals assigned to assist him. Additionally, some changes in the current methods of hiring and promoting personnel may be required to ensure continuity of knowledge and ability.
R6:
Fully staff and fund the Workforce Planning Group to encourage a full review of options for future LADWP employment. Also work with City Personnel Department and the Civil Service Office to allow some changes in hiring and promotional practices for high level essential jobs. An example would be to allow a process whereby individuals could be chosen for certain jobs prior to the departure of a senior or highly essential position. Current methodology for position listing, testing and choice could be followed, but the timing of the replacement may differ. That way, the individual could have access to the current incumbent’s knowledge, techniques and contacts to ensure a seamless transition. It may also provide reduced costs since it would not be necessary to potentially hire the incumbent to return as a consultant to assist in the transition. It is clear, given the immediate nature of this issue, that “out of the box” thinking will be necessary within LADWP as well as support provided by City and civil service personnel. 96 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY II. IBEW POLITICAL INVOLVEMENT
R7:
Determine if the current state of union/management relations is equitable and not favorable to one side at the expense of the other. LADWP management personnel can only accomplish what they try to accomplish. If they continue to allow the Union to “win” the majority of issues, they only have themselves to blame for future problems. Elected officials should strongly consider an effort to reduce continuing union involvement in the management of the Department, other than through normal channels. Of course, this may impact the level of support and money provided to the elected officials but efficient and effective management of the Department should be the overwhelming goal. The ratepayer should be the primary concern.
R8:
Immediately develop a confidential strike preparation plan and ensure that cross-training and documentation of essential functions is included in the process and plan. It is incumbent on management to ensure that operations continue under a variety of circumstances, including a work stoppage. Additional attention from management to the possible contingency of a work action is warranted and ratepayers need to be assured that the Department management is looking out for their interests. III. CITY TRANSFER AND ECAF ISSUES
R9:
Take steps to ensure that this transfer problem doesn’t recur. Some steps to be taken include: a. Develop an earlier budgeting process so Council will know what transfer funds to expect ahead of any grandstanding. b. Provide a presentation of the budget to the Council in clear and concise terms that are not “technical engineering oriented”. c. Conduct a proactive review of RPS and capital project alternatives including goal extension or reduction. d. Develop long-term projections of costs associated with RPS and major projects to ascertain if additional transfers will impact consumer costs.
R10:
The CGJ agrees with the CCF recommendation that a “new proposal for rate restructuring should be drafted and analyzed. One aspect of this proposal would be to split the current ECAF into several separate rate components. This will provide the Council (and the public) with greater visibility of LADWP’s cost structure and of the justification for any rate increases.” CCF goes on to state that: a. Costs that are clearly out of LADWP control should remain in the ECAF. b. At an appropriate frequency, Council should approve an LADWP procurement plan. As long as procurement has been in accord with the plan, ECAF cost recovery should be a pure, uncapped pass through. c. Costs that are predictable, such as long-term contract costs or energy efficiency costs, should be removed from the ECAF. d. Revenue losses attributable to DSM should be passed through without a cap but as a separate bill component in addition to ECAF. e. The City Transfer should not be tied to fluctuating ECAF revenues but rather entirely to more stable base rate revenues. This will create greater certainty of City Transfer payments and remove elements of the City Transfer from the current ECAF structure. 116 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY While such a change means that the City Transfer will fluctuate as a percentage of total revenue as ECAF revenues change, it will result in lower volatility in rates as well as in payments to the City. f. The Council should separately define a rate stabilization program that will mitigate or spread out rate increases. Rate stabilization has the effect of financing a cost increase and its impact on City finances and LADWP capital adequacy should be explicitly considered. g. Develop a clearer, more pure, definition of the ECAF rate (for review by Council and the public). h. An automatic rate change based on a pure ECAF rate should be approved. It should be pointed out that the Department has received this type of recommendation previous to the CCF Report. In July of 2007, a Revenue Requirements Study prepared for the Chief Legislative Analyst and the City Administrative Officer states, “Energy Services has bundled several different cost recovery elements in the ECAF…….neither the Board nor management are presented the ECAF budgeted revenues by element.” The recommendation made in that report was to “Unbundle the ECAF into its elements for presentation to management and to the Board.” In their response to the report, LADWP agreed that all future presentations to management and the Board would unbundle the ECAF elements.
R11:
Increase the transparency of the cost of each current ECAF item by showing the item and amount on the ratepayer’s monthly bill. The CGJ suggests following the CCF recommendation with an additional recommendation intended to provide transparency, not just to Council but to the public at large. Print on each residential bill a statement indicating the costs associated with any “controllable” large expenditure that was previously in the ECAF. A statement showing the cost to the consumer for the RPS program, DSM program and the City Transfer (separately) should be clearly available to the public for their review and ultimate approval. Statements might read as follows: “The portion of your bill collected by LADWP for the City of Los Angeles to support government services not related to LADWP (City Transfer) is $XXX or XXX%. The City contribution shown here reflects the amount of your bill that goes toward government transfers. However, on your actual bill, this charge is included in the Electric or usage charge.” In addition to City transfer costs, the Department should also present similar information for “Renewable Program Charges” or “DSM charges” to the ratepayer. This provides the ultimate level of transparency to the public and allows for discussion of each element at the Board and Council meetings. IV. RATEPAYER ADVOCATE ISSUES
R12:
Ensure that the Ratepayers function is clearly defined and that the function is not captured by politicians or a bureaucracy that will stagnate their independence and ability. It is important to identify what the function will be focused on and, as importantly, what it will not be focused on. The Ratepayer Advocate will have enough work to do without taking on the “savior of LADWP operations and public perception” role. The position should not be involved in the management of the Department or have the right to veto management decisions or set rates. The OPA should not be involved in holding LADWP accountable for meeting the City’s or Mayor’s goals, some of which will be extremely expensive to the ratepayer. That should be the job of the Board of Commissioners, City Council and the Mayor. They should, however, have input into various rate alternatives and timing differences prior to the policy decision being made so that the impact to the ratepayer is known. The OPA should take a long-term perspective on its review of rates. For example, it should shine the light on long-term plans that will have massive implications for residential and commercial rates, not just on the rate increase that may be mentioned for next year. It is important that the position provide advice and counsel to lawmakers on balancing LADWP’s plans to invest in clean power, as one example, with its need to fulfill Charter responsibility to keep rates lower than others. The primary focus should be what is best for the ratepayer. The Advocate can highlight the long term implication of these decisions. This long term perspective and visibility is more important than just blocking specific rate hikes, which may be desired by many, but may not be in the long term best interest of the City or the ratepayer. In summary, the function should provide visibility to the public and guidance to the Council on various anticipated rate increases, and provide expert advice on rate actions and strategies which will protect the ratepayer by identifying the most economical method to accomplish the City’s policy goals and the LADWP’s long-term interests. The ratepayer should be placed first in implementing the Advocate’s responsibility. The Advocate can also be instrumental in ensuring that large categories of costs, such as DSM, RPS and the City Transfer, have visibility on the customer bills. (Also see Recommendation 10.)
R13:
Ensure that the public has primary input into the appointment of the Ratepayer Advocate. The “citizen’s committee” should have ample representation from Neighborhood Councils and other citizen-based organizations. It is only with broad based input that the public will have the confidence that the position won’t bend to any specific political will. As important as the actual information provided by the Ratepayer Advocate is the fact that the existence of the position itself should be viewed by the public to be honest, independent, trustworthy and knowledgeable. This is probably the single best opportunity for the City and Department management to improve the perception of LADWP with the rate paying public. 124 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY Summary of Report Findings and Recommendations
R14:
Although the Department had numerous reasons for not wanting to make the transfer without a rate increase that it felt it deserved, holding the City “hostage” under these circumstances was inappropriate since the Department had the cash to make the transfer, although they had it reserved for other uses.
R15:
The ECAF as currently constituted at LADWP contains several elements that typically would not be found in a Cost Adjustment Factor.
R16:
The current ECAF design does not provide for adequate oversight and transparency into long-term commitments made by the Department, particularly with respect to Renewable Portfolio Standard (RPS) and Demand Side Management (DSM).
R17:
The implementation of a Ratepayer Advocate at LADWP would be unusual in the municipal utility industry.
R18:
Some people believe that the impact of the Ratepayer Advocate ballot measure is minimized because other proposed Charter amendments were not approved for the same ballot. RECOMMENDATIONS
Findings & Recommendations
1 findings
F1:
DWP employee relations management staff has not initiated any substantive meet and confer sessions with employee bargaining groups to modify aspects of the retirement benefit package in an effort to reduce costs, despite total annual retirement benefit contributions of approximately $360 million or 46.9% of pensionable salaries in FY 2009-2010. August 10, 2010, The Segal Company, Re: Reciprocity program – Impact of Possible Suspension of Program 2010 – 2011 For at least 3 years, the DWP management has chosen to contribute amounts exceeding 250% of the Annual Required Contribution to its Retiree Health Benefits Fund. During this period, they have made $317,394,370 in excess contributions, while simultaneously requesting utility rate increases and advising City officials that the Department would be unable to pay the full amount of the 8% transfer to the City in FY 2009-2010, because of insufficient cash resources. The City and LACERS may owe the WPERP $183 million or more in UAAL for employees who transferred from City employment to DWP employment during the past 6 years, increasing the WPERP contribution requirements by $11.7 million annually over the next 15 years. The City Council referred this matter to the City Administrator, WPERP and LACERS to refine the analysis on October 13, 2010; but no further action has been taken since that time.
Additional Recommendations
4
Not linked to specific findings.
R1:
The DWP Board of Commissioners give direction to management to evaluate and report back in closed session on alternatives for reducing the Department’s cost of employee retirement benefits.
R2:
The DWP Board of Commissioners advise the new Ratepayer Advocate and the City Council of the decision by the DWP management to accelerate payment of the Retiree Health Benefit Fund ARC in each of the past three fiscal years to ensure that the prepayments are fully considered when the DWP seeks future rate increases or indicates that it is unable to make revenue transfers to the General Fund.
R3:
Los Angeles City Council, the DWP Board of Commissioners and LACERS Board of Administrators need to expedite reaching an agreement regarding transferring funds to WPERP to cover the cost of an increased UAAL imposed on DWP, estimated by actuaries to equal as much as $183 million for the 6-year period between 2004 and 2010, due to Los Angeles City employees who have moved from City departments to DWP so that the burden is not imposed on ratepayers.
R4:
Los Angeles City Council, the DWP Board of Commissioners and LACERS Board of Administrators need to amend the reciprocity agreement between LACERS and WPERP with regard to the transfer of employer pension contributions in order to prevent such inequity in the future. A 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY REQUEST FOR RESPONSE California Penal Code Sections42 §933 (c) and §933.05 requires a written response to all Recommendations contained in this Report which shall be made no later than ninety (90) days after the Civil Grand Jury publishes its Report (filed with the Clerk of the Court). Respond to: Presiding Judge LAC Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street, Eleventh Floor, Room 11-506 Los Angeles, CA 90012 All responses for the 2010 - 2011 CGJ Report’s Recommendations must be submitted to the above address on or before the end of business September 30, 2011. Responses are required from: Recommendation Number(s) Responding Agency 1 City of Los Angeles (Department of Water and Power Board of Commissioners) 2 City of Los Angeles (Department of Water and Power Board of Commissioners) City of Los Angeles (City Council) City of Los Angeles (LACERS Board of Administrators) 3 City of Los Angeles (Department of Water and Power Board of Commissioners) City of Los Angeles (City Council) City of Los Angeles (LACERS Board of Administrators) 4 City of Los Angeles (Department of Water and Power Board of Commissioners) City of Los Angeles (City Council) City of Los Angeles (LACERS Board of Administrators) 42 Reference California Penal Code Sections §933(c) and §933.05 at the beginning of this 2010-2011 Civil Grand Jury Report 2010 – 2011
Findings & Recommendations
20 findings
F1:
The e-Subpoena system provides prosecutorial and defense agencies with an automated means to serve law enforcement officers. Currently, the following agencies use the system: a. District Attorney’s Office b. Alternate Public Defender (APD)1 The Los Angeles Public Defender is developing this capability.
F2:
The Los Angeles City Attorney and Long Beach City Prosecutor also electronically subpoena officers, but their requests are sent internally with their respective cities’ systems. To the CGJ’s knowledge, most other City Attorneys/City Prosecutors are using paper based subpoenas.
F3:
E-Subpoena is a means of delivering subpoenas to law enforcement personnel throughout the County electronically and receiving “proof of service” automatically. Prior to development of e-Subpoena, subpoenas were either mailed, hand carried or sent to the Justice Data Interface Controller (JDIC) printer at the law enforcement agency. This method was slow and did not provide the DA with proof that the officer/deputy was served.
F4:
The e-Subpoena process begins when a Deputy DA or APD inputs in their respective Case Management System (CMS) when an officer is needed in court on a specific date and time. CMS generates an electronic message to the officer. Although more complicated, this is essentially an e-mail. The message is sent to PIX, which then routes the message to the law enforcement agency. Depending upon the technology used by the law enforcement agency when delivering the message to the officer, a “proof of service” is returned via PIX to the originator when: a. The officer opens their e-mail b. The officer positively responds that they received it PIX provides the secure system for sending and receiving messages among agencies. The system is also used to notify an officer when they are no longer needed to appear and/or for rescheduling. JDIC-received and paper subpoenas are manually logged and tracked by the law enforcement agency, and no automated “proof of service” is returned to the originator. An overview provided by the DA describes the system benefits: a. More reliable than paper and regular e-mail b. Complete logging of delivery and receipt 1 The Alternate Public Defender is Court-appointed counsel for indigent defendants who cannot be represented by the Public Defender because of a conflict of interest. c. Improved control using case management systems versus ad hoc e-mail d. PIX ensures reliable delivery/return receipt and a standard interface to different law enforcement agency systems All DA, Public Defender, APD, and City Attorneys/City Prosecutors in the future can use the same message formats and delivery mechanisms.
F5:
E-Subpoena was started approximately five (5) years ago with LAPD.
F6:
Electronic notice of delivery and receipt occurs between PIX and the following agencies: a. LASD b. LAPD c. Long Beach Police Department d. Inglewood Police Department e. Culver City Police Department f. Montebello Police Department The last three (3) agencies on the preceding list use a third-party vendor that supply and maintain the technology for LEA delivery and receipt. At least one LEA reported that the implementation took one (1) month followed by a two (2) month period of running the systems in parallel. The biggest implementation problem encountered was officer resistance to change.
F7:
Additional benefits are: a. Electronic service reduces officer overtime from having to subpoena more officers than actually needed (blanket subpoenas) since the DA can now verify which officer(s) were served. b. With planned court closures, travel time as well as court overtime are reduced. c. Because the officer is positively served and will appear, the DA, Public Defender, and APD reduce their case continuance costs. d. Accuracy is improved through officer validation; the sender ensures that the correct officer is served. e. The law enforcement agency’s subpoena control personnel can review and manage multiple requests more efficiently. f. Risk of loss of JDIC-printed or paper subpoenas is reduced. g. Follow-up phone calls are minimized. h. Formal audit trail of service is provided. 24 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY i. Management follow-up and auditing statistics are available.
F8:
E-Subpoena results in fewer continuances/dismissals, swifter justice for crime victims, decreased criminal case backlog, and potentially reduces incarceration time and costs.
F9:
Different internet standards are used by various agencies and a third-party vendor. For example, messaging protocol and identification standards exist but are not used consistently by all departments. Currently, PIX must convert e-subpoenas into at least four (4) different technologies in order to send them to different law enforcement agencies.
F10:
Although the CGJ could not locate the source of the information, it noted from public statements that e-Subpoena resulted in significant savings to LAPD in court overtime. LAPD representatives explained that due to the different components of court overtime (number of cases filed, number of officers subpoenaed, etc.), these savings could not be calculated precisely.
F11:
Several departments reported that court affairs/subpoena control personnel time spent performing subpoena control was reduced by 50%, freeing personnel to work on other critical department functions. In addition, the volume of paper and postage was reduced 50-65%.
F12:
Less manpower is needed to generate mail and manually track each subpoena. In larger departments, less time is spent locating officers who have been transferred.
F13:
Less time is spent attempting to determine if an officer was served.
F14:
In this time of municipal budget constraints, whatever can be done to streamline the process and reduce court overtime is desirable.
F15:
Ten (10) cities within the County use the City Attorney/City Prosecutor to prosecute misdemeanors2. In cities where e-Subpoena is installed, some City Attorneys/City Prosecutors are still issuing paper subpoenas.
F16:
Several departments that have implemented e-Subpoena encourage their officers to check e-mail on their days off, although requiring that may violate Fair Labor Standards Act de minimus rules.
F17:
One LEA that has not implemented e-Subpoena was concerned about the actual direct and indirect costs of the system.
F18:
A concern raised was the situation where an officer is subpoenaed at the last minute. In these cases, the subpoena control officer would be required to contact the subpoena recipient regardless of whether the department was using paper copies or e-Subpoena.
F19:
At least one LEA was concerned that their city was behind the technology curve and may not have the infrastructure to handle e-Subpoena. The District Attorney prosecutes misdemeanors, as well as felonies, for the remaining 78 cities as well as the unincorporated areas of the County.
F20:
The following is a Table of law enforcement agencies receiving at least one hundred fifty (150) subpoenas from the DA during the period October through December 2010 and their e-Subpoena implementation status: LOS ANGELES DISTRICT ATTORNEY-ISSUED LAW ENFORCEMENT SUBPOENAS AGENCIES RECEIVING AT LEAST 150 SUBPOENAS FOR THE PERIOD OCTOBER THRU DECEMBER, 2010 No. e-Subpoena Agency Issued Status CALIFORNIA HIGHWAY PATROL 2,128 Interested PASADENA POLICE DEPARTMENT 988 GLENDALE POLICE DEPARTMENT 903 HUNTINGTON PARK POLICE DEPARTMENT 685 BURBANK POLICE DEPARTMENT 612 HAWTHORNE POLICE DEPARTMENT 604 Interested WHITTIER POLICE DEPARTMENT 593 SANTA MONICA POLICE DEPARTMENT 537 In process LASD - VARIOUS 515 Implemented GARDENA POLICE DEPARTMENT 501 DOWNEY POLICE DEPARTMENT 490 Interested EL MONTE POLICE DEPARTMENT 474 Interested POMONA POLICE DEPARTMENT 456 Interested ALHAMBRA POLICE DEPARTMENT 433 L. A. CITY FIRE DEPARTMENT 422 SOUTH GATE POLICE DEPARTMENT 421 Interested TORRANCE POLICE DEPARTMENT 403 MONTEREY PARK POLICE DEPARTMENT 366 WEST COVINA POLICE DEPARTMENT 364 L. A. UNIFIED SCHOOL DISTRICT PD 318 L. A. COUNTY CORONER 300 Interested EL SEGUNDO POLICE DEPARTMENT 274 Interested MONTEBELLO POLICE DEPARTMENT 271 In process L. A. COUNTY PROBATION 255 Interested SAN FERNANDO POLICE DEPARTMENT 216 MANHATTAN BEACH POLICE DEPARTMENT 189 BEVERLY HILLS POLICE DEPARTMENT 182 COVINA POLICE DEPARTMENT 176 MONROVIA POLICE DEPARTMENT 168 GLENDORA POLICE DEPARTMENT 163 SAN GABRIEL POLICE DEPARTMENT 163 BELL GARDENS POLICE DEPARTMENT 159 REDONDO BEACH POLICE DEPARTMENT 159 BELL POLICE DEPARTMENT 157 LAPD – VARIOUS 155 Implemented SOUTH PASADENA POLICE DEPARTMENT 154 26 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY
Additional Recommendations
5
Not linked to specific findings.
R1:
Implement e-Subpoena as a cost saving and operational efficiency measure for local law enforcement agencies receiving at least one hundred fifty (150) DA subpoenas quarterly.
R2:
Encourage the City Attorney/City Prosecutor to use the system in cities where the Police Department is using e-Subpoena.
R3:
LASD and LAPD evaluate electronically transmitting other documents such as police reports and probable cause determinations3 among law enforcement agencies, prosecutors and the Court.
R4:
LASD to expand implementation of filing Pitchess motions electronically. A Pitchess motion defines those portions of a deputy’s personnel file which may be made available to defense counsel.
R5:
The DA staff is encouraged to conduct an e-Subpoena training class for court liaison/subpoena control officers and encourage departments still receiving paper subpoenas to implement e-Subpoena. REQUEST FOR RESPONSE California Penal Code Sections4 §933(c) and §933.05 requires a written response to all Recommendations contained in this Report which shall be made no later than ninety (90) days after the Civil Grand Jury publishes its Report (filed with the Clerk of the Court). Respond to: Presiding Judge Los Angeles County Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street, Eleventh Floor, Room 11-506 Los Angeles, CA 90012 All responses for the 2010 - 2011 CGJ Report’s Recommendations must be submitted to the above address on or before the end of business September 30, 2011. Responses are required from: Recommendation Number(s) Responding Agency 1 City of Alhambra (Police Department) City of Bell (Police Department) City of Bell Gardens (Police Department) City of Beverly Hills (Police Department) City of Burbank (Police Department) 3 Probable Cause determination is a LEA prepared, Court approved document which permits an agency to detain a suspect. Reference California Penal Code Sections §933(c) and §933.05 at the beginning of this 2010-2011 Civil Grand Jury Report City of Covina (Police Department) City of Gardena (Police Department) City of Glendale (Police Department) City of Glendora (Police Department) City of Huntington Park (Police Department) City of Los Angeles Fire Department City of Los Angeles Unified School District (School Police) City of Manhattan Beach (Police Department) City of Monrovia (Police Department) City of Monterey Park (Police Department) City of Pasadena (Police Department) City of Redondo Beach (Police Department) City of San Fernando (Police Department) City of San Gabriel (Police Department) City of South Pasadena (Police Department) City of Torrance (Police Department) City of West Covina (Police Department) City of Whittier (Police Department) 2 City of Inglewood (City Attorney) 3 City of Los Angeles (Police Department) County of Los Angeles (Sheriffs Department) 4 County of Los Angeles (Sheriffs Department) 5 County of Los Angeles (District Attorney) 28 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY Acronyms APD Alternate Public Defender CGJ Los Angeles County Civil Grand Jury CMS Case Management System DA Los Angeles District Attorney’s Office ISAB Los Angeles County Information Systems Advisory Board JDIC Justice Data Interface Controller LAPD Los Angeles Police Department LASD Los Angeles Sheriffs Department LEA Law enforcement Agency PIX Proactive Information Exchange THIS PAGE INTENTIONALLY LEFT BLANK 30 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY HIGH TECH FORENSICS AND CYBER SECURITY CRIME FIGHTING IN THE DIGITAL AGE “We have to do better at what we do. Our public deserves it.” Committee Members Chairperson - Meg George Grace Hernandez Beverly T. Kishimoto Max E. Van Doren HIGH TECH FORENSICS AND CYBER SECURITY CRIME FIGHTING IN THE DIGITAL AGE “We have to do better at what we do. Our public deserves it.”1 SUMMARY The use of digital evidence to successfully prosecute crimes is becoming critically important. In part, this is due to the proliferation in the use of digital devices. Specific training in the collection and processing of digital evidence is needed, as is the acquisition of the hardware and software required to analyze the evidence. Computers, cell phones and other digital devices are increasingly intertwined with the commission of crimes, raising the importance of the resources and priority that must be given to cyber security, cyber investigations and high tech forensic2 examinations to provide public safety. These cyber and forensic services are provided within Los Angeles County (LAC) and its cities by regional high tech crimes task forces (RTFs) (RTFs cover more than one county.), local high tech crimes task forces, police department high tech forensic labs or through private companies. In addition seventeen (17) municipal police agencies have some in-house high tech forensic crime capability. LAC is home to critical infrastructure, businesses and industries that are vulnerable to cyber attack. It must be in a position to provide response support to such attacks, so that such business and industry will identify Los Angeles as a safe and welcoming place to locate. Those who harm us (be it crooks, cyber terrorists, or nation-states) are highly motivated and continuously improving. To counter this assault effectively we must be highly motivated and continuously improving to be effective in the efforts to: provide public safety, catch the perpetrators and successfully prosecute them. This requires vision, commitment, equipment, training and resources. Technology is evolving at a rapid pace requiring frequent upgrades to equipment, software and training. Funding of high tech forensics, cyber investigation and cyber security in LAC has largely been through government transfers (grants from State and Federal programs). This source of funding has been decreasing and continues to be under pressure due to continuing cuts and constraints. Borrowing the endowment concept from the University system, a possible new source of funding might be the establishment within law enforcement of a High Tech Forensics Examination – Cyber Investigations – Cyber Badge Endowment Program (Endowed Badge). The Endowed Badge (EB) would be awarded on a rotating basis. Funding of each EB would be through a public private partnership, and the EB could be named by the benefactor; e.g., Port of Los Angeles EB, Apple EB, Harry Potter EB, Warner Brothers EB, Wells Fargo EB, Exxon EB, DWP EB, etc. Business and industry has a vested interest in a safe City/County in which to do business; hence, there may be interest from many sectors to participate in funding an EB and 1 Graham, Gordon “Affairs in Government 2010. Some Thoughts on Risk Management,” December 3, 2010 2 In the Report, High Tech Forensics concerns digital information; it does not include DNA or fingerprint analysis naming one of the EBs. Eight (8) initial Endowed Badges are visualized. The eight (8) are comprised of five (5) EBs where each LAC Board of Supervisors District sets up and oversees the public-private partnership funding; plus three (3) EBs, where each of the City of Los Angeles Proprietary Departments ( Department Of Water and Power, Port of Los Angeles, Los Angeles International Airport (LAWA)) sets up and oversees the public-private partnership funding for a total of eight (8) EBs. The EB concept is to use a combination of government and private funds to pay for training of sworn officers in the arena of high tech forensics-cyber investigations and cyber security. There are legal issues to explore and logistical issues to analyze. The example of the partnership between Los Angeles and Microsoft in the area of fighting piracy may provide insight of a process to be followed. PURPOSE The Civil Grand Jury (CGJ) investigated the level of engagement and commitment of government entities within LAC in the prevention and prosecution of high tech crimes, as well as in the use of digital evidence in crime fighting efforts. Computers, cell phones and other digital devices are increasingly intertwined with the commission of crimes, raising the importance of resources and priority that must be given to cyber security, cyber investigations and high tech forensic examinations to provide public safety. In view of the shrinking budgets at all government levels, this Report recommends how to sustain the current level of cyber security, cyber investigations and high tech forensic examinations in the County and cities, while further developing the capability and staying ahead of the curve.
Findings & Recommendations
9 findings
F1:
Regional Joint Task Force Model: a. RCFL, ECTF, SCHTTP and ICAC are each excellent examples. b. Provide for easy collaboration, flexibility of staff allocation, leveraging of multi- agency funding and resources and mentoring c. Membership may be formalized through a Memorandum of Understanding (MOU) or an informal agreement. d. Improved service on a regional scale e. Maximize Federal, State and County resources
F2:
Localized Joint Task Force Model: a. A well structured example of this model included: i. Three (3) neighboring cities with the FL located in the Police Department of one (1) of the cities ii. Four (4) sworn officers from the three (3) cities iii. Two (2) sworn officers from two (2) RTFs b. Membership may be formalized through an MOU or may be informal. c. Supported by the citing city’s Information Technology (IT) Department d. This FL is a member of SCHTTF and TF e. Provides for easy collaboration, flexibility of staff allocation, leveraging of multi agency funding and resources and mentoring f. Improved service to participating cities constituents
F3:
Loosely aligned group of single jurisdiction FL: a. The FLs are located in the Police Department of each of the cities. b. The FL is a one-officer or one- tech shop. c. Association is loosely structured and based on a mutual aid model.
F4:
Single jurisdiction FL with membership in Regional Joint Task Force(s). a. The FL is located in the Police Department of that city. b. The FL has one (1) to five (5) trained staff, generally a combination of sworn and tech. c. Is available to other law enforcement agencies on a mutual aid model FL Skills and Equipment Considerations
F5:
Highly motivated staff
F6:
Highly qualified staff
F7:
Improved service to constituents as a goal 12 Graham, ibid. 40 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY
F8:
Procurement guidelines that recognize and take into account the rapidity with which technology is changing
F9:
Systems to monitor best practices, compliance and changing technology and to reward performance Training In employing the RPM approach in any field, including high tech forensics, training is a core ingredient. The purpose of training must be to create officers who are prepared, equipped, and ready to perform and respond to any situation that presents itself. Anyone can train personnel after something goes bad13. The real challenge is delivering training proactively to prevent problems prior to occurrence. If trained personnel are not available to utilize a FL, then it is largely an expensive box with equipment and software that is lying fallow and becoming obsolete. Whether it is a State of the art new regional FL or a small FL in a converted area of an existing facility, it requires well qualified and well trained personnel. High tech is a fast evolving field; continuous improvement is the name of the game. Today’s new “thing” may be out of date tomorrow. Today, most hard drives are magnetic, but the trend is towards switching ceramic hard drives. Storage is moving to the “cloud.” And so on. The cyber intruders, terrorists and crooks are continuously improving their mode of attack, trying and developing new tactics, software and hardware. Our forensic examiners and cyber investigators have to be continuously improving as well. Training is critical and MUST be ongoing as the technology is always evolving.
Additional Recommendations
5
Not linked to specific findings.
R1:
The District Attorney, being the nexus of all law enforcement in the County as prosecutor of felonies, should take the lead role and become the central repository for coordination of high tech information by doing the following: a. Establish and keep up to date a list of all training available for high tech forensics examination, cyber investigation and cyber security, including local, State and Federally sponsored training, as well as private training opportunities. It is likely the DA’s high tech Forensic Division is already doing this internally and could, with little effort and cost, make this information available to the Task Forces, the LAC Sheriff and the municipal police departments. b. Provide outreach to all police departments and the sheriff on a regular basis regarding the value of and training in high tech forensics in crime fighting in Los Angeles County. i. This could be done through seminars for groups of law enforcement officers organized geographically by Supervisorial District or area; e.g., South Bay, San Gabriel Valley, West LA, San Fernando Valley, etc. ii. Individual department “roll-call” training should also be part of this program. c. Keep a log of the use of digital evidence in the prosecution of cases, both high tech crimes and “old school” crimes. The log should indicate the nature of the digital evidence (cell phone photo, location info, contact info, computer file, GPS, etc.); its importance to the case (useful, important, critical); and the role it played (allowed case to settle, critical to achieving a guilty verdict, sentence enhancements, freed an innocent person, enabled the return of stolen property to rightful owner, etc.). The DA should encourage municipal departments to do this for misdemeanors as well. This will build a body of evidence to help inform decision makers in the budgeting process and persuade law enforcement agencies with no in-house capability to see a need. d. Establish a program for all deputy DAs to acquire the basic knowledge and skills necessary to develop their cases using digital evidence in a manner a judge and jury can understand e. Develop and conduct seminars to educate the judges in digital evidence use in the criminal justice process
R2:
Arcadia PD, Beverly Hills PD, City of Los Angeles PD, Culver City PD, Downey PD, Glendale PD, LAC District Attorney, LAC Sheriff, Santa Monica PD, Monrovia PD, Redondo Beach PD, Torrance PD, Whittier PD. a. Establish a “High Tech Forensics Bureau.” This will facilitate: i. Promotions and career opportunities for those who are trained and skilled in this area without having to leave the discipline ii. Succession planning and transfer of high tech expertise, preserving the investment made in creating the expertise. b. Update regular law enforcement recruit and detective training to include orientation, procedures, protocols and other training with respect to digital evidence c. Include training in digital evidence collection, analysis and use in “roll call” training. d. Take steps to acquire the POST certification for High Tech training courses for forensic examiners and cyber investigators to allow for reimbursement of the costs.
R3:
LAC Chief Information Office and Internal Services Department should conduct internal reviews concerning cyber security and infrastructure protection from Cyber attacks and terrorism: a. LAC must have protocols, policies and procedures facilitating timely, efficient rapid response by the most able cyber security resources available and ancillary emergency response by other agencies, if warranted, in the event of a cyber intrusion, fire wall breach or other cyber attack. b. These should include coordination with key third party vendors. Many basic services within the LAC are provided by third party vendors. The Metropolitan Water District and California Edison are two (2) examples.
R4:
The LAC Board of Supervisors should task their lobbyist in Sacramento and Washington with looking at opportunities to redirect fees and taxes on land line phones, cell phones or internet access services to provide funding allocated to the support high tech forensics, cyber security and forensic examination programs
R5:
LAC and the City of Los Angeles establish a "High Tech Endowed Badge Program” to support the training and equipping of FE and CI throughout local law enforcement. Initially, establishment of eight (8) EBs could be evaluated. Setting up five (5) EBs by the LAC Board of Supervisors District one for each Supervisorial District; and setting up three (3) EBs by the City of Los Angeles one for each of the Proprietary Departments (Department Of Water and Power, the Port of Los Angeles, Los Angeles International Airport (LAWA)) for a total of eight (8) EBs. Funding Training through an Endowed Badge – A Concept Borrowing a concept from the University system, the CGJ believes there is a future in establishing, within law enforcement, a High Tech Forensics Examination – Cyber Investigations – Cyber Security Endowed Badges Program. If possible, these could be “named” endowed badges (EB). It is in the interest of business to have a safe City/County in which to do business. There may be interest from many sectors to participate in this EB public private partnership. 44 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY
Findings & Recommendations
17 findings
F1:
According to the LASD, inmates released from jail are rearrested at a rate of 42.2% within the first six (6) months. After six (6) months of release, the recidivism rate for rearrest increases to 57.4%. Two (2) of the strongest, most consistent predictors contributing to recidivism among County jail inmates are lack of employment and substance abuse. Data indicates there is a high likelihood inmates will return to jail if not provided with guidance and direction within eight (8) hours of release.
F2:
At Pitchess, the CGJ observed a marked difference in the environment, interactions and activities in housing units where classes were and were not being held. Inmates not involved in classes were in crowded dormitory facilities, playing cards, watching TV, pacing or engaged in minimal constructive activities. In contrast, inmates enrolled in the MERIT program who are housed separately were in classrooms filled to capacity or engaged in listening to dynamic motivational speakers’ presentations. Several CGJ observers were moved to tears by the sincerity and focus demonstrated by these inmates.
F3:
According to the Los Angeles District Attorney’s website, the County of Los Angeles has approximately fourteen hundred (1,400) known street gangs. External community support organizations note that gang leaders are recruiting new members at a younger age with some new members being fourth generation gang members. It is estimated that of the 85,000 gang members in Los Angeles County, approximately: 4. 90% will be arrested by the age of 18 5. 75% will be arrested twice by the age of 18 6. 95% will not finish high school 7. 60% will be in prison or dead by the age of 20
F4:
Lack of a uniform pre-payment billing process throughout the facilities adversely affects the level of ORSA enrollment. ORSA is preferable because reimbursements are higher for the uninsured ORSA population from the State and Federal cost reimbursement pools. The Registration PRW provides patients with information regarding available low- cost/no-cost programs during the patients’ financial screening. While the process from preliminary medical evaluation up to the PRW registration is generally consistent across the facilities, each hospital’s practices differ after the PRW registration. At LAC+USC Pre-Payment billing envelopes are distributed only if the patient returns after they are seen by the doctor and requests this information from the Registration PRW. At Olive View, Pre-Payment envelopes are not provided at any time. If patients would like to use this form of payment, they must visit the cashier and request this information. For these two facilities, patients who specifically request the Pre-Payment plan typically are aware of the program before their hospital visit as noted by facility staff. Since the Registration PRW does not provide the envelopes unless requested, this indirectly encourages a greater number of patients to apply to ORSA. From a program reimbursement perspective, Table 5 shows LAC+USC and Harbor-UCLA Pre-Payment population as compared to the ORSA population in Fiscal Years 2007- 2010. Alternatively, Harbor-UCLA automatically issues Pre-Payment billing envelopes with discharge materials to each patient with a LAC address. In this facility, patients decide between immediate remuneration or returning to the financial office and applying for ORSA, Medi-Cal, or other low income insurance programs. This method of distribution indirectly encourages more Pre-Payment applications. From an in-house billing and collection perspective, Pre-Payment is preferable, as the facility initially collects more than ORSA (until DHS seeks reimbursement funds). However, these methods influence patients with adequate financial means to apply for the Pre-Payment plan as income verification is not required. Table 5 shows that the number of patients at Harbor-UCLA claim Pre-Payment is significantly higher, despite a considerably larger LAC+USC patient volume: Table 5. Pre-Payment Plan and ORSA Visits, LAC-USC and Harbor-UCLA UCLA, FY 2007-2010 Prepayment -Number ORSA - Number of visits Total Year Facility of visits and percentage and percentage of total Visits of total visits visits LAC-USC 691,046 16,271 2.35% 311,702 45.11% FY 2009-10 Harbor-UCLA 344,401 27,239 7.91% 94,664 27.49% FY 2008- LAC-USC 521, 960 19,124 3.66% 190,636 36.52% 09 Harbor-UCLA 337,992 31,907 9.44% 94,508 27.96% LAC-USC 505,881 25,380 5.02% 207,105 40.94% FY 2007-08 Harbor-UCLA 317,708 43,138 13.58% 99,571 31.34%
F5:
Facilities have different practices and procedures regarding the Extended Payment Plan Policy causing difficulties in collections. Establishing more EPP usage can potentially improve overall collection rates. Patients would rather pay off their debt incrementally than have their accounts transferred to debt collectors. 66 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY Increasing the use of EPP appears also to be an incentive for hospitals. Hospital staff noted that EPP allows the hospital to recoup some of the cost of service (an estimated average of $0.60 for every dollar of cost according to staff). Furthermore, it is important that patients are aware of all payment and coverage options, particularly ones that encourage patient responsibility for service payment. The hospitals’ practice of the EPP varies.4 LAC+USC reviews contracts and monthly minimums with the patient but then transfers the account to outside collection agencies. These outside vendors will communicate with the patients to receive their monthly payments and levy a service surcharge of 15-20% of the funds collected. Alternatively, Olive View manages and collects these EPP payments in-house and limits their use of outside collection agencies. Harbor-UCLA follows a similar method and sends the EPP accounts to collections only if the account becomes delinquent. Currently, County hospitals limit their efforts to educate patients regarding the EPP option. The CGJ’s interviews revealed that the collection levels for EPP accounts appear to be relatively higher than other types of accounts. (For example, Olive View staff indicated that over 80% of EPP accounts are successfully collected.)5
F6:
Patient accounts classified as “Self-Pay” may be a misnomer; they may never pay. At the initial financial screening, the Registration PRW first categorizes patients as Medi- Cal or Self-Pay. If the patient is approved for a low-cost/no-cost program, the categorization changes according to the accepted programs.6 However, if the patient does not pay their share of cost, their account becomes delinquent and is transferred to collection. The categorization then shifts to Self-Pay. Although current write-offs include the Self-Pay population, there are a variety of residual account types that fail to be collected in-house. Table 6 outlines the types of patients who are initially classified as Self-Pay patients, and the accounts that are referred to the Self-Pay population. Table 6. Self Pay Patient Characteristics Homeless Ineligible for programs Out of county residents Classified Self-Pay Insurance co-pay Patients Patients who have not received financial screening Non-compliant (undocumented immigrants, patients reluctant to provide insurance information to avoid deductable, and patients disinclined to provide information that disqualifies them for low-cost/no cost programs.) Pending and denied Medi-Cal applications Residual Accounts that Residual costs from patient responsibility or share of cost (Medi-Cal, Pre- Shift to Self-Pay payment, ORSA, ATP) While the hospital system, molded by policy and regulation, is designed to provide low income populations with more access to medical care and to prevent hospital facilities from making medical decisions based on economic reasons alone, it is vulnerable to public misuse. There are numerous anecdotal references about patients who have the 4 See Extended Payment Plan 5 Note that the hospitals’ staffs were not able to provide detailed data on the volume and charge totals of the EPP accounts 6 ATP, ORSA, Medi-Cal, Medi-Care, Self-Pay 2010 – 2011 financial means to pay for their own medical care. However, they opt to withhold critical information and, at times, even provide false information to avoid paying their medical bills. Quantifying the level of fraud or public abuse of the medical system is difficult and beyond the scope of our investigation. But in the CGJ’s analysis, it appears there are areas within the public hospital medical care system that are vulnerable to public abuse.
F7:
Although there has been confusion as to the difference between the total service charge and actual cost of service, the bottom line is: a significant loss to the County. There is a difference between the actual cost and the charged amount for rendered services. The actual cost represents the direct cost to the hospital providing treatment. The charged amount represents the service cost plus overhead. During patient billing and collection, the facilities and collection agencies seek payment for the service charge. If the account becomes delinquent and ultimately declared by the County Treasurer and Tax Collector (TTC) to be uncollectible, the service charge is written off. The total service charge written off is the amount reported and released publicly. However, the actual service cost is lower, estimated by management to be approximately 53% of the service charge. Table 7 lists the total service charges for the three (3) hospitals, as well as the estimated actual costs for service based on this reported cost-to-charge ratio: Table 7. Estimated Total DHS Medical Care Service Charges and Costs Estimated Actual Cost of Service Total Charges for (Approx. 53% of Year Service Total Charge) FY 09-10 $733,685,430 $395,676,552 Note: These costs include the ORSA, ATP, Medi-Cal and Self-Pay accounts. DHS then uses Federal and State funds to reimburse the hospital facilities for their actual costs.
F8:
Research shows that before you can prepare parolees for a job by teaching job skills, it is imperative that you prepare their minds for a new and different way of thinking when they reenter society upon release. According to a 2010 publication by the LASD on EBI, the LASD recognizes that inmates who are better prepared mentally, psychologically and educationally for transition and reentry into the community have a much higher success rate. The principles of EBI are designed specifically to assist inmates in their transition from custody to civilian life.
F9:
LASD previously had a long-term contract with a school district for instructors to provide EBI training to inmates. Negotiations are underway for a new contract that is expected to be finalized by mid-2011. At that time, instructors will teach EBI courses through the contracted organization. Ultimately, the goal over the next two (2) years is to develop an educational program to administer EBI course work to inmates in conjunction with a Federal workforce investment program. 54 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY
F10:
Custody Assistants (CAs) are LASD employees working in the jail system to manage inmates. Some CAs have been provided limited training to instruct inmates in various programs such as parenting and anger management. The amount of time spent in training varies from ten (10) hours to thirty-two (32) hours with additional workbook and video instruction. This limited training appears to be inadequate in contrast to four (4) year bachelor degrees and teaching credentials required by school district teachers. The effectiveness of the CA instructors is measured and may need to be assessed for effectiveness. This issue did not appear to be a concern with females at CRDF as much as the male population at other jails.
F11:
Concerns were expressed during this investigation from various organizations about limited access of inmates to civilian, non-sworn personnel if CAs are being charged with teaching and acting as case managers. As case managers, they seek to ensure participants have tools needed to reintegrate into the community. The concern was whether inmates will relate to and confide in LASD employee instructors with the same level of trust as they would to a civilian teacher. While the CGJ understands the security and safety issues related to uncontrolled access of inmates to civilians, questions were raised about the LASD attempting to limit external involvement with inmates. Of particular concern was whether an inmate’s needs to connect with family, make contact with their attorneys and receive meaningful assistance was adequately met.
F12:
The Inmate Welfare Fund (IWF) is a fund derived from revenue sharing contracts such as inmate phone calls, vending machines and commissaries where inmates can purchase food and personal items with money put into an account by their families. The fund generates approximately $47 million a year and is “to be expended for the benefit, education and welfare of inmates.” The IWF allocates 51% for inmate programming and services (which includes EBI courses) and 49% for jail maintenance. The Inmate Welfare Commission is an advisory body which makes
F13:
In addition, the CGJ found that the EBI program faces four (4) major obstacles:
F14:
Inability to effectively translate course material for the Spanish speaking population
F15:
Lack of adequate exposure to program benefits by the Board of Supervisors and other influential sectors of County government
F16:
Effectively marketing the program internally to local government leaders and externally to potential corporate partners
F17:
Apprehension of participation by male inmates due to internal jail house politics and gang peer pressure
Additional Recommendations
10
Not linked to specific findings.
R1:
The LADWP’s governance needs clarification and simplification. A stronger, independent Commission system may be warranted. Establishing a single governing board, with clear authority and considerable independence from day-to-day political influences, is an appropriate place to start. Strengthening the governance structure is essential to ensuring reliable electrical supplies, low rates, and adequate payments to the City, as well as to maintaining Los Angeles’ leadership among the nation’s municipal utilities. The LADWP should return to a commission system that restores integrity by balancing independence and accountability. A plan to decrease political involvement by the Mayor and Council would allow the LADWP to operate for the benefit of the ratepayers. Consider separating the policy making function of the Mayor and Council from the operational responsibilities of the Board and General Manager. The Council and Mayor could set policies and communicate them in writing to the Board which, in turn, would transmit them to the General Manager. It would require the Mayor or Council not give instructions to individuals who report directly to the Board or General Manager, directly or indirectly. Board policies should set out the utility’s purpose and ends to be achieved. They should also designate what actions of the General Manager are considered unacceptable to the Board, both general and in specific. The General Manager may then make all decisions and carry out any activities not expressly prohibited by the Board, without seeking further approval.
R2:
Establish guidelines for Commissioner appointments, and reduce the politics of appointment, real or perceived. Examples of guidelines to be written and agreed upon might be to appoint Commissions based on specific levels of expertise (financial, utility operations, corporate governance, education level, or geographic representation). Also ensure that the candidates have the time, inclination and ability to stay the entire five years. It is important that “politics” (or political contributions) be taken out of the choice for Commissioners. There are a variety of ways to deal with this issue. One is to have a Citizens Council choose the Commissioners or have Commissioners themselves choose a replacement for a member whose staggered term is up. Another example might be to have the Mayor choose two (2) members, the Council chooses two (2) members and the Neighborhood Councils choose one (1) member. Whatever the approach, the perception and the reality must be that money does not buy a Commission position. 92 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY
R3:
Expect LADWP Commissioners to serve full five-year terms. LADWP needs a historical and continuous level of knowledgeable and experienced Commissioners who can make decisions primarily based on their independent judgment. The Commission may remain responsible to the Mayor and Council, but it should be insulated from undue political influences on normal LADWP business matters. To maintain independence and continuity, LADWP Commissioners should be expected to serve out their terms unless there is cause for their removal. They should not resign when succeeding Mayors are elected. An amendment returning to the previous Charter language allowing for removal by the Mayor with Council approval or for cause by a two-thirds vote of the Council, may be warranted.
R4:
Reduce the bureaucratic impact to the Department due to Mayor or Council involvement. While citywide coordination of the Department is an important function of the Mayor’s office, the current wording of Executive Order 4 is all encompassing. Regular, informal consultation with the Mayor’s office rather than formal ED 4 submittals would potentially speed up and improve the decision making processes of the Commission. Likewise, the threat of Prop 245 fosters bureaucratic delay, takes up scarce management time, encourages more paperwork to justify decisions and adds uncertainty to normal business dealings. Pension Issue and Impact of Employee Transfers Finding and Recommendation 5. Although there was originally some concern that personnel were taking higher paying jobs at LADWP for only a short time (pension spiking) in order to increase lifetime pensions, such does not appear to be the case. However, the number of transfers from the City to the Department may have a negative impact on the pension funding for the Department. The City has taken advantage of the Department’s ability to accept additional personnel and provide pension coverage to them (eventually through increased rates) by transferring up to 1600 employees in the last five (5) years. Those transfers were part of a larger effort to keep City workers from losing their jobs in departments hit hard by the budget crisis. While it is a noble goal to protect employees from layoffs, it is unfair to place the financial burden (both salary and pension costs) on the backs of the LADWP ratepayer. The Segal Company performed an analysis of the Reciprocal Arrangement between the Water and Power Employee’s Retirement Plan (WPERP) and the Los Angeles City Employee’s Retirement System (LACERS) due to the financial impact the Reciprocity Program has had on the WPERP during the period from April 1, 2004 through March 31, 2010. Currently, when a former City employee transfers to the LADWP the WPERP recognizes prior service with LACERS, provided the member agrees to have their employee contributions transferred into WPERP. Under the Plan’s Reciprocity Program, when a member transfers, full credit for service is established in WPERP, but only their employee contributions are transferred from LACERS to WPERP; employer contributions made to LACERS associated with their service are not transferred to WPERP. Since only employee contributions are transferred, WPERP incurs an additional unfunded liability when an employee transfers to LADWP from the City. (The Department makes a 110% contribution into WPERP after the employee contributions have been transferred from LACERS. This has the effect of providing immediate employer funding for part of the actuarial loss caused by the transfer but that contribution may eventually impact rates.) The Segal Company found a large unfunded actuarial accrued liability (UAAL) as a result of these transfers. The total of the increases in UAAL, determined as of each valuation date due to the 1,331 members whose service and employee contributions has already been transferred to the WPERP as of March 31, 2010, is approximately $128.4 million. These amounts, accumulated with 8% interest to July 1, 2010, total $152.4 million. The average age for these members, years of service and average employee contributions transferred are 41.3, 6.9 years and $28,400 respectively. In addition, The Segal Company received partial information for 292 members that were identified by the Retirement Office as transfers but whose service and employee contributions were not yet transferred to WPERP as of the end of the observation period. The UAAL as of each valuation date due to these members is about $30.5 million. The average age for these members, estimated average amount of service and average employee contributions to be transferred are 40.7, 7.8 years and $37,900 respectively. The grand total of the increases in UAAL for LADWP accumulated to July 1, 2010, including both groups, is about $183.1 million. Worried about the cost of those transfers, LADWP officials moved to suspend full retirement benefits for any new worker who comes to the utility from another City agency. The City Council vetoed that measure.
R5:
The City and LADWP should come to an agreement to rescind the reciprocity agreement until such time as the number of employees transferred back and forth between the City and LADWP reaches equilibrium. Personnel should only be transferred as required by LADWP and then only with full financial contribution to the pension fund. 94 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY Succession Planning Finding and Recommendation 6. Succession planning does not take place within LADWP to any meaningful extent. Given the high turnover of senior management, it is essential that the next several layers of management have the necessary tools, including trained professionals as replacements, to accomplish their functions. Additionally, there are many positions that will be in need of replacement in the next several years; and succession planning will assist the Department in meeting those needs. This is a City-wide concern. The Los Angeles City Controller conducted a performance audit regarding the City of Los Angeles’ hiring practices and determined that “The City of Los Angeles does not strategically plan for its workforce needs.” In a department where so many people who serve the citizens of the City are eligible to retire in the next several years, this is also an intolerable situation for LADWP. It is difficult in a civil service environment to accomplish succession planning for specific positions. Because employee selection in the City of Los Angeles is based on a well established civil service system in place for well over 100 years, LADWP relies on the Civil Service Commission and the City Personnel Department to assist in meeting their hiring needs. Although filling entry-level positions is important, succession planning to fill supervisory and managerial positions is even more important and must be a priority for the Department. Once identified, a substantial amount of training and leadership development will be required. The key is the successful transfer of technical and operational knowledge to adapt to the current environment. According to the Department, as of January 1, 2010, approximately 40% of LADWP’s workforce was fifty (50) years of age or older. Within the next five (5) years, approximately 20% of the workforce will be eligible for retirement. LADWP must determine how to continue to deliver its services in the future with decreased staff due to upcoming retirements. To ensure that LADWP has the appropriate resources and positions needed to meet the business goals and objectives, there must be a sufficient number of candidates available to be considered for each job classification, especially those that are critical or have been difficult to fill. This issue alone will require collaborating internally as well as with the Personnel Department’s various divisions to consider ways to address this, such as allocating positions, consolidating job classifications, submitting examination requests and pursuing regular and executive recruitment activities. Additionally, a specific manager may not identify a replacement prior to departure. This does not provide an opportunity for training in the specifics of any job. Personnel are thrown into a job situation that may be new to them and, given all the other personnel scheduled to depart, the institutional knowledge necessary for effective performance may not be available. A change in the civil service rules may be necessary on at least a temporary basis to allow personnel to train their replacements. The Department has responded to some of these challenges by creating a Workforce Planning Group within the Human Resources Section of the LADWP. This is a good beginning to ensure that services continue to be provided to the citizens of Los Angeles. The Department’s Human Resources Manager appears to have a strong grasp of what is required to accomplish this goal and has developed a well thought out initial plan. But the process will need more resources than the current four (4) individuals assigned to assist him. Additionally, some changes in the current methods of hiring and promoting personnel may be required to ensure continuity of knowledge and ability.
R6:
Fully staff and fund the Workforce Planning Group to encourage a full review of options for future LADWP employment. Also work with City Personnel Department and the Civil Service Office to allow some changes in hiring and promotional practices for high level essential jobs. An example would be to allow a process whereby individuals could be chosen for certain jobs prior to the departure of a senior or highly essential position. Current methodology for position listing, testing and choice could be followed, but the timing of the replacement may differ. That way, the individual could have access to the current incumbent’s knowledge, techniques and contacts to ensure a seamless transition. It may also provide reduced costs since it would not be necessary to potentially hire the incumbent to return as a consultant to assist in the transition. It is clear, given the immediate nature of this issue, that “out of the box” thinking will be necessary within LADWP as well as support provided by City and civil service personnel. 96 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY II. IBEW POLITICAL INVOLVEMENT
R7:
Develop and implement a staff policy and procedure that ensures patient awareness of the availability of the Extended Payment Plan option
R8:
Establish a directive to expand the use of EPP by uninsured patients who have the means to pay for services
R9:
Design and implement a program to analyze and prosecute abuse of the LAC public hospital medical care system
R10:
Change the classification from Self-Pay to Financial Liability because currently it is not a self-pay system but a financial liability for the County 2010 – 2011 REQUEST FOR RESPONSE California Penal Code Sections7 §933(c) and §933.05 requires a written response to all Recommendations contained in this Report which shall be made no later than ninety (90) days after the Civil Grand Jury published its Report (filed with the Clerk of the Court). Respond to: Presiding Judge Los Angeles County Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street, Eleventh Floor, Room 11-506 Los Angeles, Ca 90012 All responses for the 2010-2011 CGJ Report’s Recommendations must be submitted to the above address on or before the end of business September 30, 2011. Responses are required from: Recommendation Number(s) Responding Agency 1 LAC DHS 2 LAC DHS 3 LAC DHS 4 LAC DHS 5 LAC DHS 6 LAC DHS 7 LAC DHS 8 LAC DHS 9 LAC DHS 10 LAC DHS 7 Reference California Penal Code Sections §933(c) and §933.05 at the beginning of this 2010-2011 Civil Grand Jury Report 70 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY ACRONYMS ATP Ability to Pay CGJ Civil Grand Jury CHC Comprehensive Health Center DHS Department of Health Services DSH Disproportionate Share Hospital EMTALA Emergency Medical Treatment and Active Labor Act EPP Extended Payment Plan ER Emergency Room FPL Federal Poverty Level FY Fiscal Year Harbor-UCLA Harbor-UCLA Medical Center ICN Initial Contact Nurse LAC+USC Los Angeles County Medical Center MLK Martin Luther King Jr. Multi-Service Ambulatory Care Center MRUN Medical Record Number Olive View Olive View Medical Center ORSA Outpatient Reduced-Cost Simplified Application PPP Public-Private Partnership Program PRW Patient Resource Worker RLA Rancho Los Amigos National Rehabilitation Center SNCP Safety Net Care Pool TTC Los Angeles County Treasure and Tax Collector USCB United States Collection Bureau, Inc. 2010 – 2011 THIS PAGE INTENTIONALLY LEFT BLANK 72 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY CITY OF LOS ANGELES DEPARTMENT OF WATER AND POWER Who’s Really In The Dark? Committee Members Chairperson - Mitchell Group Grace Hernandez Kenneth A. Jones Linda Loding Judy Packer Virginia Smith-Rader LOS ANGELES DEPARTMENT OF WATER AND POWER WHO’S REALLY IN THE DARK?
Findings & Recommendations
7 findings
F13:
The Department has provided substantial funds to the City of Los Angeles in the form of Power and Water transfers for many years. The Power system alone has provided over $2 billion to the City in the last twelve (12) years with another $204 million from the Water system (up to the time the transfer was stopped by the Courts). Exhibit 16. Summary of Power and Water Transfer Amounts shows the money received by the City of Los Angeles for the last twelve (12) years. Exhibit 16 Summary of Power and Water Transfer Amounts Year Power % of Water % of Transfer Operating Transfer Operating Revenues Revenues 1998-1999 $108,145,800 5 $16,252,500 5 1999-2000 $112,000,000 5 $22,200,000 5 2000-2001 $119,800,000 5 $25,500,000 5 2001-2002 $179,153,000 5 $27,247,000 5 2002-2003 $185,358,000 7 $27,523,000 5 2003-2004 $210,214,000 7 $27,649,000 5 2004-2005 $160,166,700 7 $29,815,100 5 2005-2006 $157,894,300 7 $27,914,300 5 2006-2007 $174,747,200 7 0 0 2007-2008 $182,003,900 7 0 0 2008-2009 $222,505,900 7 0 0 2009-2010 $220,475,000 8 0 0 TOTAL $2,032,463,800 $204,100,900 Source: LADWP Summary of City Transfer Declarations for Fiscal Years 1999-2010
F14:
Although the Department had numerous reasons for not wanting to make the transfer without a rate increase, the Department felt it deserved, holding the City “hostage” under these circumstances was inappropriate. The Department had the cash to make the transfer, stating they had it reserved for other uses. The Department said it could not afford the transfer. This caused a substantial argument from the Council on their need for the money and a public relations nightmare with the public, who was told that the Department was unreasonable by requiring a rate increase before making the transfer. In reality, the money had previously been budgeted for the transfer. But since the Department had doubled its unrestricted cash balance to $300 million, it felt that it could no longer afford to make the scheduled transfer to the City without rate relief. Saying they did not have the cash was inappropriate and set off a series of events and negative public and Council perceptions that will take many years to correct. What is uncertain is whether the doubling of the amount of cash (from $150 million to $300 million) was “overkill” and whether or not a smaller increase to $225 million, for example would have satisfied the bond agencies and still have money left for the almost $75 million transfer. What is known is that by refusing to make the transfer, the Department’s credibility and reputation as a good “citizen” was in jeopardy. The real question is whether a cash position of $225 million (which would have been the $300 million less the transfer) in addition to the $547 million would have sufficed for the rating agencies, since that would also have brought LADWP’s minimum targeted liquidity levels to over one hundred (100) days, also in line with comparable peers. That difference would potentially have allowed the transfer without the ensuing problems. That will never be known for sure. Newspaper articles were relentless on the “greed” of the LADWP management. In reality, the Department was only trying to protect themselves and the ratepayer; but they had a poor way of explaining that to the satisfaction of the public. What then transpired was a battle between the Mayor, the Council and the Controller (all publicly elected officials) on who would be the greater 110 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY friend of the public. The Department was caught in the middle of a situation that should never have gotten that far.
F15:
The ECAF as currently constituted at LADWP contains several elements that typically would not be found in a cost adjustment factor. The CCF report does an excellent job of discussing the ECAF at LADWP, as follows: The ECAF operates as a ‘pass-through’ of renewable energy costs, fuel/natural gas costs, purchased power costs and energy conservation costs as well as providing rate stabilization requirements. Fuel costs and purchased power costs represent the traditional Fuel Cost Adjustment (FCA). These costs are dependent on market prices. While a utility can follow best- practice procurement and hedging plans, it cannot completely control the market price of fuel and purchased power. Some renewable energy costs are also dependent on market prices (long-term renewable Power contracts whose prices are indexed to gas prices or power prices) but others, such as long term fixed-price Purchase Power Agreement costs, prepaid energy costs, transmission costs or the capital costs of LADWP-built renewable resources, are not dependent on market prices and, therefore, would not typically be part of an FCA. Energy conservation costs such as the costs of energy efficiency programs are also not part of the typical FCA. On the other hand, revenue losses due to Demand Side Management (DSM) are often considered unpredictable and out of the utility’s control. Therefore, in many cases, including that of the California IOUs, these losses are passed through by an adjustment mechanism (revenue decoupling) similar to an FCA. The ECAF also contains a separate element that accounts for the City Transfer payments that are made as a percentage of total revenues. This adds 8% to all other ECAF costs such that the Department is essentially kept whole on the 8% of ECAF revenues that are transferred to the City as ECAF costs rise and fall. While this makes sense given the way City Transfer payments are calculated today, the fact that City Transfer payments are tied to volatile ECAF revenues at all introduces additional volatility both to customers and to the City, as well as adding additional complexity to the ECAF balancing account. The ECAF is intended to limit the speed at which rates grow. Cost increases in excess of the cap are accumulated in the ECAF account and deferred until the quarterly cost increase would otherwise be less than the cap. While this provides a limited amount of rate stabilization, it is at cross purposes with the role of the ECAF in enabling a quick response to uncontrollable cost increases. During times when the cap prevents revenues from increasing as quickly as costs, an under collection of ECAF costs accumulates. This under collection must be financed by the Department, negatively impacting cash levels as well as debt- coverage ratios. A well designed rate stabilization plan usually includes a method to amortize under collections within a defined time horizon; the ECAF cap can prevent timely amortization. In addition to renewable energy costs, a decoupling mechanism for energy efficiency improvements was introduced that incorporated into ECAF a charge for revenues lost due to energy efficiency improvements. This allowed LADWP to maintain base revenue levels while reducing overall electricity demand. Additional language changes created a small rate stabilization fund, updated language to reflect a 7% City Transfer (now 8%), expanded decommissioning costs from nuclear facilities to all generation facilities, and specifically included emissions fees, interest expense above 4%, uncollectible bills, asset write-offs, and extraordinary expenses. 114 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY The ECAF rate is calculated on a quarterly basis by estimating the following twelve (12) months of costs, described above, adding any previous under or over collection of ECAF, and dividing by the estimated energy demand for the following twelve months. From this rate, an amount of 1.25 cents/kWh is subtracted to yield the ECAF rate to be charged to customers over the next quarter. This 1.25 cents is meant to reflect a portion of the ECAF charge that is included in base rates, implying that current base rates are higher than needed to cover base operations. In FY 2009, costs booked to the ECAF account totaled slightly over $1.3 billion. In summary, there are now six (6) distinct categories of expenses currently included in the ECAF rate: a. Fuel - Includes all costs associated with natural gas, coal, and nuclear fuel procurement, including emissions, greenhouse gas reduction and retirement costs b. Purchased Power - Includes all purchased power costs, including associated transmission, short-term energy market purchases as well as long-term purchased Power c. RPS costs - Includes all charges associated with renewable resource energy, capacity, RPS related prepayment expense, operations and maintenance, depreciation, and interest expenses for generation and transmission d. DSM expenses - Includes qualified DSM costs, defined as costs incurred for the acquisition and installation of devices and systems, including incentive payments, audit costs related to DSM, and administrative costs, which are part of those programs or projects designed to lower and control power system demand or consumption (limited to 10% of three (3) items above) e. DSM Revenue Loss Recovery - Includes lost revenue due to the implementation of DSM programs, helping to preserve LADWP’s rate base as demand is reduced through energy efficiency f. City Transfer - Includes a factor of 8% added to all ECAF expenses to cover the portion of the City Transfer associated with ECAF revenues. (This does not include the City Transfer component associated with base rate revenues, which is built into the existing base rate structure.) In effect, only a few of these costs are considered “uncontrollable” and, therefore, should be included in ECAF: fuel, some renewable costs tied to fuel and DSM revenue losses.
F16:
The current ECAF design does not provide for adequate oversight and transparency into long-term commitments made by the Department, particularly with respect to Renewable Portfolio Standard (RPS) and Demand Side Management (DSM). The presence of so many elements into a single cost adjustment factor reduces transparency into the cost drivers behind ECAF increases. Understanding the causes of ECAF increases today requires a detailed decomposition and analysis that is difficult for policy makers and customers to understand. The act of bundling market-driven elements with less volatile costs that lie within the Department’s control can limit overall transparency and potentially lead to a lack of accountability for those costs. Under the current system, ECAF increases are passed through to customers automatically without detailed rate review. Long-term commitments have predictable costs and, as such, they can be made with specific consideration for their impact on costs. Under the current structure, commitments that are both predictable and within the Department’s control can be passed through to ratepayers without review. This includes major capital project commitments that represent strategic (and therefore changeable and not operational) decisions. Finally, rate responses to volatile fuel and purchased power costs should not be constrained by the presence of a very tight cap on ECAF changes. Exposure to market prices should be passed through uncapped to the ratepayer to avoid the potential for financial distress. CCF concluded that the costs associated with ECAF are set to increase rapidly over the next two (2) years. Without a significant increase in the ECAF rates, this will put significant pressure on LADWP’s debt ratios, with the potential that ratios in 2011 will be well under target levels. At the same time, a cap on market-based drivers presents a significant risk to the Department in the event of a market price shock, providing support for the argument that the ECAF should be decomposed into separate elements with their own individual mechanisms for rate review. Any effort to reconstitute the ECAF won’t be simple. Any effort to promote transparency must not be at the expense of expediency, and care must be taken to prevent disproportionate impacts on individual classes of ratepayers.
F17:
The implementation of a Ratepayer Advocate at LADWP would be unusual in the municipal utility industry. While the majority of states have Ratepayer Advocate positions or groups, those organizations monitor rates imposed by IOUs, not for publicly owned utilities. The concept is that public utilities are owned by the people, and the people’s representatives (the elected City Council) would ensure that the people were protected and would do what the people want. However, in many locations including Los Angeles, Council members have complained that they could not get the information that they needed from the utility and that, at times, the information was not consistent, informative or transparent. There is also concern in many jurisdictions, including many in Los Angeles, that special interest groups, such as unions (who have substantial political power due to their monetary contributions) have greater input into the reviews and decisions of elected representatives than they have in the public at large. For example, it might be in the City’s best interest and the utility’s best interest to have an immediate focus on solar or wind power, but a Ratepayer Advocate could provide a transparency on the cost of such proposal and present alternatives in terms of focus or timing that might benefit the consumer. As shown in Exhibit 18. Ratepayer Advocate Organizations at Surveyed Municipal Utilities, there are very few “official” Ratepayer Advocate organizations in other municipal utilities that could found. 120 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY Exhibit 18 Ratepayer Advocate Organizations at Surveyed Municipal Utilities Utility Ratepayer Advocate Organizations LADWP Office of Public Accountability recently passed during the municipal Election CPS Energy No indication of Ratepayer Advocate. They have a newly formed Citizens Ratepayer coalition but it is not independent or government (it is non-profit). They ask for donations to help with legal costs on the website. SMUD No indication of Ratepayer Advocate function. MLGW No indication of Ratepayer Advocate function. JEA No indication of Ratepayer Advocate function. Austin Energy No indication of Ratepayer Advocate function. CSU No indication of Ratepayer Advocate function.
F18:
Some people believe that the impact of the Ratepayer Advocate ballot measure is minimized because other proposed Charter amendments were not approved for the same ballot. As the deadline for the March 8, 2011 ballot measure drew closer, there were competing proposals from public advocates and Council members. At one point, the Council voted for three (3) supposed LADWP reforms: a. Creating an Office of Public Accountability with a Ratepayer Advocate b. Requiring LADWP’s budget to be submitted earlier with a guarantee that “surplus” funds will come to the City of LA for General Fund uses c. Granting the City Council the authority to remove the LADWP’s General Manager or LADWP Commissioners with a two-thirds Council vote. The Council could also override the Mayor’s removal of the General Manager or Commissioners with a two-thirds vote. Only the first two (2) items were on the March 8, 2011 ballot (and both passed with large majorities), with the third being vetoed by Mayor Villaraigosa so that it would not go before the voters. The Mayor’s obvious goal was to ensure that he kept control over the appointment and removal of Department management and governance. There were seven (7) votes from the Council to override the Mayor’s veto, which was insufficient by one (1). The thought by some of the people who proposed these changes was that as long as the Mayor controlled the appointments of LADWP Commissioners and General Managers, any attempt at serious Ratepayer Advocacy would be minimized. The end result is that the Office of Public Accountability will be limited to the review of Water and Power rates and will rely on the City Council and Mayor to pass ordinances to ensure the thorough review and analysis of LADWP’s strategic plan, operations, finances and management. As one consumer activist stated, “…the establishment of a Ratepayers Advocate supported by the Office of Public Accountability is a hollow and symbolic gesture unless they are supported by subsequent ballot measures that reform the Commission process and establish a City Prosecutor…..The last thing LA needs now is oversight reform that consists of more audits and advice with no authority or mandate to enforce the law…..it is important to remember that oversight and accountability mean little, if anything at all, without enforcement authority and a mandate for prosecution.”
F19:
Although the final wording of the Ratepayer Advocate ballot measure may be interpreted as being effective, the implementation of the measure, and therefore its strength, is up to Council ordinance. There was an original version of the Ratepayer Advocate position which declared “the role of the OPA shall be to (1) promote efficiency and effectiveness of the Department; (2) provide centralized focus on ratepayer protection and consumer complaints; and (3) provide independent analysis of Department actions, particularly as they relate to Water and Electricity rate actions. The OPA shall advocate against excessive rates and shall provide expert advice on rate actions and strategies which most economically accomplish the City’s policy goals and protect the Department’s long-term interests.” The final wording of the proposed ballot measure indicates that the proposed focus will be on determining if rates are too high, not if LADWP is using revenues to overhaul infrastructure and move towards green energy and a sustainable, local water supply. The issues are if the Ratepayer Advocate should be expected to question whether, for example, the use of wind power (which is substantially higher generation cost compared to any other RPS item) is appropriate or whether, given the decision to go with wind, the rates are minimized and accurate. It is a subtle but very important distinction that will have huge impacts to both the work load of the Ratepayer Advocate and to his/her overall impact and effectiveness. After numerous motions from various Council members on the wording of a Ratepayer Advocate ballot measure, and after considering a higher level of funding (0.1% rather than 0.025% of annual revenues), the following was the actual wording decided upon and the wording that went to the public for voting on March 8, 2011. Section 683. Office of Public Accountability (a) The role of the Office of Public Accountability (OPA) shall be to provide public independent analysis of Department actions as they relate to water and electricity rates. (b) The OPA shall be headed by an Executive Director, who shall be exempt from civil service. The Executive Director shall be appointed by a citizens committee to a five- year term, subject in appointment to confirmation by the Council and Mayor. The Council shall by ordinance provide for the removal of the Executive Director in a procedure similar to that set forth in City Charter Section 575 (e), and only for the reasons provided by ordinance. The Council by ordinance shall prescribe the composition and manner of selection of the citizens committee. (c) The Executive Director shall (1) report directly to, but shall not be instructed by, the board; (2) have full charge and control of all work of the OPA; (3) be responsible for the proper administration of its affairs; (4) appoint, discharge, suspend, or transfer all of its employees, subject to the civil service provision of the Charter; (5) issue instructions to OPA employees in the line of their duties, subject to the civil service provisions of the Charter; (6) prior to the beginning of each fiscal year and in accordance with a schedule prescribed by ordinance, submit to the City 122 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY
Additional Recommendations
5
Not linked to specific findings.
R7:
Determine if the current state of union/management relations is equitable and not favorable to one side at the expense of the other. LADWP management personnel can only accomplish what they try to accomplish. If they continue to allow the Union to “win” the majority of issues, they only have themselves to blame for future problems. Elected officials should strongly consider an effort to reduce continuing union involvement in the management of the Department, other than through normal channels. Of course, this may impact the level of support and money provided to the elected officials but efficient and effective management of the Department should be the overwhelming goal. The ratepayer should be the primary concern.
R8:
Immediately develop a confidential strike preparation plan and ensure that cross-training and documentation of essential functions is included in the process and plan. It is incumbent on management to ensure that operations continue under a variety of circumstances, including a work stoppage. Additional attention from management to the possible contingency of a work action is warranted and ratepayers need to be assured that the Department management is looking out for their interests. III. CITY TRANSFER AND ECAF ISSUES
R9:
Take steps to ensure that this transfer problem doesn’t recur. Some steps to be taken include: a. Develop an earlier budgeting process so Council will know what transfer funds to expect ahead of any grandstanding. b. Provide a presentation of the budget to the Council in clear and concise terms that are not “technical engineering oriented”. c. Conduct a proactive review of RPS and capital project alternatives including goal extension or reduction. d. Develop long-term projections of costs associated with RPS and major projects to ascertain if additional transfers will impact consumer costs.
R10:
The CGJ agrees with the CCF recommendation that a “new proposal for rate restructuring should be drafted and analyzed. One aspect of this proposal would be to split the current ECAF into several separate rate components. This will provide the Council (and the public) with greater visibility of LADWP’s cost structure and of the justification for any rate increases.” CCF goes on to state that: a. Costs that are clearly out of LADWP control should remain in the ECAF. b. At an appropriate frequency, Council should approve an LADWP procurement plan. As long as procurement has been in accord with the plan, ECAF cost recovery should be a pure, uncapped pass through. c. Costs that are predictable, such as long-term contract costs or energy efficiency costs, should be removed from the ECAF. d. Revenue losses attributable to DSM should be passed through without a cap but as a separate bill component in addition to ECAF. e. The City Transfer should not be tied to fluctuating ECAF revenues but rather entirely to more stable base rate revenues. This will create greater certainty of City Transfer payments and remove elements of the City Transfer from the current ECAF structure. 116 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY While such a change means that the City Transfer will fluctuate as a percentage of total revenue as ECAF revenues change, it will result in lower volatility in rates as well as in payments to the City. f. The Council should separately define a rate stabilization program that will mitigate or spread out rate increases. Rate stabilization has the effect of financing a cost increase and its impact on City finances and LADWP capital adequacy should be explicitly considered. g. Develop a clearer, more pure, definition of the ECAF rate (for review by Council and the public). h. An automatic rate change based on a pure ECAF rate should be approved. It should be pointed out that the Department has received this type of recommendation previous to the CCF Report. In July of 2007, a Revenue Requirements Study prepared for the Chief Legislative Analyst and the City Administrative Officer states, “Energy Services has bundled several different cost recovery elements in the ECAF…….neither the Board nor management are presented the ECAF budgeted revenues by element.” The recommendation made in that report was to “Unbundle the ECAF into its elements for presentation to management and to the Board.” In their response to the report, LADWP agreed that all future presentations to management and the Board would unbundle the ECAF elements.
R11:
Increase the transparency of the cost of each current ECAF item by showing the item and amount on the ratepayer’s monthly bill. The CGJ suggests following the CCF recommendation with an additional recommendation intended to provide transparency, not just to Council but to the public at large. Print on each residential bill a statement indicating the costs associated with any “controllable” large expenditure that was previously in the ECAF. A statement showing the cost to the consumer for the RPS program, DSM program and the City Transfer (separately) should be clearly available to the public for their review and ultimate approval. Statements might read as follows: “The portion of your bill collected by LADWP for the City of Los Angeles to support government services not related to LADWP (City Transfer) is $XXX or XXX%. The City contribution shown here reflects the amount of your bill that goes toward government transfers. However, on your actual bill, this charge is included in the Electric or usage charge.” In addition to City transfer costs, the Department should also present similar information for “Renewable Program Charges” or “DSM charges” to the ratepayer. This provides the ultimate level of transparency to the public and allows for discussion of each element at the Board and Council meetings. IV. RATEPAYER ADVOCATE ISSUES
Findings & Recommendations
18 findings
F1:
The governance of the Department of Water and Power is distributed among several different groups including the Board of Water and Power Commissioners, the Mayor, the City Council, the City attorney and IBEW.
F2:
There has been a significant turnover in both Commissioners and General Managers for the LADWP, especially in recent years, which diminishes the overall governance continuity.
F3:
There is a perception that political contributions rather than specialized skills or experience may play a primary part in the decision to appoint personnel to the Commission or other governance positions.
F4:
There are a variety of governance structures in place at other municipal utilities; there is no one structure that meets all needs.
F5:
Although there was originally some concern that personnel were taking higher paying jobs at LADWP for only a short time (pension spiking) in order to increase lifetime pensions, such does not appear to be the case. However, the number of transfers from the City to the Department may have a negative impact on the pensions for the Department.
F6:
Succession planning does not take place within LADWP to any meaningful extent.
F7:
The IBEW is very active in local and state elections, local and state legislation and in ongoing City politics. It also contributes substantial time and money to the election of City politicians, including various Council members, the Mayor and the City Attorney which potentially allows for a substantial amount of power in the day-to-day governance of the Department.
F8:
There is considerable belief that the unions are increasingly involved in the operations and management of the Department.
F9:
The public sector unions, especially IBEW, have been successful for their members by accomplishing a higher level of salary and benefits than other employee unions. This information is of concern to many ratepayers since it will increase the rates developed to pay for services.
F10:
The IBEW represents about 88% of all LADWP employees which is an unusually high percentage for utilities.
F11:
Although the LADWP and the IBEW engage in “mutual gains bargaining” through a Joint Labor Management Resolution Board (JRB), the bargaining results are reportedly more in favor of the Union. The number of grievances filed by the Union has not materially changed as a result of this process.
F12:
The LADWP is at risk by having a high percentage of essential personnel in the same Union and does not have a current “strike plan” to continue operations and serve the citizens of Los Angeles in case of a work action.
F13:
The Department has provided substantial funds to the City of Los Angeles in the form of Power and Water transfers for many years.
F14:
Although the Department had numerous reasons for not wanting to make the transfer without a rate increase that it felt it deserved, holding the City “hostage” under these circumstances was inappropriate since the Department had the cash to make the transfer, although they had it reserved for other uses.
F15:
The ECAF as currently constituted at LADWP contains several elements that typically would not be found in a Cost Adjustment Factor.
F16:
The current ECAF design does not provide for adequate oversight and transparency into long-term commitments made by the Department, particularly with respect to Renewable Portfolio Standard (RPS) and Demand Side Management (DSM).
F17:
The implementation of a Ratepayer Advocate at LADWP would be unusual in the municipal utility industry.
F18:
Some people believe that the impact of the Ratepayer Advocate ballot measure is minimized because other proposed Charter amendments were not approved for the same ballot.
Additional Recommendations
18
Not linked to specific findings.
R1:
The governance of the Department of Water and Power is distributed among several different groups including the Board of Water and Power Commissioners, the Mayor, the City Council, the City attorney and IBEW.
R2:
There has been a significant turnover in both Commissioners and General Managers for the LADWP, especially in recent years, which diminishes the overall governance continuity.
R3:
There is a perception that political contributions rather than specialized skills or experience may play a primary part in the decision to appoint personnel to the Commission or other governance positions.
R4:
There are a variety of governance structures in place at other municipal utilities; there is no one structure that meets all needs.
R5:
Although there was originally some concern that personnel were taking higher paying jobs at LADWP for only a short time (pension spiking) in order to increase lifetime pensions, such does not appear to be the case. However, the number of transfers from the City to the Department may have a negative impact on the pensions for the Department.
R6:
Succession planning does not take place within LADWP to any meaningful extent.
R7:
The IBEW is very active in local and state elections, local and state legislation and in ongoing City politics. It also contributes substantial time and money to the election of City politicians, including various Council members, the Mayor and the City Attorney which potentially allows for a substantial amount of power in the day-to-day governance of the Department.
R8:
There is considerable belief that the unions are increasingly involved in the operations and management of the Department.
R9:
The public sector unions, especially IBEW, have been successful for their members by accomplishing a higher level of salary and benefits than other employee unions. This information is of concern to many ratepayers since it will increase the rates developed to pay for services.
R10:
The IBEW represents about 88% of all LADWP employees which is an unusually high percentage for utilities.
R11:
Although the LADWP and the IBEW engage in “mutual gains bargaining” through a Joint Labor Management Resolution Board (JRB), the bargaining results are reportedly more in favor of the Union. The number of grievances filed by the Union has not materially changed as a result of this process.
R12:
Ensure that the Ratepayers function is clearly defined and that the function is not captured by politicians or a bureaucracy that will stagnate their independence and ability. It is important to identify what the function will be focused on and, as importantly, what it will not be focused on. The Ratepayer Advocate will have enough work to do without taking on the “savior of LADWP operations and public perception” role. The position should not be involved in the management of the Department or have the right to veto management decisions or set rates. The OPA should not be involved in holding LADWP accountable for meeting the City’s or Mayor’s goals, some of which will be extremely expensive to the ratepayer. That should be the job of the Board of Commissioners, City Council and the Mayor. They should, however, have input into various rate alternatives and timing differences prior to the policy decision being made so that the impact to the ratepayer is known. The OPA should take a long-term perspective on its review of rates. For example, it should shine the light on long-term plans that will have massive implications for residential and commercial rates, not just on the rate increase that may be mentioned for next year. It is important that the position provide advice and counsel to lawmakers on balancing LADWP’s plans to invest in clean power, as one example, with its need to fulfill Charter responsibility to keep rates lower than others. The primary focus should be what is best for the ratepayer. The Advocate can highlight the long term implication of these decisions. This long term perspective and visibility is more important than just blocking specific rate hikes, which may be desired by many, but may not be in the long term best interest of the City or the ratepayer. In summary, the function should provide visibility to the public and guidance to the Council on various anticipated rate increases, and provide expert advice on rate actions and strategies which will protect the ratepayer by identifying the most economical method to accomplish the City’s policy goals and the LADWP’s long-term interests. The ratepayer should be placed first in implementing the Advocate’s responsibility. The Advocate can also be instrumental in ensuring that large categories of costs, such as DSM, RPS and the City Transfer, have visibility on the customer bills. (Also see Recommendation 10.)
R13:
Ensure that the public has primary input into the appointment of the Ratepayer Advocate. The “citizen’s committee” should have ample representation from Neighborhood Councils and other citizen-based organizations. It is only with broad based input that the public will have the confidence that the position won’t bend to any specific political will. As important as the actual information provided by the Ratepayer Advocate is the fact that the existence of the position itself should be viewed by the public to be honest, independent, trustworthy and knowledgeable. This is probably the single best opportunity for the City and Department management to improve the perception of LADWP with the rate paying public. 124 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY Summary of Report Findings and Recommendations
R14:
Although the Department had numerous reasons for not wanting to make the transfer without a rate increase that it felt it deserved, holding the City “hostage” under these circumstances was inappropriate since the Department had the cash to make the transfer, although they had it reserved for other uses.
R15:
The ECAF as currently constituted at LADWP contains several elements that typically would not be found in a Cost Adjustment Factor.
R16:
The current ECAF design does not provide for adequate oversight and transparency into long-term commitments made by the Department, particularly with respect to Renewable Portfolio Standard (RPS) and Demand Side Management (DSM).
R17:
The implementation of a Ratepayer Advocate at LADWP would be unusual in the municipal utility industry.
R18:
Some people believe that the impact of the Ratepayer Advocate ballot measure is minimized because other proposed Charter amendments were not approved for the same ballot. RECOMMENDATIONS
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Findings & Recommendations
15 findings
F1:
The community input process in the Port of Los Angeles community has degraded and does not have the organizational strength to be effective. Status of the Port Community Advisory Committee (PCAC) PCAC exists and operates today though there have been several changes made in its funding and organization. The biggest changes occurred in 2009 when the Port (not BOHC) eliminated staff support for five (5) of the nine (9) original PCAC subcommittees. This was accomplished by reducing the overtime budget that allowed Port staff to attend PCAC subcommittees in the evening. The Port also eliminated the funding of private consultants that formerly had performed work on behalf of PCAC and its subcommittees. Finally, the Port eliminated funding for renting space at a hotel in San Pedro for PCAC meetings. The rationale for these changes was that Port revenues had decreased due to the economic recession, and operating expenses were cut as a result. Also, many subcommittee meetings were lightly attended, often by the same people; and their scopes tended to overlap with other subcommittees. PCAC now has four (4) subcommittees: Steering, Wilmington Waterfront, San Pedro Coordinated Plan and EIR/Aesthetic Mitigation. The scopes of defunded subcommittees that dealt with specific 160 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY environmental issues such as water, air, and noise have been rolled into the EIR/Aesthetic subcommittee. Though PCAC is a standing committee of BOHC, these changes were never formally vetted nor approved by BOHC. Another issue with PCAC is the composition of membership. As originally envisioned, PCAC was to include a broad representation of constituents in the harbor community including neighborhood and residential associations, labor and business groups, educational institutions, representatives from local government and economic development agencies. As it has unfolded in the last ten (10) years, certain groups have failed to appoint members and some appointed members have failed to consistently attend. This has resulted in PCAC being dominated by members from the Neighborhood Councils and residential groups. Business groups have been under- represented. Several constituent organizations either no longer exist or they lack any legal structure as a registered corporation with the State. Lack of a legal structure makes it more difficult to ensure that an organization has bylaws, elects officers, conducts periodic meetings and maintains a legitimate address for notices and agendas. Some of the existing PCAC constituent organizations are reportedly nothing more than a small, informal group of neighbors. Table 2 shows the status of some of these organizations: Table 2. PCAC Member Organization Status Organization Current Status # of votes Wilmington Community Advisory No legal structure 3 Committee Harbor City/Harbor Gateway Chamber Suspended 1 of Commerce Pacific Avenue Corridor Task Force No legal structure 1 Wilmington Commercial Dissolved 1 District/Business Improvement District Crescent Area Residents Association No legal structure 1 Dana Strand Residents Association No legal structure; 1 No appointed member Point Fermin Residents Association No legal structure 1 Rancho San Pedro Residents No legal structure; 1 Association No appointed member San Pedro & Peninsula Homeowners Suspended 3 Coalition Wilmington Citizens Committee No legal structure 1 At large member from Council Dist 15 No appointed 1 member Education at large – LA Harbor College No appointed 1 member Total 16 2010 – 2011 Some of these organizations such as Point Fermin and Crescent are, in fact, active but do not meet regularly lack bylaws. Dana Strand and Rancho San Pedro Residents have not appointed a representative. Representatives from Council District 15 and Los Angeles Harbor College have resigned and have not been replaced. In total, sixteen (16) out of thirty-six (36) voting seats are unfilled, have never been filled, or represent organizations that no longer exist or lack a legal structure. It may be time to address the composition of PCAC to ensure that it has equitable representation from legitimate organizations that have a stake in Port operations and appoint active members. Existing PCAC bylaws provide for no term limits for PCAC members. This is left up to the appointing organizations. The voting Co-Chair of PCAC is elected for a one-year term but can be re-elected with no term limit. This has resulted in institutional memory among PCAC membership. It has also led to domination by entrenched interests, particularly among representatives of homeowner groups which form the largest constituency within PCAC. Attendance has been an issue for PCAC for years. PCAC bylaws require a quorum of 50% of the voting membership of eighteen (18) members. Beginning in late 2008, attendance began to decline at the monthly PCAC meetings. In late 2009, attendance declined to the point that a quorum was not present at three (3) consecutive meetings. Meetings that did have quorums were razor thin. The last time a PCAC meeting had twenty (20) or more members attend was in June 2009, a standard that formerly was often achieved. The sub-committees have been meeting sporadically. The EIR Sub-Committee has met only once since July 2010. The Wilmington Waterfront and San Pedro Planning Sub- Committees have been meeting fairly regularly but sometimes miss a month or two. Along with declining attendance is the problem of light agendas. Meetings in recent months have featured agendas that were light on substance or major action items. Agendas are often light at the Sub-Committee meetings as well, with agendas featuring more status reports than action items. In 2010 only three (3) motions were approved by PCAC for referral to BOHC, two (2) of those dealing with the Battleship USS Iowa. In contrast, in 2007, twelve (12) motions were approved by PCAC for referral to BOHC. In 2008, fourteen (14) motions were approved. In 2009, nine (9) were approved. Clearly, PCAC is running out of things to do. This paucity of substantive business is partially the price of success. Many of the projects and mitigation measures that were the focus of PCAC deliberations in earlier years have been completed. As mentioned above, PCAC has notched many successes in how these projects have been shaped or influenced. Many of these projects such as the Wilmington Buffer, San Pedro Waterfront, Pier 300/400, the Plan, etc. are now completed, in development or nearing construction. In recent years, there have not been as many projects with EIRs that required debate. This may change in the future as the Port contemplates a new generation of major projects such as Pier 300 expansion, main channel deepening and development of near-dock intermodal rail facilities. This last project, in particular, may produce new community relation challenges as the rail facilities will be close to residential areas. However, until these new EIRs are at the point where PCAC can review them, monthly meetings may be too often. Another factor in the declining PCAC agendas is that the Port staff is bypassing PCAC and transferring the Committee’s mission of organizing community input and working on environmental mitigation projects either to itself or to newly created entities. The Port has taken upon itself the task of organizing community input related to the development of the San Pedro waterfront. Port staff have successfully organized several workshops to present 162 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY the project and gather input, something that PCAC may not be set up to do. But whereas PCAC had a role in collecting and shaping community input and presenting
F2:
The Clean Air Action Plan Is Not Analytically Sound Clean Air Action Plan The Plan was originally prepared and approved by the governing boards of both San Pedro bay ports in 2006 and then updated in 2010. The Plan sets emission reduction goals for three (3) types of pollutants a. Diesel Particulate Matter (DPM) b. NOx or Oxides of Nitrogen c. SOx or Oxides of Sulfur 2010 – 2011 The Plan also sets a goal of reducing of Particulate Matter less than 2.5 microns in diameter (PM ) but assumes that DPM reductions will also result in reductions in PM . 2.5 2.5 rather than setting a specific target. The Plan establishes a baseline of 2005 emission levels and emission reduction goals for the years 2014 and 2023. The goals are expressed as percentage reductions such as 77% reduction for DPM, 59% reduction for NOx and 93% reduction for SOx by the year 2023. These goals are not controlled for cargo growth so the reductions have to be achieved irrespective of cargo volumes. These goals also dovetail with overall basin- wide air quality goals established by the South Coast Air Quality Management District (SCAQMD). The Plan, if implemented successfully, will achieve the Port’s “fair share” of emission reduction as required by the SCAQMD. By far the major polluters are ocean going vessels and heavy duty trucks. Technologies and capital investments for achieving reduction goals are heavily weighted toward these polluters. These strategies include: d. Reducing vessel speeds up to 40 nautical miles from Point Fermin, thereby burning less fuel as they approach the ports e. Setting emission standards for heavy duty trucks that exceed EPA standards, along with incentives for truck operators to replace older trucks with those running cleaner burning engines f. Switching fuels on ocean going vessels with cleaner burning fuels g. Setting standards for cleaner burning engines for ocean going vessels h. Using shore-based power sources for ocean going vessels when docked at berth, instead of running heavily polluting auxiliary engines i. Establishing an Emission Control Area (nationwide) that sets pollution standards for ocean going vessels up to two hundred (200) nautical miles off the coast Table 3 shows the emission reduction targets vs. current emission levels vs. the emissions forecast given the current cargo volume forecast through the year 2023. Table 3 Emission Reduction Standards and Forecasts (Figures are annual tons of emissions. Deficit number in parentheses means that target reduction is not met.) 2005 2009 2014 2014 2014 2023 2023 2023 Pollutant Baseline Actual Target Forecast Deficit Target Forecast Deficit DPM 2,025 1,004 567 576 (9) 459 527 (68) NOx 34,444 21,755 26,866 27,865 (999) 14,286 28,244 (13,958) SOx 12,421 6,358 869 890 (21) 1,010 994 16 As shown in the Table 3, the combined Port effort is forecast to nearly meet the targeted emission reduction standards for each pollutant. A major exception to this is NOx in the year 2023. There is less confidence in the forecast for NOx reductions because of uncertainties regarding the reduction strategies and technologies, particularly for improvements in ocean going vessel engines. As these technologies are tested and proven, the ports may be more confident in upgrading the forecast in future updates to the Plan. 164 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY The Plan shows a serious commitment on the part of the ports of Los Angeles and Long Beach to limit the environmental impacts of port operations. The Plan includes ambitious goals for emission reductions and wide ranging and controversial strategies for achieving those reductions. No doubt, implementation of the Plan will result in cleaner air and increased health status for area residents. The Plan expresses a goal to reduce health risk from Port operations. Increased health risk is assumed to be positively correlated with exposure to DPM, which is considered to be a carcinogen. The Plan further assumes that reducing DPM will reduce the risk of cancer and improve the health status of nearby residents, as cancer is a reliable proxy for many health risks. In fact, health risks are impacted by all particulate matter, not just DPM. Particulate matter in general is highly correlated with respiratory disease and impaired lung development. Most of the emission sources at the Port are diesel engines which explain the reliance on DPM as a marker for particulate matter in the Plan. However, given the enormous costs associated with implementing the Plan, the Port may want to take the extra step of targeting and measuring total particulate matter (PM and PM ) in addition to DPM. 2.5 10
F3:
Los Angeles County could benefit from a Regional Port Authority consolidating the Ports of Long Beach and Los Angeles. Existing Coordination Between Ports The ports of Los Angeles and Long Beach are both municipally controlled by their respective cities. Each port is governed by a Board of Harbor Commissioners. The two (2) ports are adjacent to each other and are roughly the same size both in terms of area and workload. The ports also share much of the same infrastructure, including the outer harbor (the waterways between the breakwater and the piers). The transportation infrastructure such as freeways, railways and rail yards are also shared by the customers of both ports. Both ports are financial guarantors for the Alameda Corridor Transportation Authority (ACTA) which operates a major rail corridor between the ports and the rail yards in east Los Angeles. In the past few years, the two (2) ports have widely coordinated on environmental programs. This is a recognition that the ports have to implement similar mitigation programs to ensure that costs are shared equitably, and neither port can benefit by foregoing participation. For example, the ports have coordinated in producing a joint Plan. Specific programs from this Plan are implemented jointly. For example, both ports have enacted similar regulations on vessel speed reductions and cleaner fuels, powering ships with shore based power when they are in port and replacing older truck engines with newer, cleaner burning engines. The ports are now working on a joint WRAP that will require the same type of joint effort and coordination. Both ports are dominated by container terminals. In the past, both ports also served other types of shippers such as liquid bulk, autos, break bulk, and cruise ship operators. In recent years, there has been some consolidation. The Port of Los Angeles has largely gotten out of the liquid bulk; e.g., petroleum business: and this type of cargo has consolidated in Long Beach. Wood products have largely consolidated at the Port of Long Beach as well. 2010 – 2011 Detriments of Current Port Structure In the past, the ports did not often compete for shipping traffic. Usually, there was little excess terminal capacity so steamship lines and terminal operators would have little choice in properties. In other cases, the steamship line or terminal operator worked with one port to develop a facility specifically for their requirements. Terminals were never built without a tenant in mind. In the past two (2) or three (3) years as cargo growth has trailed off and even decreased, the ports have started to compete for shipping traffic. For example, Hyundai Merchant Marine recently moved from Long Beach to Los Angeles. This is a concern since both ports serve the same market, use the same landside transportation infrastructure; and longshoremen are covered by the same collective bargaining agreement. The ports do not have many ways differentiating themselves other than lease rates or the configuration of a specific property. Should the ports engage in rate-based competition, it would result in a transfer of economic value from the publicly owned ports to privately held lessees, contrary to sound public policy goals which should preclude this type of subsidy. This may become a larger problem when the Panama Canal expansion is completed in three (3) years as shipping traffic potentially bypasses the West Coast altogether. There is duplication in some specialized facilities. For example, both ports operate cruise ship terminals (though the Port of Long Beach cruise terminal is technically leased out by another city department). Los Angeles is planning to open yet a third cruise ship terminal at Kaiser Point in the next few years. Should the cruise ship business lessen, there may be temptation to compete for this business resulting in a transfer of economic value from the publicly owned ports to private cruise ship lines. Finally, the ports compete for the same staff which theoretically increases personnel costs. There are duplicative administrative structures at both ports which precludes the ability to economize by sharing management positions. Potential Benefits of Consolidation Consolidating the control and governance of the two (2) ports could realize significant benefits. One major benefit is already being realized. As mentioned earlier, the two (2) ports are coordinating on environmental mitigation efforts such as the Plan and WRAP. This coordination requires negotiations between the environmental management units of each port as well as the approval of the two (2) governing boards. Consolidation would eliminate the need for these negotiations and the potential tradeoffs, compromises and uncertainty that undoubtedly occur with these negotiations. Consolidation would also be an explicit recognition that the two (2) ports share the same ecosystem and the source of pollutants is difficult to trace from one port or another. Consolidated ports would remove temptation for the two (2) ports to compete for shipping traffic on financial terms. This would ensure that private shipping interests are not being subsidized by publicly owned agencies through favorable lease terms. The consolidated port would still have to compete for shipping traffic with other port authorities in North America; but due to its location, sheer size and access to a vast local market, it could still compete effectively with other 166 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY West Coast ports. The distraction of competing with a nearby port authority would be removed. The combined port authority could compete as a united front. A consolidated port could benefit from a streamlined management structure including a consolidated governing board. This would result in unified decision making over port operations and development. In addition to more streamlined decision making, it would realize economies by reducing the number of management positions needed to staff the consolidated management structure. Infrastructure decisions may be streamlined through consolidation of ensuring that all facilities are used optimally throughout the port. For example, cruise ship operations could be consolidated at one or two facilities rather than the three that are either in operation or in the construction stage. Challenges to Consolidation Port consolidation faces some serious challenges. A major legal hurdle is that the two ports are located on separate land grants from the State. These grants would have to undergo some sort of consolidation which would require an act of the State Legislature. All existing lease contracts would also have to be assigned to the new port entity. Depending on the lease terms, some tenants may want to negotiate new terms. The consolidated port would most likely be governed through a port authority, a special district dedicated to operating the port. This would also require an act of the Legislature to create this special district. The region has precedents for a special district of this magnitude. The Metropolitan Water District of Southern California or the Los Angeles County Metropolitan Transportation Authority is successful examples of regional special districts. The role of the two (2) cities (Los Angeles and Long Beach) would have to be determined. The two (2) mayors might have appointment powers over the authority’s governing board, or the board might be elected region wide. Consolidation would also require consolidating, assuming or refinancing the existing port revenue bonds that each city has issued. It is conceivable that the bond markets may perceive less financial risk in a consolidated port authority than in the current city controlled structure. This would result in less debt service, reduced financing costs and more rate flexibility. Perhaps the most serious hurdle would be the loss of local control. A consolidated port authority would mean less control for the cities of Los Angeles and Long Beach unless they retained appointment powers for the governing board. A hybrid structure for the governing board where the mayors appoint some portion of the board while the remaining seats are elected region wide may make the most sense. In any scenario, amendments would have to be made to both city charters. 2010 – 2011
F4:
The Port of Los Angeles is adequately secured from external threats. Current Security Mandates and Level of Compliance The mandate for security of Port facilities is divided by jurisdiction. The Federal government has jurisdiction for ensuring security in all cargo and cruise terminals. This jurisdiction is further divided as follows: The U.S. Coast Guard has authority for securing the terminal facilities. This authority is granted by the Maritime Transportation Security Act (as enabled by the Code of Federal Regulations 33 CFR 105). These regulations require operators of deep draft; e.g., container terminals and cruise terminals to prepare a Facilities Security Plan which is approved by the Coast Guard. Each terminal lessee has a plan for their terminal property. The Coast Guard is responsible for enforcing the terms of these plans at the Port and has a small force of armed security staff to respond to violations of the plans. The Coast Guard has the authority to shut down a terminal in the event of a serious violation. A primary enforcement tool for the Coast Guard is the Transportation Worker Identification Credential (TWIC) which is required for access to any Coast Guard secured areas such as container terminals. The Port Police does not have access to the terminals unless requested by the Coast Guard or the terminal operator. The Coast Guard also has shared jurisdiction over the waterways with the Port. The U.S. Customs and Border Patrol has jurisdiction over the actual cargo. They monitor incoming containers through examination of records and will inspect certain high risk cargoes and containers such as those originating in the Middle East. Customs and Border Patrol also operates gamma radiation detection equipment at the exit gates of all container terminals. This equipment detects the presence of radiation and flags containers for more extensive inspection including opening the container and examining the contents. Security for other leased facilities at the Port, other than cargo and cruise terminals, is the responsibility of the individual lessees, which can include restaurant and hotel operators, warehouse operators and other industrial property lessees. This responsibility is established in the terms of individual leases and is similar to those found in standard commercial leases. Security for non-leased Port property is the responsibility of the Port Police. This includes waterways, roadways, common areas, parks and Port operated facilities. The Port Police have no mandate or responsibility for Homeland Security or counter terrorism. Instead, the Port Police is responsible for enforcing the Port Tariff; i.e., rules promulgated by BOHC for Port users, the Los Angeles Municipal Code and the State Penal and Vehicle Codes. The Port Police have a staff of 217, including 131 sworn police officers. The Port Police use an array of cameras, water-born sonar devices and patrol craft to monitor Port property. The Port Police augments the capabilities of the Federal authorities for certain functions such as water patrol and inspections using divers. Port divers inspect the hulls of ships if warranted. Drugs have been found hidden in hull cavities in the past. Water craft will provide a protective screen around cruise ships as they enter and exit the Port. 168 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY History of Security Incidents at the Port Since 2006, there have been only two (2) security breaches on Port property. Both involved fake TWICs and were investigated by the Coast Guard and prosecuted by the U.S. Justice Department. No further details are available. The Port Police tracks crimes and arrests on Port property involving violations of State or local laws. Reported crimes are approximately two hundred (200) per year with about two-thirds of these classified as Part I crimes; e.g., violent and property crimes. Theft and vandalism are frequent crimes reported at the Port in addition to traffic infractions. Port Police also make 400-500 arrests each year. About half of these arrests involve apprehending persons with outstanding warrants or for failure to appear. Rather than Homeland Security related issues, Port Police workload is similar to that of a municipal police force with the addition of a sizeable surveillance function.
F5:
Longer term savings could be achieved by modifying some pension benefit provisions for new employees. These include: changing the basic benefit formulas to levels that existed prior to 2001 and restricting or eliminating service credit enhancement provisions, such as sick leave and “air time” service credit.
F6:
Regular review of actuarial assumptions facilitates keeping pension plans focused on prevailing investment climates, actuarial trends and other factors that influence pension assets, liabilities and sustainability. For example, the pension plan administrators of both CalPERS and LACERA review actuarial assumptions annually with their respective governing boards and evaluate them more rigorously on at least a triennial basis.
F7:
The risk of “pension spiking” could be reduced substantially by converting to a 36-month or longer basis for calculating Final Average Salary for at least 85% of CalPERS member agencies in LAC.
F8:
Besides regular salary, some jurisdictions allow other categories of compensation to be included in the calculation of pensionable salaries, including sick leave buy-back and certain categories of special pay and bonuses. This results in higher pension benefits and costs.
F9:
Hybrid defined benefit and defined contribution pension plans would more equitably share the risk of investment losses between the employer and employee. A jurisdiction’s ability to modify pension provisions for retirees, existing employees or future employees varies by group and may be controlled by statute and case law. A 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY
F10:
A small percentage of LAC CalPERS member agencies (13.2%) have decided to adopt post retirement COLA provisions that have a potential to increase pension system costs at rates that exceed inflation, effectively increasing the present value of retiree compensation over time.
F11:
The actuarial assumed rate of return using both the 10-year and a 15-year smoothing methodologies cause swings in actual investment gains and losses to moderate actuarial investment performance, and thus the actuarial value of assets. These methodologies ensure that jurisdictions contribute an amount each year that is closer to the normal contribution rate.
F12:
The overwhelming majority of jurisdictions in LAC are not prefunding retiree health benefits or contributing the Annual Required Contribution determined by actuaries, deciding instead to fund these benefits on a pay-as-you-go basis. This practice is inconsistent with recommendations by actuaries and the Government Finance Officers Association. In addition, this is a costly policy that reduces the jurisdictions’ capacity to discount contribution rates and, instead, passes full costs onto the taxpayer.
F13:
Opportunities may exist for some jurisdictions to cap benefit amounts, require copayments from retirees or implement other changes that would reduce costs for jurisdictions providing retiree health benefits to current retirees in the short term. However, each instance would need to be assessed by the jurisdictions’ legal counsel to ensure that such modifications would not be a violation of contract law.
F14:
It is unlikely that retiree health benefits can be modified for current retirees and employees. However, jurisdictions could change the benefit offered to new hires by establishing benefit caps or defined contribution components, establishing improved cost sharing agreements with employees and modifying plan design to more effectively couple retiree health benefits with Medicare. Such change may involve negotiations with collective bargaining groups.
F15:
Pension Obligation Bonds are not used extensively by Los Angeles County jurisdictions. However, there are indications that some jurisdictions are considering POBs to fund UAAL that developed during the recent economic downturn. The GFOA and other experts recommend that jurisdictions proceed cautiously when considering POB borrowings by: a. Thoroughly evaluating financial benefits and risks b. Fully recognizing “other issues” that may arise if the bonds are issued such as: i. The loss of flexibility in difficult economic times because of the need to make timely payments of principal and interest in order to not default on the bonds ii. Potential misunderstanding by policy makers regarding the possibility that an unfunded liability may recur in the future iii. Potential pressures for additional benefits by government employees if plans are fully funded and government’s contribution as a percentage of payroll has declined relative to neighboring jurisdictions 2010 – 2011 PHASE II: SECTION 1 LOS ANGELES COUNTY EMPLOYEES RETIREMENT ASSOCIATION SUMMARY The Los Angeles County Employees Retirement Association (LACERA) administers the pension system for the County of Los Angeles, acts as the trustee of contributions that have been made by the County and plan members, and invests assets in a manner that attempts to moderate risk and maximize returns. LACERA provides advice and counsel to County managers on the financial impact of proposed changes to the County’s retirement system, and are partners with the County on benefit design, funding strategy and other aspects of pension system management. Overall, LACERA is well run and effective at fulfilling its responsibilities, and the County has done a good job at moderating pension costs. However, LACERA could explore the benefits of changes to actuarial methodologies used to smooth investment returns and the County could, with input from LACERA, focus on discussions with employee bargaining groups to redesign benefits, including exploring benefit caps and establishing defined contribution alternatives; examining opportunities for cost reductions from modifying certain provisions that create opportunities for pension spiking; and consider policy changes to ensure the pre-funding of OPEB benefits by increasing annual contributions and narrowing the allowed uses of the County Contribution Credit Reserve. PURPOSE The Los Angeles County (LAC) and LACERA were chosen by the Civil Grand Jury (CGJ) for in- depth review based on its status as the largest plan in the region and relatively high dollar amount of liability. LACERA also has a better than average funded ratio and multiple plan tiers, as well as the County’s substantial pension obligation bond debt and retiree health benefit unfunded liability.
Additional Recommendations
10
Not linked to specific findings.
R1:
BOHC to restructure PCAC, improving the efficiency and effectiveness of the Committee and refocusing its mission: a. Rename PCAC to Port Region Advisory Committee. Note: the committee will still be referred to as PCAC in this recommendation for ease of understanding b. Adopt a resolution that fulfills the requirements of the ASJ, Article IX-B and better define the role of PCAC: i. Article IX-B requirement is, “(a) the Board will consider all resolutions adopted by PCAC in an expeditious and timely manner; and (b) the Board shall issue a written statement of reasons and appropriate findings for any PCAC resolution rejected by the Board.” ii. Make the resolution clear and specific in defining the types of actions and decisions in which PCAC should engage, including reviewing CEQA documents, mitigation measures costing more than $1 million, as well as, those vetted by the TraPac related non-profit Board. c. Enhance the governance role of BOHC by establishing an annual work plan for PCAC. Require quarterly updates on deliberations through a standing agenda item on the BHS agenda. Furthermore, the BHS resolution should include a requirement that a BOHC member serve as a Co-Chair of PCAC. The role of this Co-Chair would be to ensure that PCAC fulfills its advisory role to BOHC and focuses on mission related activities. d. BOHC to amend PCAC’s by-laws so that PCAC and its sub-committees meet quarterly instead of monthly. e. BOHC to amend PCAC’s by-laws regarding composition of PCAC constituent organizations and voting membership to reflect the relative impacts of Port operations on the groups. For example, residential composition should be weighted higher than business composition insofar as Port operations impact residents more than businesses. The by-laws should also reduce the total composition of PCAC by 40%, thereby eliminating groups that are not as 2010 – 2011 established or lack certification standards, such as a legal structure, elected officers, etc. Table 4 shows how one such restructuring would look: Table 4 Proposed PCAC Composition Type of constituency Organization # of reps Total # Total % Neighborhoods/Residential Central SP 1 Coastal SP 1 Harbor City 1 NW SP 1 Wilmington 2 CD 15 ‐ SP 2 CD 15 ‐ Wilmington 1 Total Neighbor/residential 9 45% Civic Wilmington Comm Advisory 1 1 5% Business/Econ Dev Harbor Assoc of industry 2 SP C of C 1 PMSA 1 Wilmington C of C 1 Total business/econ dev 5 25% Labor ILWU 1 Non‐ILWU 1 Total labor 2 10% Education LA Harbor College 1 1 5% At Large BHC appointed 1 CD 15 appointed 1 Total at large 2 10% Totals 20 20 100% f. BOHC to amend PCAC’s by-laws to include a certification process for PCAC constituent organizations. These organizations should: i. Be registered with the California Secretary of State ii. Have their own by-laws or articles of incorporation iii. Have a purpose that has a nexus or connection with Port operations or the impacts of Port operations iv. Meet at least quarterly in open session v. Elect officers vi. Organizations should be required to recertify annually. Any organization that has not recertified within six (6) months should be decertified and replaced. This requirement would not apply to governmental organizations or subdivisions such as Neighborhood Councils. g. BOHC to amend PCAC’s by-laws to include a certification process for PCAC voting members. The certification requirement should include: 170 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY i. Prospective voting members should have a letter of nomination from their appointing constituent organization. BOHC would then certify their appointment. ii. Certification should be revoked if the voting member has two (2) unexcused absences or three (3) excused absences during a period of four (4) consecutive quarterly meetings. iii. Certification should also be revoked if the voting member is charged with code of conduct breaches in two (2) meetings during a period of four (4) consecutive quarterly meetings. iv. Upon revocation, the voting seat would be filled by the alternate voting member, or the constituent organization could nominate a new member. v. Existing PCAC members can be granted new five-year terms at the discretion of BOHC. h. BOHC to amend PCAC’s by-laws to limit terms for PCAC Co-Chair (not a BOHC member) and PCAC sub-committee chairs to two (2) consecutive one (1) year terms. Terms for all PCAC members should be limited to five (5) years. i. BOHC to amend PCAC by-laws to include a code of conduct for PCAC members. This code of conduct should be enforced by an appointed Sergeant-at-Arms. Breaches of the code of conduct should be documented and enforced pursuant to the revocation process as described above. j. Retain the current roster of sub-committees within PCAC plus the addition of a subcommittee that would assume the responsibilities of the planned non- profit organization to oversee the Port Community Mitigation Trust Fund. This new subcommittee would replace this planned non-profit organization. All recommendations from this subcommittee would then be vetted and approved by PCAC prior to recommendation to BOHC. k. Continue to assign technical and administrative support staff to PCAC meetings in order to provide expert advice and knowledge. The Port should continue to assign legal counsel to PCAC meetings.
R2:
Revisit the Plan to ensure that all particulate matter, not just DPM, is being tracked and those reduction goals are included for PM and PM . 2.5 10
R3:
BOHC to propose to the City of Long Beach the commissioning of independent study of the costs and benefits of a consolidated Port Authority in San Pedro Bay. The study should be overseen by a commission composed of experts in municipal finance, supply chain logistics, public health, and public policy plus representatives from the governments of Los Angeles County, City of Los Angeles, Long Beach and the State of California, including a representative from the State Lands Commission. Should the study suggest that the region would benefit from a consolidated Port Authority; the Commission would be well advised to develop a legislative action plan to enact the recommendations from the study. 2010 – 2011 SUMMARY OF FINDINGS AND RECOMMENDATIONS
R4:
The Port of Los Angeles is adequately secured from external threats. RECOMMENDATIONS
R5:
Develop and maintain consistent criteria participation data for ILP and other TAY services.
R6:
Initiate the process of tracking youths’ denial of ILP services if offered and record date and follow up to reinitiate the ILP.
R7:
Evaluate effectiveness of the existing data management system and explore new software that could streamline data collection and analysis which improves identification of service gaps and accomplishments.
R8:
Increase and improve communication efforts with TAY participants to raise awareness of ILP housing and other TAY related services by improving data collection efforts and maintaining contact with participants after they leave the program.
R9:
Establish confidential e-mail distribution lists and send regularly scheduled e-mails to provide awareness of scholarships, ILP services, available resources, and job opportunities.
R10:
Increase frequency in which participants provide progress updates and complete surveys that measure progress, satisfaction and solicit input and suggestions. Improved and increased communication between participants and staff may allow the recommended evaluation plan to be effectively implemented. The second method for maintaining ongoing communication with youth participants could involve the increased use of social networking, such as facebook.com, since most youths are already using these social networking sites. 198 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY REQUEST FOR RESPONSE California Penal Code Sections6 §933 (c) and §933.05 requires a written response to all Recommendations contained in this Report which shall be made no later than ninety (90) days after the Civil Grand Jury publishes its Report (filed with the Clerk of the Court). Respond to: Presiding Judge Los Angeles County Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street, Eleventh Floor, Room 11-506 Los Angeles, CA 90012 All responses for the 2010 - 2011 CGJ Report’s Recommendations must be submitted to the above address on or before the end of business September 30, 2011. Responses are required from: Recommendation Number(s) Responding Agency 1 County of Los Angeles (DCFS, Probation Department) 2 County of Los Angeles (DCFS, Probation Department) 3 County of Los Angeles (DCFS, Probation Department) 4 County of Los Angeles (DCFS, Probation Department) 5 County of Los Angeles (DCFS, Probation Department) 6 County of Los Angeles (DCFS, Probation Department) 7 County of Los Angeles (DCFS, Probation Department) 8 County of Los Angeles (DCFS, Probation Department) 9 County of Los Angeles (DCFS, Probation Department) 10 County of Los Angeles (DCFS, Probation Department) 6 Reference California Penal Code Sections §933(c) and §933.05 at the beginning of this 2010-2011 Civil Grand Jury Report 2010 – 2011 ACRONYMS AA Associate of Arts ACT American College Testing (formerly) AFDC-FC Aid for Families with Dependent Children/Foster Care CAPIT CA State Child Abuse Prevention, Intervention and Treatment program CSW Children Social Worker DCFS Department of Children and Family Services DPO Deputy Probation Officer GED General Educational Development GR General Relief HC Housing Coordinator ILP Independent Living Program KinGap Guardianship Assistance Payment Program LAC Los Angeles County LAHSA Los Angeles Homeless Services Authority LST Life Skills Training PPM Permanent Placement Mode PD Probation Department SAT Scholastic Aptitude Test TAY Transitional Age Youth TC Transition Coordinator 200 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY THP Transitional Housing Program THP+ Transitional Age Program Plus THPP Transitional Housing Placement Program TILP Transitional Independent Living Plan TRC Transitional Resource Centers YDS Youth Development Services 2010 – 2011 THIS PAGE INTENTIONALLY LEFT BLANK 202 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY WHOA! THE STATE OF PUBLIC PENSIONS IN LOS ANGELES COUNTY Committee Members Chairperson - Meg George Beverly T. Kishimoto Susan Stetson Max E. Van Doren ASSESSMENT OF THE STATE OF PENSION PLANS IN LOS ANGELES COUNTY INTRODUCTION The 2010-2011 Los Angeles County Civil Grand Jury (CGJ) conducted an investigation of pensions in Los Angeles County (LAC) entitled: Assessment of the State of Pension Plans in Los Angeles County. This investigation was conducted in accordance with the authorities defined in the California Penal Codes (CPC) §914 through §939. Pursuant to CPC §926 et al, the CGJ engaged the services of an auditing firm to assist it with the pension investigation. This assessment was designed to accomplish the following objectives:
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Findings & Recommendations
6 findings
F1:
Total CalPERS and retiree health UAAL, including and Pension Obligation Bond debt, equaled $116.6 million as of June 30, 2009, which is significant.
F2:
A significant portion of this liability is related to OPEB, or retiree health benefits provided to City employees. As of June 30, 2009, the UAAL for OPEB equaled $49.1 million, or 42.2% of all unfunded retirement obligations in 2009.
F3:
OPEB liabilities are growing rapidly. In part, this is because the City has chosen not to fund its Annual Required Contribution at the levels recommended by actuaries. In FY 2008-2009, the City contributed only 34.2% of the requirement; and, in FY 2009- 2010, the City contributed only 30.2% of the requirement. In FY 2009-2010, this represented a funding shortfall of approximately $2.7 million. Since 2007, the City has also not funded the full amount of the ARC for the MMRP closed plan.
F4:
The policy to fund these benefits on a pay-as-you-go basis is striking because the City has unique pension funding authority authorized by the voters when they approved special property tax levies in 1946 and 1952. Revenue from this levy were sufficient to nearly fund the full cost of the CalPERS Annual Required Contribution in FY 2009-2010. As a result, the City only needs to fund the OPEB, MMRP and POB debt from discretionary resources.
F5:
With the exception of attempts to reduce the City’s pick up of the employees contribution to CalPERS, the City appears to have done very little to reign in the cost of the retirement benefits that it provides. A blue ribbon committee in 2006 recommended revenue solutions to cope with the City’s “pension-funding shortfall,” 282 A 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY and subsequent steps by the City Council have involved adopting a resolution to pass through the portion of property tax revenue collected by the Redevelopment Agency from the special property tax levy.
F6:
The City has moved forward aggressively to pre fund its OPEB obligations, being one of only 14 out of 70 OPEB cities to do so in the County. While the City’s most recent actuarial evaluation from 2008 reported a funded ratio of only 45.2% on $5.8 million in liabilities, recent finance reports show that the cash balance in the fund has grown substantially to $3.4 million as of January 31, 2011.
Additional Recommendations
2
Not linked to specific findings.
R1:
Monterey Park’s City Council adopt policies to fully fund the ARC for both the MMRP and OPEB retirement benefit plans for employees in order to ensure future funding of benefits and earn investment income which would discount the annual required contributions
R2:
Monterey Park’s City Council direct its City management to explore alternatives for reducing retirement benefit costs, including possible additional revisions to the amount of the employee contribution pick up paid by the City and alternative employee cost sharing arrangements for retiree health benefits. REQUEST FOR RESPONSE California Penal Code Sections48 §933 (c) and §933.05 requires a written response to all Recommendations contained in this Report which shall be made no later than ninety (90) days after the CGJ publishes its Report (filed with the Clerk of the Court). Respond to: Presiding Judge Los Angeles County Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street, Eleventh Floor, Room 11-506 Los Angeles, CA 90012 All responses for the 2010 - 2011 CGJ Report’s Recommendations must be submitted to the above address on or before the end of business September 30, 2011. Responses are required from: Recommendation Number(s) Responding Agency 1 City of Monterey Park 2 City of Monterey Park 48 Reference California Penal Code Sections §933(c) and §933.05 at the beginning of this 2010-2011 CGJ Report 2010 – 2011 PHASE II: SECTION 5 HERMOSA BEACH POLICE SAFETY PLAN SUMMARY The Hermosa Beach Police Safety Plan is one of 3 plans the City provides to its employees through CalPERS. In 2009, this plan had the highest contribution rate in the County at approximately 57.9% of salaries for the employer and employee share of pension benefit costs for uniformed personnel. The City also contributed to a defined benefit retiree health plan for these employees at a rate of approximately 5.3% of salaries, for a total retirement contribution rate of 62.2% in that year. Pension contributions are projected by CalPERS to increase by an additional 8.0% by 2012, increasing the total effective rate for uniformed Police Department retirement benefits to 70% of salaries by that year if retiree health rates remain static. This growth in contributions is also occurring with the Miscellaneous and Fire Safety plans for Hermosa Beach. Also administered for the City by CalPERS, the Miscellaneous employee effective contribution rate was 27.1% of salaries in 2009 and could increase by an additional 2% by 2012.The Fire Safety employee effective contribution rate was 51.9% in 2009, and could increase by an additional 3% by 2012. In total for the 3 plans, CalPERS projects that the City will be required to contribute $4,149,982 on base salaries of $12,751,612 in FY 2011-2012, or approximately 32.5% of salaries excluding retiree health benefits. The City has recognized the significance of the funding difficulties that it faces and has initiated several strategies to reduce costs including proposals to labor unions to modify pension formulas. However, the City is not proposing to reduce or eliminate the City’s commitment to pick up the 7% (Miscellaneous) and 9% (Safety) employee contributions for CalPERS pensions at this time. The City is considering the issuance of Pension Obligation Bonds (POBs) to take advantage of current lower interest rates on borrowing. In recent analysis, bond advisors have estimated that POBs would save an estimated $329,818 over 8 years. PURPOSE The Hermosa Beach Police Safety Plan was chosen by the CGJ for in-depth review, based on the high annual required contribution for pension and retiree health benefits, amounting to over 62% of pensionable salaries in 2009, and expected to rise to over 70% of pensionable salaries by 2012.
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Findings & Recommendations
1 findings
F1:
DWP employee relations management staff has not initiated any substantive meet and confer sessions with employee bargaining groups to modify aspects of the retirement benefit package in an effort to reduce costs, despite total annual retirement benefit contributions of approximately $360 million or 46.9% of pensionable salaries in FY 2009-2010. August 10, 2010, The Segal Company, Re: Reciprocity program – Impact of Possible Suspension of Program 2010 – 2011 For at least 3 years, the DWP management has chosen to contribute amounts exceeding 250% of the Annual Required Contribution to its Retiree Health Benefits Fund. During this period, they have made $317,394,370 in excess contributions, while simultaneously requesting utility rate increases and advising City officials that the Department would be unable to pay the full amount of the 8% transfer to the City in FY 2009-2010, because of insufficient cash resources. The City and LACERS may owe the WPERP $183 million or more in UAAL for employees who transferred from City employment to DWP employment during the past 6 years, increasing the WPERP contribution requirements by $11.7 million annually over the next 15 years. The City Council referred this matter to the City Administrator, WPERP and LACERS to refine the analysis on October 13, 2010; but no further action has been taken since that time.
Additional Recommendations
4
Not linked to specific findings.
R1:
The DWP Board of Commissioners give direction to management to evaluate and report back in closed session on alternatives for reducing the Department’s cost of employee retirement benefits.
R2:
The DWP Board of Commissioners advise the new Ratepayer Advocate and the City Council of the decision by the DWP management to accelerate payment of the Retiree Health Benefit Fund ARC in each of the past three fiscal years to ensure that the prepayments are fully considered when the DWP seeks future rate increases or indicates that it is unable to make revenue transfers to the General Fund.
R3:
Los Angeles City Council, the DWP Board of Commissioners and LACERS Board of Administrators need to expedite reaching an agreement regarding transferring funds to WPERP to cover the cost of an increased UAAL imposed on DWP, estimated by actuaries to equal as much as $183 million for the 6-year period between 2004 and 2010, due to Los Angeles City employees who have moved from City departments to DWP so that the burden is not imposed on ratepayers.
R4:
Los Angeles City Council, the DWP Board of Commissioners and LACERS Board of Administrators need to amend the reciprocity agreement between LACERS and WPERP with regard to the transfer of employer pension contributions in order to prevent such inequity in the future. A 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY REQUEST FOR RESPONSE California Penal Code Sections42 §933 (c) and §933.05 requires a written response to all Recommendations contained in this Report which shall be made no later than ninety (90) days after the Civil Grand Jury publishes its Report (filed with the Clerk of the Court). Respond to: Presiding Judge LAC Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street, Eleventh Floor, Room 11-506 Los Angeles, CA 90012 All responses for the 2010 - 2011 CGJ Report’s Recommendations must be submitted to the above address on or before the end of business September 30, 2011. Responses are required from: Recommendation Number(s) Responding Agency 1 City of Los Angeles (Department of Water and Power Board of Commissioners) 2 City of Los Angeles (Department of Water and Power Board of Commissioners) City of Los Angeles (City Council) City of Los Angeles (LACERS Board of Administrators) 3 City of Los Angeles (Department of Water and Power Board of Commissioners) City of Los Angeles (City Council) City of Los Angeles (LACERS Board of Administrators) 4 City of Los Angeles (Department of Water and Power Board of Commissioners) City of Los Angeles (City Council) City of Los Angeles (LACERS Board of Administrators) 42 Reference California Penal Code Sections §933(c) and §933.05 at the beginning of this 2010-2011 Civil Grand Jury Report 2010 – 2011
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Findings & Recommendations
20 findings
F1:
The e-Subpoena system provides prosecutorial and defense agencies with an automated means to serve law enforcement officers. Currently, the following agencies use the system: a. District Attorney’s Office b. Alternate Public Defender (APD)1 The Los Angeles Public Defender is developing this capability.
F2:
The Los Angeles City Attorney and Long Beach City Prosecutor also electronically subpoena officers, but their requests are sent internally with their respective cities’ systems. To the CGJ’s knowledge, most other City Attorneys/City Prosecutors are using paper based subpoenas.
F3:
E-Subpoena is a means of delivering subpoenas to law enforcement personnel throughout the County electronically and receiving “proof of service” automatically. Prior to development of e-Subpoena, subpoenas were either mailed, hand carried or sent to the Justice Data Interface Controller (JDIC) printer at the law enforcement agency. This method was slow and did not provide the DA with proof that the officer/deputy was served.
F4:
The e-Subpoena process begins when a Deputy DA or APD inputs in their respective Case Management System (CMS) when an officer is needed in court on a specific date and time. CMS generates an electronic message to the officer. Although more complicated, this is essentially an e-mail. The message is sent to PIX, which then routes the message to the law enforcement agency. Depending upon the technology used by the law enforcement agency when delivering the message to the officer, a “proof of service” is returned via PIX to the originator when: a. The officer opens their e-mail b. The officer positively responds that they received it PIX provides the secure system for sending and receiving messages among agencies. The system is also used to notify an officer when they are no longer needed to appear and/or for rescheduling. JDIC-received and paper subpoenas are manually logged and tracked by the law enforcement agency, and no automated “proof of service” is returned to the originator. An overview provided by the DA describes the system benefits: a. More reliable than paper and regular e-mail b. Complete logging of delivery and receipt 1 The Alternate Public Defender is Court-appointed counsel for indigent defendants who cannot be represented by the Public Defender because of a conflict of interest. c. Improved control using case management systems versus ad hoc e-mail d. PIX ensures reliable delivery/return receipt and a standard interface to different law enforcement agency systems All DA, Public Defender, APD, and City Attorneys/City Prosecutors in the future can use the same message formats and delivery mechanisms.
F5:
E-Subpoena was started approximately five (5) years ago with LAPD.
F6:
Electronic notice of delivery and receipt occurs between PIX and the following agencies: a. LASD b. LAPD c. Long Beach Police Department d. Inglewood Police Department e. Culver City Police Department f. Montebello Police Department The last three (3) agencies on the preceding list use a third-party vendor that supply and maintain the technology for LEA delivery and receipt. At least one LEA reported that the implementation took one (1) month followed by a two (2) month period of running the systems in parallel. The biggest implementation problem encountered was officer resistance to change.
F7:
Additional benefits are: a. Electronic service reduces officer overtime from having to subpoena more officers than actually needed (blanket subpoenas) since the DA can now verify which officer(s) were served. b. With planned court closures, travel time as well as court overtime are reduced. c. Because the officer is positively served and will appear, the DA, Public Defender, and APD reduce their case continuance costs. d. Accuracy is improved through officer validation; the sender ensures that the correct officer is served. e. The law enforcement agency’s subpoena control personnel can review and manage multiple requests more efficiently. f. Risk of loss of JDIC-printed or paper subpoenas is reduced. g. Follow-up phone calls are minimized. h. Formal audit trail of service is provided. 24 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY i. Management follow-up and auditing statistics are available.
F8:
E-Subpoena results in fewer continuances/dismissals, swifter justice for crime victims, decreased criminal case backlog, and potentially reduces incarceration time and costs.
F9:
Different internet standards are used by various agencies and a third-party vendor. For example, messaging protocol and identification standards exist but are not used consistently by all departments. Currently, PIX must convert e-subpoenas into at least four (4) different technologies in order to send them to different law enforcement agencies.
F10:
Although the CGJ could not locate the source of the information, it noted from public statements that e-Subpoena resulted in significant savings to LAPD in court overtime. LAPD representatives explained that due to the different components of court overtime (number of cases filed, number of officers subpoenaed, etc.), these savings could not be calculated precisely.
F11:
Several departments reported that court affairs/subpoena control personnel time spent performing subpoena control was reduced by 50%, freeing personnel to work on other critical department functions. In addition, the volume of paper and postage was reduced 50-65%.
F12:
Less manpower is needed to generate mail and manually track each subpoena. In larger departments, less time is spent locating officers who have been transferred.
F13:
Less time is spent attempting to determine if an officer was served.
F14:
In this time of municipal budget constraints, whatever can be done to streamline the process and reduce court overtime is desirable.
F15:
Ten (10) cities within the County use the City Attorney/City Prosecutor to prosecute misdemeanors2. In cities where e-Subpoena is installed, some City Attorneys/City Prosecutors are still issuing paper subpoenas.
F16:
Several departments that have implemented e-Subpoena encourage their officers to check e-mail on their days off, although requiring that may violate Fair Labor Standards Act de minimus rules.
F17:
One LEA that has not implemented e-Subpoena was concerned about the actual direct and indirect costs of the system.
F18:
A concern raised was the situation where an officer is subpoenaed at the last minute. In these cases, the subpoena control officer would be required to contact the subpoena recipient regardless of whether the department was using paper copies or e-Subpoena.
F19:
At least one LEA was concerned that their city was behind the technology curve and may not have the infrastructure to handle e-Subpoena. The District Attorney prosecutes misdemeanors, as well as felonies, for the remaining 78 cities as well as the unincorporated areas of the County.
F20:
The following is a Table of law enforcement agencies receiving at least one hundred fifty (150) subpoenas from the DA during the period October through December 2010 and their e-Subpoena implementation status: LOS ANGELES DISTRICT ATTORNEY-ISSUED LAW ENFORCEMENT SUBPOENAS AGENCIES RECEIVING AT LEAST 150 SUBPOENAS FOR THE PERIOD OCTOBER THRU DECEMBER, 2010 No. e-Subpoena Agency Issued Status CALIFORNIA HIGHWAY PATROL 2,128 Interested PASADENA POLICE DEPARTMENT 988 GLENDALE POLICE DEPARTMENT 903 HUNTINGTON PARK POLICE DEPARTMENT 685 BURBANK POLICE DEPARTMENT 612 HAWTHORNE POLICE DEPARTMENT 604 Interested WHITTIER POLICE DEPARTMENT 593 SANTA MONICA POLICE DEPARTMENT 537 In process LASD - VARIOUS 515 Implemented GARDENA POLICE DEPARTMENT 501 DOWNEY POLICE DEPARTMENT 490 Interested EL MONTE POLICE DEPARTMENT 474 Interested POMONA POLICE DEPARTMENT 456 Interested ALHAMBRA POLICE DEPARTMENT 433 L. A. CITY FIRE DEPARTMENT 422 SOUTH GATE POLICE DEPARTMENT 421 Interested TORRANCE POLICE DEPARTMENT 403 MONTEREY PARK POLICE DEPARTMENT 366 WEST COVINA POLICE DEPARTMENT 364 L. A. UNIFIED SCHOOL DISTRICT PD 318 L. A. COUNTY CORONER 300 Interested EL SEGUNDO POLICE DEPARTMENT 274 Interested MONTEBELLO POLICE DEPARTMENT 271 In process L. A. COUNTY PROBATION 255 Interested SAN FERNANDO POLICE DEPARTMENT 216 MANHATTAN BEACH POLICE DEPARTMENT 189 BEVERLY HILLS POLICE DEPARTMENT 182 COVINA POLICE DEPARTMENT 176 MONROVIA POLICE DEPARTMENT 168 GLENDORA POLICE DEPARTMENT 163 SAN GABRIEL POLICE DEPARTMENT 163 BELL GARDENS POLICE DEPARTMENT 159 REDONDO BEACH POLICE DEPARTMENT 159 BELL POLICE DEPARTMENT 157 LAPD – VARIOUS 155 Implemented SOUTH PASADENA POLICE DEPARTMENT 154 26 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY
Additional Recommendations
5
Not linked to specific findings.
R1:
Implement e-Subpoena as a cost saving and operational efficiency measure for local law enforcement agencies receiving at least one hundred fifty (150) DA subpoenas quarterly.
R2:
Encourage the City Attorney/City Prosecutor to use the system in cities where the Police Department is using e-Subpoena.
R3:
LASD and LAPD evaluate electronically transmitting other documents such as police reports and probable cause determinations3 among law enforcement agencies, prosecutors and the Court.
R4:
LASD to expand implementation of filing Pitchess motions electronically. A Pitchess motion defines those portions of a deputy’s personnel file which may be made available to defense counsel.
R5:
The DA staff is encouraged to conduct an e-Subpoena training class for court liaison/subpoena control officers and encourage departments still receiving paper subpoenas to implement e-Subpoena. REQUEST FOR RESPONSE California Penal Code Sections4 §933(c) and §933.05 requires a written response to all Recommendations contained in this Report which shall be made no later than ninety (90) days after the Civil Grand Jury publishes its Report (filed with the Clerk of the Court). Respond to: Presiding Judge Los Angeles County Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street, Eleventh Floor, Room 11-506 Los Angeles, CA 90012 All responses for the 2010 - 2011 CGJ Report’s Recommendations must be submitted to the above address on or before the end of business September 30, 2011. Responses are required from: Recommendation Number(s) Responding Agency 1 City of Alhambra (Police Department) City of Bell (Police Department) City of Bell Gardens (Police Department) City of Beverly Hills (Police Department) City of Burbank (Police Department) 3 Probable Cause determination is a LEA prepared, Court approved document which permits an agency to detain a suspect. Reference California Penal Code Sections §933(c) and §933.05 at the beginning of this 2010-2011 Civil Grand Jury Report City of Covina (Police Department) City of Gardena (Police Department) City of Glendale (Police Department) City of Glendora (Police Department) City of Huntington Park (Police Department) City of Los Angeles Fire Department City of Los Angeles Unified School District (School Police) City of Manhattan Beach (Police Department) City of Monrovia (Police Department) City of Monterey Park (Police Department) City of Pasadena (Police Department) City of Redondo Beach (Police Department) City of San Fernando (Police Department) City of San Gabriel (Police Department) City of South Pasadena (Police Department) City of Torrance (Police Department) City of West Covina (Police Department) City of Whittier (Police Department) 2 City of Inglewood (City Attorney) 3 City of Los Angeles (Police Department) County of Los Angeles (Sheriffs Department) 4 County of Los Angeles (Sheriffs Department) 5 County of Los Angeles (District Attorney) 28 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY Acronyms APD Alternate Public Defender CGJ Los Angeles County Civil Grand Jury CMS Case Management System DA Los Angeles District Attorney’s Office ISAB Los Angeles County Information Systems Advisory Board JDIC Justice Data Interface Controller LAPD Los Angeles Police Department LASD Los Angeles Sheriffs Department LEA Law enforcement Agency PIX Proactive Information Exchange THIS PAGE INTENTIONALLY LEFT BLANK 30 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY HIGH TECH FORENSICS AND CYBER SECURITY CRIME FIGHTING IN THE DIGITAL AGE “We have to do better at what we do. Our public deserves it.” Committee Members Chairperson - Meg George Grace Hernandez Beverly T. Kishimoto Max E. Van Doren HIGH TECH FORENSICS AND CYBER SECURITY CRIME FIGHTING IN THE DIGITAL AGE “We have to do better at what we do. Our public deserves it.”1 SUMMARY The use of digital evidence to successfully prosecute crimes is becoming critically important. In part, this is due to the proliferation in the use of digital devices. Specific training in the collection and processing of digital evidence is needed, as is the acquisition of the hardware and software required to analyze the evidence. Computers, cell phones and other digital devices are increasingly intertwined with the commission of crimes, raising the importance of the resources and priority that must be given to cyber security, cyber investigations and high tech forensic2 examinations to provide public safety. These cyber and forensic services are provided within Los Angeles County (LAC) and its cities by regional high tech crimes task forces (RTFs) (RTFs cover more than one county.), local high tech crimes task forces, police department high tech forensic labs or through private companies. In addition seventeen (17) municipal police agencies have some in-house high tech forensic crime capability. LAC is home to critical infrastructure, businesses and industries that are vulnerable to cyber attack. It must be in a position to provide response support to such attacks, so that such business and industry will identify Los Angeles as a safe and welcoming place to locate. Those who harm us (be it crooks, cyber terrorists, or nation-states) are highly motivated and continuously improving. To counter this assault effectively we must be highly motivated and continuously improving to be effective in the efforts to: provide public safety, catch the perpetrators and successfully prosecute them. This requires vision, commitment, equipment, training and resources. Technology is evolving at a rapid pace requiring frequent upgrades to equipment, software and training. Funding of high tech forensics, cyber investigation and cyber security in LAC has largely been through government transfers (grants from State and Federal programs). This source of funding has been decreasing and continues to be under pressure due to continuing cuts and constraints. Borrowing the endowment concept from the University system, a possible new source of funding might be the establishment within law enforcement of a High Tech Forensics Examination – Cyber Investigations – Cyber Badge Endowment Program (Endowed Badge). The Endowed Badge (EB) would be awarded on a rotating basis. Funding of each EB would be through a public private partnership, and the EB could be named by the benefactor; e.g., Port of Los Angeles EB, Apple EB, Harry Potter EB, Warner Brothers EB, Wells Fargo EB, Exxon EB, DWP EB, etc. Business and industry has a vested interest in a safe City/County in which to do business; hence, there may be interest from many sectors to participate in funding an EB and 1 Graham, Gordon “Affairs in Government 2010. Some Thoughts on Risk Management,” December 3, 2010 2 In the Report, High Tech Forensics concerns digital information; it does not include DNA or fingerprint analysis naming one of the EBs. Eight (8) initial Endowed Badges are visualized. The eight (8) are comprised of five (5) EBs where each LAC Board of Supervisors District sets up and oversees the public-private partnership funding; plus three (3) EBs, where each of the City of Los Angeles Proprietary Departments ( Department Of Water and Power, Port of Los Angeles, Los Angeles International Airport (LAWA)) sets up and oversees the public-private partnership funding for a total of eight (8) EBs. The EB concept is to use a combination of government and private funds to pay for training of sworn officers in the arena of high tech forensics-cyber investigations and cyber security. There are legal issues to explore and logistical issues to analyze. The example of the partnership between Los Angeles and Microsoft in the area of fighting piracy may provide insight of a process to be followed. PURPOSE The Civil Grand Jury (CGJ) investigated the level of engagement and commitment of government entities within LAC in the prevention and prosecution of high tech crimes, as well as in the use of digital evidence in crime fighting efforts. Computers, cell phones and other digital devices are increasingly intertwined with the commission of crimes, raising the importance of resources and priority that must be given to cyber security, cyber investigations and high tech forensic examinations to provide public safety. In view of the shrinking budgets at all government levels, this Report recommends how to sustain the current level of cyber security, cyber investigations and high tech forensic examinations in the County and cities, while further developing the capability and staying ahead of the curve.
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Findings & Recommendations
9 findings
F1:
Regional Joint Task Force Model: a. RCFL, ECTF, SCHTTP and ICAC are each excellent examples. b. Provide for easy collaboration, flexibility of staff allocation, leveraging of multi- agency funding and resources and mentoring c. Membership may be formalized through a Memorandum of Understanding (MOU) or an informal agreement. d. Improved service on a regional scale e. Maximize Federal, State and County resources
F2:
Localized Joint Task Force Model: a. A well structured example of this model included: i. Three (3) neighboring cities with the FL located in the Police Department of one (1) of the cities ii. Four (4) sworn officers from the three (3) cities iii. Two (2) sworn officers from two (2) RTFs b. Membership may be formalized through an MOU or may be informal. c. Supported by the citing city’s Information Technology (IT) Department d. This FL is a member of SCHTTF and TF e. Provides for easy collaboration, flexibility of staff allocation, leveraging of multi agency funding and resources and mentoring f. Improved service to participating cities constituents
F3:
Loosely aligned group of single jurisdiction FL: a. The FLs are located in the Police Department of each of the cities. b. The FL is a one-officer or one- tech shop. c. Association is loosely structured and based on a mutual aid model.
F4:
Single jurisdiction FL with membership in Regional Joint Task Force(s). a. The FL is located in the Police Department of that city. b. The FL has one (1) to five (5) trained staff, generally a combination of sworn and tech. c. Is available to other law enforcement agencies on a mutual aid model FL Skills and Equipment Considerations
F5:
Highly motivated staff
F6:
Highly qualified staff
F7:
Improved service to constituents as a goal 12 Graham, ibid. 40 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY
F8:
Procurement guidelines that recognize and take into account the rapidity with which technology is changing
F9:
Systems to monitor best practices, compliance and changing technology and to reward performance Training In employing the RPM approach in any field, including high tech forensics, training is a core ingredient. The purpose of training must be to create officers who are prepared, equipped, and ready to perform and respond to any situation that presents itself. Anyone can train personnel after something goes bad13. The real challenge is delivering training proactively to prevent problems prior to occurrence. If trained personnel are not available to utilize a FL, then it is largely an expensive box with equipment and software that is lying fallow and becoming obsolete. Whether it is a State of the art new regional FL or a small FL in a converted area of an existing facility, it requires well qualified and well trained personnel. High tech is a fast evolving field; continuous improvement is the name of the game. Today’s new “thing” may be out of date tomorrow. Today, most hard drives are magnetic, but the trend is towards switching ceramic hard drives. Storage is moving to the “cloud.” And so on. The cyber intruders, terrorists and crooks are continuously improving their mode of attack, trying and developing new tactics, software and hardware. Our forensic examiners and cyber investigators have to be continuously improving as well. Training is critical and MUST be ongoing as the technology is always evolving.
Additional Recommendations
5
Not linked to specific findings.
R1:
The District Attorney, being the nexus of all law enforcement in the County as prosecutor of felonies, should take the lead role and become the central repository for coordination of high tech information by doing the following: a. Establish and keep up to date a list of all training available for high tech forensics examination, cyber investigation and cyber security, including local, State and Federally sponsored training, as well as private training opportunities. It is likely the DA’s high tech Forensic Division is already doing this internally and could, with little effort and cost, make this information available to the Task Forces, the LAC Sheriff and the municipal police departments. b. Provide outreach to all police departments and the sheriff on a regular basis regarding the value of and training in high tech forensics in crime fighting in Los Angeles County. i. This could be done through seminars for groups of law enforcement officers organized geographically by Supervisorial District or area; e.g., South Bay, San Gabriel Valley, West LA, San Fernando Valley, etc. ii. Individual department “roll-call” training should also be part of this program. c. Keep a log of the use of digital evidence in the prosecution of cases, both high tech crimes and “old school” crimes. The log should indicate the nature of the digital evidence (cell phone photo, location info, contact info, computer file, GPS, etc.); its importance to the case (useful, important, critical); and the role it played (allowed case to settle, critical to achieving a guilty verdict, sentence enhancements, freed an innocent person, enabled the return of stolen property to rightful owner, etc.). The DA should encourage municipal departments to do this for misdemeanors as well. This will build a body of evidence to help inform decision makers in the budgeting process and persuade law enforcement agencies with no in-house capability to see a need. d. Establish a program for all deputy DAs to acquire the basic knowledge and skills necessary to develop their cases using digital evidence in a manner a judge and jury can understand e. Develop and conduct seminars to educate the judges in digital evidence use in the criminal justice process
R2:
Arcadia PD, Beverly Hills PD, City of Los Angeles PD, Culver City PD, Downey PD, Glendale PD, LAC District Attorney, LAC Sheriff, Santa Monica PD, Monrovia PD, Redondo Beach PD, Torrance PD, Whittier PD. a. Establish a “High Tech Forensics Bureau.” This will facilitate: i. Promotions and career opportunities for those who are trained and skilled in this area without having to leave the discipline ii. Succession planning and transfer of high tech expertise, preserving the investment made in creating the expertise. b. Update regular law enforcement recruit and detective training to include orientation, procedures, protocols and other training with respect to digital evidence c. Include training in digital evidence collection, analysis and use in “roll call” training. d. Take steps to acquire the POST certification for High Tech training courses for forensic examiners and cyber investigators to allow for reimbursement of the costs.
R3:
LAC Chief Information Office and Internal Services Department should conduct internal reviews concerning cyber security and infrastructure protection from Cyber attacks and terrorism: a. LAC must have protocols, policies and procedures facilitating timely, efficient rapid response by the most able cyber security resources available and ancillary emergency response by other agencies, if warranted, in the event of a cyber intrusion, fire wall breach or other cyber attack. b. These should include coordination with key third party vendors. Many basic services within the LAC are provided by third party vendors. The Metropolitan Water District and California Edison are two (2) examples.
R4:
The LAC Board of Supervisors should task their lobbyist in Sacramento and Washington with looking at opportunities to redirect fees and taxes on land line phones, cell phones or internet access services to provide funding allocated to the support high tech forensics, cyber security and forensic examination programs
R5:
LAC and the City of Los Angeles establish a "High Tech Endowed Badge Program” to support the training and equipping of FE and CI throughout local law enforcement. Initially, establishment of eight (8) EBs could be evaluated. Setting up five (5) EBs by the LAC Board of Supervisors District one for each Supervisorial District; and setting up three (3) EBs by the City of Los Angeles one for each of the Proprietary Departments (Department Of Water and Power, the Port of Los Angeles, Los Angeles International Airport (LAWA)) for a total of eight (8) EBs. Funding Training through an Endowed Badge – A Concept Borrowing a concept from the University system, the CGJ believes there is a future in establishing, within law enforcement, a High Tech Forensics Examination – Cyber Investigations – Cyber Security Endowed Badges Program. If possible, these could be “named” endowed badges (EB). It is in the interest of business to have a safe City/County in which to do business. There may be interest from many sectors to participate in this EB public private partnership. 44 2010-2011 LOS ANGELES COUNTY CIVIL GRAND JURY
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Findings & Recommendations
17 findings
F1:
According to the LASD, inmates released from jail are rearrested at a rate of 42.2% within the first six (6) months. After six (6) months of release, the recidivism rate for rearrest increases to 57.4%. Two (2) of the strongest, most consistent predictors contributing to recidivism among County jail inmates are lack of employment and substance abuse. Data indicates there is a high likelihood inmates will return to jail if not provided with guidance and direction within eight (8) hours of release.
F2:
At Pitchess, the CGJ observed a marked difference in the environment, interactions and activities in housing units where classes were and were not being held. Inmates not involved in classes were in crowded dormitory facilities, playing cards, watching TV, pacing or engaged in minimal constructive activities. In contrast, inmates enrolled in the MERIT program who are housed separately were in classrooms filled to capacity or engaged in listening to dynamic motivational speakers’ presentations. Several CGJ observers were moved to tears by the sincerity and focus demonstrated by these inmates.
F3:
According to the Los Angeles District Attorney’s website, the County of Los Angeles has approximately fourteen hundred (1,400) known street gangs. External community support organizations note that gang leaders are recruiting new members at a younger age with some new members being fourth generation gang members. It is estimated that of the 85,000 gang members in Los Angeles County, approximately: 4. 90% will be arrested by the age of 18 5. 75% will be arrested twice by the age of 18 6. 95% will not finish high school 7. 60% will be in prison or dead by the age of 20
F4:
Lack of a uniform pre-payment billing process throughout the facilities adversely affects the level of ORSA enrollment. ORSA is preferable because reimbursements are higher for the uninsured ORSA population from the State and Federal cost reimbursement pools. The Registration PRW provides patients with information regarding available low- cost/no-cost programs during the patients’ financial screening. While the process from preliminary medical evaluation up to the PRW registration is generally consistent across the facilities, each hospital’s practices differ after the PRW registration. At LAC+USC Pre-Payment billing envelopes are distributed only if the patient returns after they are seen by the doctor and requests this information from the Registration PRW. At Olive View, Pre-Payment envelopes are not provided at any time. If patients would like to use this form of payment, they must visit the cashier and request this information. For these two facilities, patients who specifically request the Pre-Payment plan typically are aware of the program before their hospital visit as noted by facility staff. Since the Registration PRW does not provide the envelopes unless requested, this indirectly encourages a greater number of patients to apply to ORSA. From a program reimbursement perspective, Table 5 shows LAC+USC and Harbor-UCLA Pre-Payment population as compared to the ORSA population in Fiscal Years 2007- 2010. Alternatively, Harbor-UCLA automatically issues Pre-Payment billing envelopes with discharge materials to each patient with a LAC address. In this facility, patients decide between immediate remuneration or returning to the financial office and applying for ORSA, Medi-Cal, or other low income insurance programs. This method of distribution indirectly encourages more Pre-Payment applications. From an in-house billing and collection perspective, Pre-Payment is preferable, as the facility initially collects more than ORSA (until DHS seeks reimbursement funds). However, these methods influence patients with adequate financial means to apply for the Pre-Payment plan as income verification is not required. Table 5 shows that the number of patients at Harbor-UCLA claim Pre-Payment is significantly higher, despite a considerably larger LAC+USC patient volume: Table 5. Pre-Payment Plan and ORSA Visits, LAC-USC and Harbor-UCLA UCLA, FY 2007-2010 Prepayment -Number ORSA - Number of visits Total Year Facility of visits and percentage and percentage of total Visits of total visits visits LAC-USC 691,046 16,271 2.35% 311,702 45.11% FY 2009-10 Harbor-UCLA 344,401 27,239 7.91% 94,664 27.49% FY 2008- LAC-USC 521, 960 19,124 3.66% 190,636 36.52% 09 Harbor-UCLA 337,992 31,907 9.44% 94,508 27.96% LAC-USC 505,881 25,380 5.02% 207,105 40.94% FY 2007-08 Harbor-UCLA 317,708 43,138 13.58% 99,571 31.34%
F5:
Facilities have different practices and procedures regarding the Extended Payment Plan Policy causing difficulties in collections. Establishing more EPP usage can potentially improve overall collection rates. Patients would rather pay off their debt incrementally than have their accounts transferred to debt collectors. 66 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY Increasing the use of EPP appears also to be an incentive for hospitals. Hospital staff noted that EPP allows the hospital to recoup some of the cost of service (an estimated average of $0.60 for every dollar of cost according to staff). Furthermore, it is important that patients are aware of all payment and coverage options, particularly ones that encourage patient responsibility for service payment. The hospitals’ practice of the EPP varies.4 LAC+USC reviews contracts and monthly minimums with the patient but then transfers the account to outside collection agencies. These outside vendors will communicate with the patients to receive their monthly payments and levy a service surcharge of 15-20% of the funds collected. Alternatively, Olive View manages and collects these EPP payments in-house and limits their use of outside collection agencies. Harbor-UCLA follows a similar method and sends the EPP accounts to collections only if the account becomes delinquent. Currently, County hospitals limit their efforts to educate patients regarding the EPP option. The CGJ’s interviews revealed that the collection levels for EPP accounts appear to be relatively higher than other types of accounts. (For example, Olive View staff indicated that over 80% of EPP accounts are successfully collected.)5
F6:
Patient accounts classified as “Self-Pay” may be a misnomer; they may never pay. At the initial financial screening, the Registration PRW first categorizes patients as Medi- Cal or Self-Pay. If the patient is approved for a low-cost/no-cost program, the categorization changes according to the accepted programs.6 However, if the patient does not pay their share of cost, their account becomes delinquent and is transferred to collection. The categorization then shifts to Self-Pay. Although current write-offs include the Self-Pay population, there are a variety of residual account types that fail to be collected in-house. Table 6 outlines the types of patients who are initially classified as Self-Pay patients, and the accounts that are referred to the Self-Pay population. Table 6. Self Pay Patient Characteristics Homeless Ineligible for programs Out of county residents Classified Self-Pay Insurance co-pay Patients Patients who have not received financial screening Non-compliant (undocumented immigrants, patients reluctant to provide insurance information to avoid deductable, and patients disinclined to provide information that disqualifies them for low-cost/no cost programs.) Pending and denied Medi-Cal applications Residual Accounts that Residual costs from patient responsibility or share of cost (Medi-Cal, Pre- Shift to Self-Pay payment, ORSA, ATP) While the hospital system, molded by policy and regulation, is designed to provide low income populations with more access to medical care and to prevent hospital facilities from making medical decisions based on economic reasons alone, it is vulnerable to public misuse. There are numerous anecdotal references about patients who have the 4 See Extended Payment Plan 5 Note that the hospitals’ staffs were not able to provide detailed data on the volume and charge totals of the EPP accounts 6 ATP, ORSA, Medi-Cal, Medi-Care, Self-Pay 2010 – 2011 financial means to pay for their own medical care. However, they opt to withhold critical information and, at times, even provide false information to avoid paying their medical bills. Quantifying the level of fraud or public abuse of the medical system is difficult and beyond the scope of our investigation. But in the CGJ’s analysis, it appears there are areas within the public hospital medical care system that are vulnerable to public abuse.
F7:
Although there has been confusion as to the difference between the total service charge and actual cost of service, the bottom line is: a significant loss to the County. There is a difference between the actual cost and the charged amount for rendered services. The actual cost represents the direct cost to the hospital providing treatment. The charged amount represents the service cost plus overhead. During patient billing and collection, the facilities and collection agencies seek payment for the service charge. If the account becomes delinquent and ultimately declared by the County Treasurer and Tax Collector (TTC) to be uncollectible, the service charge is written off. The total service charge written off is the amount reported and released publicly. However, the actual service cost is lower, estimated by management to be approximately 53% of the service charge. Table 7 lists the total service charges for the three (3) hospitals, as well as the estimated actual costs for service based on this reported cost-to-charge ratio: Table 7. Estimated Total DHS Medical Care Service Charges and Costs Estimated Actual Cost of Service Total Charges for (Approx. 53% of Year Service Total Charge) FY 09-10 $733,685,430 $395,676,552 Note: These costs include the ORSA, ATP, Medi-Cal and Self-Pay accounts. DHS then uses Federal and State funds to reimburse the hospital facilities for their actual costs.
F8:
Research shows that before you can prepare parolees for a job by teaching job skills, it is imperative that you prepare their minds for a new and different way of thinking when they reenter society upon release. According to a 2010 publication by the LASD on EBI, the LASD recognizes that inmates who are better prepared mentally, psychologically and educationally for transition and reentry into the community have a much higher success rate. The principles of EBI are designed specifically to assist inmates in their transition from custody to civilian life.
F9:
LASD previously had a long-term contract with a school district for instructors to provide EBI training to inmates. Negotiations are underway for a new contract that is expected to be finalized by mid-2011. At that time, instructors will teach EBI courses through the contracted organization. Ultimately, the goal over the next two (2) years is to develop an educational program to administer EBI course work to inmates in conjunction with a Federal workforce investment program. 54 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY
F10:
Custody Assistants (CAs) are LASD employees working in the jail system to manage inmates. Some CAs have been provided limited training to instruct inmates in various programs such as parenting and anger management. The amount of time spent in training varies from ten (10) hours to thirty-two (32) hours with additional workbook and video instruction. This limited training appears to be inadequate in contrast to four (4) year bachelor degrees and teaching credentials required by school district teachers. The effectiveness of the CA instructors is measured and may need to be assessed for effectiveness. This issue did not appear to be a concern with females at CRDF as much as the male population at other jails.
F11:
Concerns were expressed during this investigation from various organizations about limited access of inmates to civilian, non-sworn personnel if CAs are being charged with teaching and acting as case managers. As case managers, they seek to ensure participants have tools needed to reintegrate into the community. The concern was whether inmates will relate to and confide in LASD employee instructors with the same level of trust as they would to a civilian teacher. While the CGJ understands the security and safety issues related to uncontrolled access of inmates to civilians, questions were raised about the LASD attempting to limit external involvement with inmates. Of particular concern was whether an inmate’s needs to connect with family, make contact with their attorneys and receive meaningful assistance was adequately met.
F12:
The Inmate Welfare Fund (IWF) is a fund derived from revenue sharing contracts such as inmate phone calls, vending machines and commissaries where inmates can purchase food and personal items with money put into an account by their families. The fund generates approximately $47 million a year and is “to be expended for the benefit, education and welfare of inmates.” The IWF allocates 51% for inmate programming and services (which includes EBI courses) and 49% for jail maintenance. The Inmate Welfare Commission is an advisory body which makes
F13:
In addition, the CGJ found that the EBI program faces four (4) major obstacles:
F14:
Inability to effectively translate course material for the Spanish speaking population
F15:
Lack of adequate exposure to program benefits by the Board of Supervisors and other influential sectors of County government
F16:
Effectively marketing the program internally to local government leaders and externally to potential corporate partners
F17:
Apprehension of participation by male inmates due to internal jail house politics and gang peer pressure
Additional Recommendations
10
Not linked to specific findings.
R1:
The LADWP’s governance needs clarification and simplification. A stronger, independent Commission system may be warranted. Establishing a single governing board, with clear authority and considerable independence from day-to-day political influences, is an appropriate place to start. Strengthening the governance structure is essential to ensuring reliable electrical supplies, low rates, and adequate payments to the City, as well as to maintaining Los Angeles’ leadership among the nation’s municipal utilities. The LADWP should return to a commission system that restores integrity by balancing independence and accountability. A plan to decrease political involvement by the Mayor and Council would allow the LADWP to operate for the benefit of the ratepayers. Consider separating the policy making function of the Mayor and Council from the operational responsibilities of the Board and General Manager. The Council and Mayor could set policies and communicate them in writing to the Board which, in turn, would transmit them to the General Manager. It would require the Mayor or Council not give instructions to individuals who report directly to the Board or General Manager, directly or indirectly. Board policies should set out the utility’s purpose and ends to be achieved. They should also designate what actions of the General Manager are considered unacceptable to the Board, both general and in specific. The General Manager may then make all decisions and carry out any activities not expressly prohibited by the Board, without seeking further approval.
R2:
Establish guidelines for Commissioner appointments, and reduce the politics of appointment, real or perceived. Examples of guidelines to be written and agreed upon might be to appoint Commissions based on specific levels of expertise (financial, utility operations, corporate governance, education level, or geographic representation). Also ensure that the candidates have the time, inclination and ability to stay the entire five years. It is important that “politics” (or political contributions) be taken out of the choice for Commissioners. There are a variety of ways to deal with this issue. One is to have a Citizens Council choose the Commissioners or have Commissioners themselves choose a replacement for a member whose staggered term is up. Another example might be to have the Mayor choose two (2) members, the Council chooses two (2) members and the Neighborhood Councils choose one (1) member. Whatever the approach, the perception and the reality must be that money does not buy a Commission position. 92 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY
R3:
Expect LADWP Commissioners to serve full five-year terms. LADWP needs a historical and continuous level of knowledgeable and experienced Commissioners who can make decisions primarily based on their independent judgment. The Commission may remain responsible to the Mayor and Council, but it should be insulated from undue political influences on normal LADWP business matters. To maintain independence and continuity, LADWP Commissioners should be expected to serve out their terms unless there is cause for their removal. They should not resign when succeeding Mayors are elected. An amendment returning to the previous Charter language allowing for removal by the Mayor with Council approval or for cause by a two-thirds vote of the Council, may be warranted.
R4:
Reduce the bureaucratic impact to the Department due to Mayor or Council involvement. While citywide coordination of the Department is an important function of the Mayor’s office, the current wording of Executive Order 4 is all encompassing. Regular, informal consultation with the Mayor’s office rather than formal ED 4 submittals would potentially speed up and improve the decision making processes of the Commission. Likewise, the threat of Prop 245 fosters bureaucratic delay, takes up scarce management time, encourages more paperwork to justify decisions and adds uncertainty to normal business dealings. Pension Issue and Impact of Employee Transfers Finding and Recommendation 5. Although there was originally some concern that personnel were taking higher paying jobs at LADWP for only a short time (pension spiking) in order to increase lifetime pensions, such does not appear to be the case. However, the number of transfers from the City to the Department may have a negative impact on the pension funding for the Department. The City has taken advantage of the Department’s ability to accept additional personnel and provide pension coverage to them (eventually through increased rates) by transferring up to 1600 employees in the last five (5) years. Those transfers were part of a larger effort to keep City workers from losing their jobs in departments hit hard by the budget crisis. While it is a noble goal to protect employees from layoffs, it is unfair to place the financial burden (both salary and pension costs) on the backs of the LADWP ratepayer. The Segal Company performed an analysis of the Reciprocal Arrangement between the Water and Power Employee’s Retirement Plan (WPERP) and the Los Angeles City Employee’s Retirement System (LACERS) due to the financial impact the Reciprocity Program has had on the WPERP during the period from April 1, 2004 through March 31, 2010. Currently, when a former City employee transfers to the LADWP the WPERP recognizes prior service with LACERS, provided the member agrees to have their employee contributions transferred into WPERP. Under the Plan’s Reciprocity Program, when a member transfers, full credit for service is established in WPERP, but only their employee contributions are transferred from LACERS to WPERP; employer contributions made to LACERS associated with their service are not transferred to WPERP. Since only employee contributions are transferred, WPERP incurs an additional unfunded liability when an employee transfers to LADWP from the City. (The Department makes a 110% contribution into WPERP after the employee contributions have been transferred from LACERS. This has the effect of providing immediate employer funding for part of the actuarial loss caused by the transfer but that contribution may eventually impact rates.) The Segal Company found a large unfunded actuarial accrued liability (UAAL) as a result of these transfers. The total of the increases in UAAL, determined as of each valuation date due to the 1,331 members whose service and employee contributions has already been transferred to the WPERP as of March 31, 2010, is approximately $128.4 million. These amounts, accumulated with 8% interest to July 1, 2010, total $152.4 million. The average age for these members, years of service and average employee contributions transferred are 41.3, 6.9 years and $28,400 respectively. In addition, The Segal Company received partial information for 292 members that were identified by the Retirement Office as transfers but whose service and employee contributions were not yet transferred to WPERP as of the end of the observation period. The UAAL as of each valuation date due to these members is about $30.5 million. The average age for these members, estimated average amount of service and average employee contributions to be transferred are 40.7, 7.8 years and $37,900 respectively. The grand total of the increases in UAAL for LADWP accumulated to July 1, 2010, including both groups, is about $183.1 million. Worried about the cost of those transfers, LADWP officials moved to suspend full retirement benefits for any new worker who comes to the utility from another City agency. The City Council vetoed that measure.
R5:
The City and LADWP should come to an agreement to rescind the reciprocity agreement until such time as the number of employees transferred back and forth between the City and LADWP reaches equilibrium. Personnel should only be transferred as required by LADWP and then only with full financial contribution to the pension fund. 94 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY Succession Planning Finding and Recommendation 6. Succession planning does not take place within LADWP to any meaningful extent. Given the high turnover of senior management, it is essential that the next several layers of management have the necessary tools, including trained professionals as replacements, to accomplish their functions. Additionally, there are many positions that will be in need of replacement in the next several years; and succession planning will assist the Department in meeting those needs. This is a City-wide concern. The Los Angeles City Controller conducted a performance audit regarding the City of Los Angeles’ hiring practices and determined that “The City of Los Angeles does not strategically plan for its workforce needs.” In a department where so many people who serve the citizens of the City are eligible to retire in the next several years, this is also an intolerable situation for LADWP. It is difficult in a civil service environment to accomplish succession planning for specific positions. Because employee selection in the City of Los Angeles is based on a well established civil service system in place for well over 100 years, LADWP relies on the Civil Service Commission and the City Personnel Department to assist in meeting their hiring needs. Although filling entry-level positions is important, succession planning to fill supervisory and managerial positions is even more important and must be a priority for the Department. Once identified, a substantial amount of training and leadership development will be required. The key is the successful transfer of technical and operational knowledge to adapt to the current environment. According to the Department, as of January 1, 2010, approximately 40% of LADWP’s workforce was fifty (50) years of age or older. Within the next five (5) years, approximately 20% of the workforce will be eligible for retirement. LADWP must determine how to continue to deliver its services in the future with decreased staff due to upcoming retirements. To ensure that LADWP has the appropriate resources and positions needed to meet the business goals and objectives, there must be a sufficient number of candidates available to be considered for each job classification, especially those that are critical or have been difficult to fill. This issue alone will require collaborating internally as well as with the Personnel Department’s various divisions to consider ways to address this, such as allocating positions, consolidating job classifications, submitting examination requests and pursuing regular and executive recruitment activities. Additionally, a specific manager may not identify a replacement prior to departure. This does not provide an opportunity for training in the specifics of any job. Personnel are thrown into a job situation that may be new to them and, given all the other personnel scheduled to depart, the institutional knowledge necessary for effective performance may not be available. A change in the civil service rules may be necessary on at least a temporary basis to allow personnel to train their replacements. The Department has responded to some of these challenges by creating a Workforce Planning Group within the Human Resources Section of the LADWP. This is a good beginning to ensure that services continue to be provided to the citizens of Los Angeles. The Department’s Human Resources Manager appears to have a strong grasp of what is required to accomplish this goal and has developed a well thought out initial plan. But the process will need more resources than the current four (4) individuals assigned to assist him. Additionally, some changes in the current methods of hiring and promoting personnel may be required to ensure continuity of knowledge and ability.
R6:
Fully staff and fund the Workforce Planning Group to encourage a full review of options for future LADWP employment. Also work with City Personnel Department and the Civil Service Office to allow some changes in hiring and promotional practices for high level essential jobs. An example would be to allow a process whereby individuals could be chosen for certain jobs prior to the departure of a senior or highly essential position. Current methodology for position listing, testing and choice could be followed, but the timing of the replacement may differ. That way, the individual could have access to the current incumbent’s knowledge, techniques and contacts to ensure a seamless transition. It may also provide reduced costs since it would not be necessary to potentially hire the incumbent to return as a consultant to assist in the transition. It is clear, given the immediate nature of this issue, that “out of the box” thinking will be necessary within LADWP as well as support provided by City and civil service personnel. 96 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY II. IBEW POLITICAL INVOLVEMENT
R7:
Develop and implement a staff policy and procedure that ensures patient awareness of the availability of the Extended Payment Plan option
R8:
Establish a directive to expand the use of EPP by uninsured patients who have the means to pay for services
R9:
Design and implement a program to analyze and prosecute abuse of the LAC public hospital medical care system
R10:
Change the classification from Self-Pay to Financial Liability because currently it is not a self-pay system but a financial liability for the County 2010 – 2011 REQUEST FOR RESPONSE California Penal Code Sections7 §933(c) and §933.05 requires a written response to all Recommendations contained in this Report which shall be made no later than ninety (90) days after the Civil Grand Jury published its Report (filed with the Clerk of the Court). Respond to: Presiding Judge Los Angeles County Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street, Eleventh Floor, Room 11-506 Los Angeles, Ca 90012 All responses for the 2010-2011 CGJ Report’s Recommendations must be submitted to the above address on or before the end of business September 30, 2011. Responses are required from: Recommendation Number(s) Responding Agency 1 LAC DHS 2 LAC DHS 3 LAC DHS 4 LAC DHS 5 LAC DHS 6 LAC DHS 7 LAC DHS 8 LAC DHS 9 LAC DHS 10 LAC DHS 7 Reference California Penal Code Sections §933(c) and §933.05 at the beginning of this 2010-2011 Civil Grand Jury Report 70 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY ACRONYMS ATP Ability to Pay CGJ Civil Grand Jury CHC Comprehensive Health Center DHS Department of Health Services DSH Disproportionate Share Hospital EMTALA Emergency Medical Treatment and Active Labor Act EPP Extended Payment Plan ER Emergency Room FPL Federal Poverty Level FY Fiscal Year Harbor-UCLA Harbor-UCLA Medical Center ICN Initial Contact Nurse LAC+USC Los Angeles County Medical Center MLK Martin Luther King Jr. Multi-Service Ambulatory Care Center MRUN Medical Record Number Olive View Olive View Medical Center ORSA Outpatient Reduced-Cost Simplified Application PPP Public-Private Partnership Program PRW Patient Resource Worker RLA Rancho Los Amigos National Rehabilitation Center SNCP Safety Net Care Pool TTC Los Angeles County Treasure and Tax Collector USCB United States Collection Bureau, Inc. 2010 – 2011 THIS PAGE INTENTIONALLY LEFT BLANK 72 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY CITY OF LOS ANGELES DEPARTMENT OF WATER AND POWER Who’s Really In The Dark? Committee Members Chairperson - Mitchell Group Grace Hernandez Kenneth A. Jones Linda Loding Judy Packer Virginia Smith-Rader LOS ANGELES DEPARTMENT OF WATER AND POWER WHO’S REALLY IN THE DARK?
Findings & Recommendations
3 findings
F1:
The City of Pasadena will be facing a significant financial challenge when it no longer receives funds from the Redevelopment Agency for the payment of Pension Obligation Bond debt presently used to finance the Fire and Police Retirement System. This funding source is due to end in 2014.
F2:
The City is actively considering solutions to the chronic underfunding of the FPRS which are reasonable and prudent.
F3:
The City’s unfunded retiree health liability of $30.8 million is a substantial obligation and is expected to grow with planned increases to the subsidy level for FPRS members and the rapidly rising costs of health care. The City has adopted a pay-as- you go policy, which is more costly in the long run because reserve balances are not available to generate investment income that discounts annual required contributions.
Additional Recommendations
3
Not linked to specific findings.
R1:
The City Council endorse the recommendations being made by management staff regarding actuarial assumptions, cost stabilization, administrative restructuring and funding for the FPRS
R2:
The City Council direct the City Manager to negotiate reductions in the amount of employee contribution picked up by the City for its CalPERS pension plans, up to the full amount of 8% for Miscellaneous and 9% for Safety employees
R3:
The City Council adopt a policy to fully fund the OPEB actuarially determined Annual Required Contribution each year, to build reserves toward future benefit obligations and earn investment income that can reduce the amount of the ARC in future years 2010 – 2011
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Findings & Recommendations
7 findings
F13:
The Department has provided substantial funds to the City of Los Angeles in the form of Power and Water transfers for many years. The Power system alone has provided over $2 billion to the City in the last twelve (12) years with another $204 million from the Water system (up to the time the transfer was stopped by the Courts). Exhibit 16. Summary of Power and Water Transfer Amounts shows the money received by the City of Los Angeles for the last twelve (12) years. Exhibit 16 Summary of Power and Water Transfer Amounts Year Power % of Water % of Transfer Operating Transfer Operating Revenues Revenues 1998-1999 $108,145,800 5 $16,252,500 5 1999-2000 $112,000,000 5 $22,200,000 5 2000-2001 $119,800,000 5 $25,500,000 5 2001-2002 $179,153,000 5 $27,247,000 5 2002-2003 $185,358,000 7 $27,523,000 5 2003-2004 $210,214,000 7 $27,649,000 5 2004-2005 $160,166,700 7 $29,815,100 5 2005-2006 $157,894,300 7 $27,914,300 5 2006-2007 $174,747,200 7 0 0 2007-2008 $182,003,900 7 0 0 2008-2009 $222,505,900 7 0 0 2009-2010 $220,475,000 8 0 0 TOTAL $2,032,463,800 $204,100,900 Source: LADWP Summary of City Transfer Declarations for Fiscal Years 1999-2010
F14:
Although the Department had numerous reasons for not wanting to make the transfer without a rate increase, the Department felt it deserved, holding the City “hostage” under these circumstances was inappropriate. The Department had the cash to make the transfer, stating they had it reserved for other uses. The Department said it could not afford the transfer. This caused a substantial argument from the Council on their need for the money and a public relations nightmare with the public, who was told that the Department was unreasonable by requiring a rate increase before making the transfer. In reality, the money had previously been budgeted for the transfer. But since the Department had doubled its unrestricted cash balance to $300 million, it felt that it could no longer afford to make the scheduled transfer to the City without rate relief. Saying they did not have the cash was inappropriate and set off a series of events and negative public and Council perceptions that will take many years to correct. What is uncertain is whether the doubling of the amount of cash (from $150 million to $300 million) was “overkill” and whether or not a smaller increase to $225 million, for example would have satisfied the bond agencies and still have money left for the almost $75 million transfer. What is known is that by refusing to make the transfer, the Department’s credibility and reputation as a good “citizen” was in jeopardy. The real question is whether a cash position of $225 million (which would have been the $300 million less the transfer) in addition to the $547 million would have sufficed for the rating agencies, since that would also have brought LADWP’s minimum targeted liquidity levels to over one hundred (100) days, also in line with comparable peers. That difference would potentially have allowed the transfer without the ensuing problems. That will never be known for sure. Newspaper articles were relentless on the “greed” of the LADWP management. In reality, the Department was only trying to protect themselves and the ratepayer; but they had a poor way of explaining that to the satisfaction of the public. What then transpired was a battle between the Mayor, the Council and the Controller (all publicly elected officials) on who would be the greater 110 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY friend of the public. The Department was caught in the middle of a situation that should never have gotten that far.
F15:
The ECAF as currently constituted at LADWP contains several elements that typically would not be found in a cost adjustment factor. The CCF report does an excellent job of discussing the ECAF at LADWP, as follows: The ECAF operates as a ‘pass-through’ of renewable energy costs, fuel/natural gas costs, purchased power costs and energy conservation costs as well as providing rate stabilization requirements. Fuel costs and purchased power costs represent the traditional Fuel Cost Adjustment (FCA). These costs are dependent on market prices. While a utility can follow best- practice procurement and hedging plans, it cannot completely control the market price of fuel and purchased power. Some renewable energy costs are also dependent on market prices (long-term renewable Power contracts whose prices are indexed to gas prices or power prices) but others, such as long term fixed-price Purchase Power Agreement costs, prepaid energy costs, transmission costs or the capital costs of LADWP-built renewable resources, are not dependent on market prices and, therefore, would not typically be part of an FCA. Energy conservation costs such as the costs of energy efficiency programs are also not part of the typical FCA. On the other hand, revenue losses due to Demand Side Management (DSM) are often considered unpredictable and out of the utility’s control. Therefore, in many cases, including that of the California IOUs, these losses are passed through by an adjustment mechanism (revenue decoupling) similar to an FCA. The ECAF also contains a separate element that accounts for the City Transfer payments that are made as a percentage of total revenues. This adds 8% to all other ECAF costs such that the Department is essentially kept whole on the 8% of ECAF revenues that are transferred to the City as ECAF costs rise and fall. While this makes sense given the way City Transfer payments are calculated today, the fact that City Transfer payments are tied to volatile ECAF revenues at all introduces additional volatility both to customers and to the City, as well as adding additional complexity to the ECAF balancing account. The ECAF is intended to limit the speed at which rates grow. Cost increases in excess of the cap are accumulated in the ECAF account and deferred until the quarterly cost increase would otherwise be less than the cap. While this provides a limited amount of rate stabilization, it is at cross purposes with the role of the ECAF in enabling a quick response to uncontrollable cost increases. During times when the cap prevents revenues from increasing as quickly as costs, an under collection of ECAF costs accumulates. This under collection must be financed by the Department, negatively impacting cash levels as well as debt- coverage ratios. A well designed rate stabilization plan usually includes a method to amortize under collections within a defined time horizon; the ECAF cap can prevent timely amortization. In addition to renewable energy costs, a decoupling mechanism for energy efficiency improvements was introduced that incorporated into ECAF a charge for revenues lost due to energy efficiency improvements. This allowed LADWP to maintain base revenue levels while reducing overall electricity demand. Additional language changes created a small rate stabilization fund, updated language to reflect a 7% City Transfer (now 8%), expanded decommissioning costs from nuclear facilities to all generation facilities, and specifically included emissions fees, interest expense above 4%, uncollectible bills, asset write-offs, and extraordinary expenses. 114 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY The ECAF rate is calculated on a quarterly basis by estimating the following twelve (12) months of costs, described above, adding any previous under or over collection of ECAF, and dividing by the estimated energy demand for the following twelve months. From this rate, an amount of 1.25 cents/kWh is subtracted to yield the ECAF rate to be charged to customers over the next quarter. This 1.25 cents is meant to reflect a portion of the ECAF charge that is included in base rates, implying that current base rates are higher than needed to cover base operations. In FY 2009, costs booked to the ECAF account totaled slightly over $1.3 billion. In summary, there are now six (6) distinct categories of expenses currently included in the ECAF rate: a. Fuel - Includes all costs associated with natural gas, coal, and nuclear fuel procurement, including emissions, greenhouse gas reduction and retirement costs b. Purchased Power - Includes all purchased power costs, including associated transmission, short-term energy market purchases as well as long-term purchased Power c. RPS costs - Includes all charges associated with renewable resource energy, capacity, RPS related prepayment expense, operations and maintenance, depreciation, and interest expenses for generation and transmission d. DSM expenses - Includes qualified DSM costs, defined as costs incurred for the acquisition and installation of devices and systems, including incentive payments, audit costs related to DSM, and administrative costs, which are part of those programs or projects designed to lower and control power system demand or consumption (limited to 10% of three (3) items above) e. DSM Revenue Loss Recovery - Includes lost revenue due to the implementation of DSM programs, helping to preserve LADWP’s rate base as demand is reduced through energy efficiency f. City Transfer - Includes a factor of 8% added to all ECAF expenses to cover the portion of the City Transfer associated with ECAF revenues. (This does not include the City Transfer component associated with base rate revenues, which is built into the existing base rate structure.) In effect, only a few of these costs are considered “uncontrollable” and, therefore, should be included in ECAF: fuel, some renewable costs tied to fuel and DSM revenue losses.
F16:
The current ECAF design does not provide for adequate oversight and transparency into long-term commitments made by the Department, particularly with respect to Renewable Portfolio Standard (RPS) and Demand Side Management (DSM). The presence of so many elements into a single cost adjustment factor reduces transparency into the cost drivers behind ECAF increases. Understanding the causes of ECAF increases today requires a detailed decomposition and analysis that is difficult for policy makers and customers to understand. The act of bundling market-driven elements with less volatile costs that lie within the Department’s control can limit overall transparency and potentially lead to a lack of accountability for those costs. Under the current system, ECAF increases are passed through to customers automatically without detailed rate review. Long-term commitments have predictable costs and, as such, they can be made with specific consideration for their impact on costs. Under the current structure, commitments that are both predictable and within the Department’s control can be passed through to ratepayers without review. This includes major capital project commitments that represent strategic (and therefore changeable and not operational) decisions. Finally, rate responses to volatile fuel and purchased power costs should not be constrained by the presence of a very tight cap on ECAF changes. Exposure to market prices should be passed through uncapped to the ratepayer to avoid the potential for financial distress. CCF concluded that the costs associated with ECAF are set to increase rapidly over the next two (2) years. Without a significant increase in the ECAF rates, this will put significant pressure on LADWP’s debt ratios, with the potential that ratios in 2011 will be well under target levels. At the same time, a cap on market-based drivers presents a significant risk to the Department in the event of a market price shock, providing support for the argument that the ECAF should be decomposed into separate elements with their own individual mechanisms for rate review. Any effort to reconstitute the ECAF won’t be simple. Any effort to promote transparency must not be at the expense of expediency, and care must be taken to prevent disproportionate impacts on individual classes of ratepayers.
F17:
The implementation of a Ratepayer Advocate at LADWP would be unusual in the municipal utility industry. While the majority of states have Ratepayer Advocate positions or groups, those organizations monitor rates imposed by IOUs, not for publicly owned utilities. The concept is that public utilities are owned by the people, and the people’s representatives (the elected City Council) would ensure that the people were protected and would do what the people want. However, in many locations including Los Angeles, Council members have complained that they could not get the information that they needed from the utility and that, at times, the information was not consistent, informative or transparent. There is also concern in many jurisdictions, including many in Los Angeles, that special interest groups, such as unions (who have substantial political power due to their monetary contributions) have greater input into the reviews and decisions of elected representatives than they have in the public at large. For example, it might be in the City’s best interest and the utility’s best interest to have an immediate focus on solar or wind power, but a Ratepayer Advocate could provide a transparency on the cost of such proposal and present alternatives in terms of focus or timing that might benefit the consumer. As shown in Exhibit 18. Ratepayer Advocate Organizations at Surveyed Municipal Utilities, there are very few “official” Ratepayer Advocate organizations in other municipal utilities that could found. 120 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY Exhibit 18 Ratepayer Advocate Organizations at Surveyed Municipal Utilities Utility Ratepayer Advocate Organizations LADWP Office of Public Accountability recently passed during the municipal Election CPS Energy No indication of Ratepayer Advocate. They have a newly formed Citizens Ratepayer coalition but it is not independent or government (it is non-profit). They ask for donations to help with legal costs on the website. SMUD No indication of Ratepayer Advocate function. MLGW No indication of Ratepayer Advocate function. JEA No indication of Ratepayer Advocate function. Austin Energy No indication of Ratepayer Advocate function. CSU No indication of Ratepayer Advocate function.
F18:
Some people believe that the impact of the Ratepayer Advocate ballot measure is minimized because other proposed Charter amendments were not approved for the same ballot. As the deadline for the March 8, 2011 ballot measure drew closer, there were competing proposals from public advocates and Council members. At one point, the Council voted for three (3) supposed LADWP reforms: a. Creating an Office of Public Accountability with a Ratepayer Advocate b. Requiring LADWP’s budget to be submitted earlier with a guarantee that “surplus” funds will come to the City of LA for General Fund uses c. Granting the City Council the authority to remove the LADWP’s General Manager or LADWP Commissioners with a two-thirds Council vote. The Council could also override the Mayor’s removal of the General Manager or Commissioners with a two-thirds vote. Only the first two (2) items were on the March 8, 2011 ballot (and both passed with large majorities), with the third being vetoed by Mayor Villaraigosa so that it would not go before the voters. The Mayor’s obvious goal was to ensure that he kept control over the appointment and removal of Department management and governance. There were seven (7) votes from the Council to override the Mayor’s veto, which was insufficient by one (1). The thought by some of the people who proposed these changes was that as long as the Mayor controlled the appointments of LADWP Commissioners and General Managers, any attempt at serious Ratepayer Advocacy would be minimized. The end result is that the Office of Public Accountability will be limited to the review of Water and Power rates and will rely on the City Council and Mayor to pass ordinances to ensure the thorough review and analysis of LADWP’s strategic plan, operations, finances and management. As one consumer activist stated, “…the establishment of a Ratepayers Advocate supported by the Office of Public Accountability is a hollow and symbolic gesture unless they are supported by subsequent ballot measures that reform the Commission process and establish a City Prosecutor…..The last thing LA needs now is oversight reform that consists of more audits and advice with no authority or mandate to enforce the law…..it is important to remember that oversight and accountability mean little, if anything at all, without enforcement authority and a mandate for prosecution.”
F19:
Although the final wording of the Ratepayer Advocate ballot measure may be interpreted as being effective, the implementation of the measure, and therefore its strength, is up to Council ordinance. There was an original version of the Ratepayer Advocate position which declared “the role of the OPA shall be to (1) promote efficiency and effectiveness of the Department; (2) provide centralized focus on ratepayer protection and consumer complaints; and (3) provide independent analysis of Department actions, particularly as they relate to Water and Electricity rate actions. The OPA shall advocate against excessive rates and shall provide expert advice on rate actions and strategies which most economically accomplish the City’s policy goals and protect the Department’s long-term interests.” The final wording of the proposed ballot measure indicates that the proposed focus will be on determining if rates are too high, not if LADWP is using revenues to overhaul infrastructure and move towards green energy and a sustainable, local water supply. The issues are if the Ratepayer Advocate should be expected to question whether, for example, the use of wind power (which is substantially higher generation cost compared to any other RPS item) is appropriate or whether, given the decision to go with wind, the rates are minimized and accurate. It is a subtle but very important distinction that will have huge impacts to both the work load of the Ratepayer Advocate and to his/her overall impact and effectiveness. After numerous motions from various Council members on the wording of a Ratepayer Advocate ballot measure, and after considering a higher level of funding (0.1% rather than 0.025% of annual revenues), the following was the actual wording decided upon and the wording that went to the public for voting on March 8, 2011. Section 683. Office of Public Accountability (a) The role of the Office of Public Accountability (OPA) shall be to provide public independent analysis of Department actions as they relate to water and electricity rates. (b) The OPA shall be headed by an Executive Director, who shall be exempt from civil service. The Executive Director shall be appointed by a citizens committee to a five- year term, subject in appointment to confirmation by the Council and Mayor. The Council shall by ordinance provide for the removal of the Executive Director in a procedure similar to that set forth in City Charter Section 575 (e), and only for the reasons provided by ordinance. The Council by ordinance shall prescribe the composition and manner of selection of the citizens committee. (c) The Executive Director shall (1) report directly to, but shall not be instructed by, the board; (2) have full charge and control of all work of the OPA; (3) be responsible for the proper administration of its affairs; (4) appoint, discharge, suspend, or transfer all of its employees, subject to the civil service provision of the Charter; (5) issue instructions to OPA employees in the line of their duties, subject to the civil service provisions of the Charter; (6) prior to the beginning of each fiscal year and in accordance with a schedule prescribed by ordinance, submit to the City 122 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY
Additional Recommendations
5
Not linked to specific findings.
R7:
Determine if the current state of union/management relations is equitable and not favorable to one side at the expense of the other. LADWP management personnel can only accomplish what they try to accomplish. If they continue to allow the Union to “win” the majority of issues, they only have themselves to blame for future problems. Elected officials should strongly consider an effort to reduce continuing union involvement in the management of the Department, other than through normal channels. Of course, this may impact the level of support and money provided to the elected officials but efficient and effective management of the Department should be the overwhelming goal. The ratepayer should be the primary concern.
R8:
Immediately develop a confidential strike preparation plan and ensure that cross-training and documentation of essential functions is included in the process and plan. It is incumbent on management to ensure that operations continue under a variety of circumstances, including a work stoppage. Additional attention from management to the possible contingency of a work action is warranted and ratepayers need to be assured that the Department management is looking out for their interests. III. CITY TRANSFER AND ECAF ISSUES
R9:
Take steps to ensure that this transfer problem doesn’t recur. Some steps to be taken include: a. Develop an earlier budgeting process so Council will know what transfer funds to expect ahead of any grandstanding. b. Provide a presentation of the budget to the Council in clear and concise terms that are not “technical engineering oriented”. c. Conduct a proactive review of RPS and capital project alternatives including goal extension or reduction. d. Develop long-term projections of costs associated with RPS and major projects to ascertain if additional transfers will impact consumer costs.
R10:
The CGJ agrees with the CCF recommendation that a “new proposal for rate restructuring should be drafted and analyzed. One aspect of this proposal would be to split the current ECAF into several separate rate components. This will provide the Council (and the public) with greater visibility of LADWP’s cost structure and of the justification for any rate increases.” CCF goes on to state that: a. Costs that are clearly out of LADWP control should remain in the ECAF. b. At an appropriate frequency, Council should approve an LADWP procurement plan. As long as procurement has been in accord with the plan, ECAF cost recovery should be a pure, uncapped pass through. c. Costs that are predictable, such as long-term contract costs or energy efficiency costs, should be removed from the ECAF. d. Revenue losses attributable to DSM should be passed through without a cap but as a separate bill component in addition to ECAF. e. The City Transfer should not be tied to fluctuating ECAF revenues but rather entirely to more stable base rate revenues. This will create greater certainty of City Transfer payments and remove elements of the City Transfer from the current ECAF structure. 116 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY While such a change means that the City Transfer will fluctuate as a percentage of total revenue as ECAF revenues change, it will result in lower volatility in rates as well as in payments to the City. f. The Council should separately define a rate stabilization program that will mitigate or spread out rate increases. Rate stabilization has the effect of financing a cost increase and its impact on City finances and LADWP capital adequacy should be explicitly considered. g. Develop a clearer, more pure, definition of the ECAF rate (for review by Council and the public). h. An automatic rate change based on a pure ECAF rate should be approved. It should be pointed out that the Department has received this type of recommendation previous to the CCF Report. In July of 2007, a Revenue Requirements Study prepared for the Chief Legislative Analyst and the City Administrative Officer states, “Energy Services has bundled several different cost recovery elements in the ECAF…….neither the Board nor management are presented the ECAF budgeted revenues by element.” The recommendation made in that report was to “Unbundle the ECAF into its elements for presentation to management and to the Board.” In their response to the report, LADWP agreed that all future presentations to management and the Board would unbundle the ECAF elements.
R11:
Increase the transparency of the cost of each current ECAF item by showing the item and amount on the ratepayer’s monthly bill. The CGJ suggests following the CCF recommendation with an additional recommendation intended to provide transparency, not just to Council but to the public at large. Print on each residential bill a statement indicating the costs associated with any “controllable” large expenditure that was previously in the ECAF. A statement showing the cost to the consumer for the RPS program, DSM program and the City Transfer (separately) should be clearly available to the public for their review and ultimate approval. Statements might read as follows: “The portion of your bill collected by LADWP for the City of Los Angeles to support government services not related to LADWP (City Transfer) is $XXX or XXX%. The City contribution shown here reflects the amount of your bill that goes toward government transfers. However, on your actual bill, this charge is included in the Electric or usage charge.” In addition to City transfer costs, the Department should also present similar information for “Renewable Program Charges” or “DSM charges” to the ratepayer. This provides the ultimate level of transparency to the public and allows for discussion of each element at the Board and Council meetings. IV. RATEPAYER ADVOCATE ISSUES
Findings & Recommendations
15 findings
F1:
It was noted that within thirty (30) days of receipt of a Hearing Examiner’s Report the DOT makes a recommendation to the City Council outlining areas under consideration for a PPD. If the proposed PPD meets all of the program’s criteria, DOT gives notice to area residents stating boundaries and parking restrictions of the permit parking district. Currently a two-year waiting period to obtain Permits has been known to occur.
F2:
The following incidents have occurred: a. In 2008 a petition for Preferential Parking was initiated by the residents of 1600 Block of Hi-Point Street. 176 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY b. After repeated inquiries with DOT for two (2) years, in July 2010 the residents received a letter from DOT stating “preferential parking restriction requirements had been met, and the requested installation of a PPD had been approved.” c. On August 5, 2010 an additional petition was circulated opposing the establishment of a PPD. Of particular concern to the CGJ is that it took approximately two (2) years for approval of the PPD, and one (1) day for it to be denied.
F3:
In addition, there have been numerous attempts by area residents to get reasons for rescindment of the PPD, all to no avail.
F4:
When a PPD is approved, there appears to be no formal process for rescinding such a district or informing residents of same.
F5:
Longer term savings could be achieved by modifying some pension benefit provisions for new employees. These include: changing the basic benefit formulas to levels that existed prior to 2001 and restricting or eliminating service credit enhancement provisions, such as sick leave and “air time” service credit.
F6:
Regular review of actuarial assumptions facilitates keeping pension plans focused on prevailing investment climates, actuarial trends and other factors that influence pension assets, liabilities and sustainability. For example, the pension plan administrators of both CalPERS and LACERA review actuarial assumptions annually with their respective governing boards and evaluate them more rigorously on at least a triennial basis.
F7:
The risk of “pension spiking” could be reduced substantially by converting to a 36-month or longer basis for calculating Final Average Salary for at least 85% of CalPERS member agencies in LAC.
F8:
Besides regular salary, some jurisdictions allow other categories of compensation to be included in the calculation of pensionable salaries, including sick leave buy-back and certain categories of special pay and bonuses. This results in higher pension benefits and costs.
F9:
Hybrid defined benefit and defined contribution pension plans would more equitably share the risk of investment losses between the employer and employee. A jurisdiction’s ability to modify pension provisions for retirees, existing employees or future employees varies by group and may be controlled by statute and case law. A 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY
F10:
A small percentage of LAC CalPERS member agencies (13.2%) have decided to adopt post retirement COLA provisions that have a potential to increase pension system costs at rates that exceed inflation, effectively increasing the present value of retiree compensation over time.
F11:
The actuarial assumed rate of return using both the 10-year and a 15-year smoothing methodologies cause swings in actual investment gains and losses to moderate actuarial investment performance, and thus the actuarial value of assets. These methodologies ensure that jurisdictions contribute an amount each year that is closer to the normal contribution rate.
F12:
The overwhelming majority of jurisdictions in LAC are not prefunding retiree health benefits or contributing the Annual Required Contribution determined by actuaries, deciding instead to fund these benefits on a pay-as-you-go basis. This practice is inconsistent with recommendations by actuaries and the Government Finance Officers Association. In addition, this is a costly policy that reduces the jurisdictions’ capacity to discount contribution rates and, instead, passes full costs onto the taxpayer.
F13:
Opportunities may exist for some jurisdictions to cap benefit amounts, require copayments from retirees or implement other changes that would reduce costs for jurisdictions providing retiree health benefits to current retirees in the short term. However, each instance would need to be assessed by the jurisdictions’ legal counsel to ensure that such modifications would not be a violation of contract law.
F14:
It is unlikely that retiree health benefits can be modified for current retirees and employees. However, jurisdictions could change the benefit offered to new hires by establishing benefit caps or defined contribution components, establishing improved cost sharing agreements with employees and modifying plan design to more effectively couple retiree health benefits with Medicare. Such change may involve negotiations with collective bargaining groups.
F15:
Pension Obligation Bonds are not used extensively by Los Angeles County jurisdictions. However, there are indications that some jurisdictions are considering POBs to fund UAAL that developed during the recent economic downturn. The GFOA and other experts recommend that jurisdictions proceed cautiously when considering POB borrowings by: a. Thoroughly evaluating financial benefits and risks b. Fully recognizing “other issues” that may arise if the bonds are issued such as: i. The loss of flexibility in difficult economic times because of the need to make timely payments of principal and interest in order to not default on the bonds ii. Potential misunderstanding by policy makers regarding the possibility that an unfunded liability may recur in the future iii. Potential pressures for additional benefits by government employees if plans are fully funded and government’s contribution as a percentage of payroll has declined relative to neighboring jurisdictions 2010 – 2011 PHASE II: SECTION 1 LOS ANGELES COUNTY EMPLOYEES RETIREMENT ASSOCIATION SUMMARY The Los Angeles County Employees Retirement Association (LACERA) administers the pension system for the County of Los Angeles, acts as the trustee of contributions that have been made by the County and plan members, and invests assets in a manner that attempts to moderate risk and maximize returns. LACERA provides advice and counsel to County managers on the financial impact of proposed changes to the County’s retirement system, and are partners with the County on benefit design, funding strategy and other aspects of pension system management. Overall, LACERA is well run and effective at fulfilling its responsibilities, and the County has done a good job at moderating pension costs. However, LACERA could explore the benefits of changes to actuarial methodologies used to smooth investment returns and the County could, with input from LACERA, focus on discussions with employee bargaining groups to redesign benefits, including exploring benefit caps and establishing defined contribution alternatives; examining opportunities for cost reductions from modifying certain provisions that create opportunities for pension spiking; and consider policy changes to ensure the pre-funding of OPEB benefits by increasing annual contributions and narrowing the allowed uses of the County Contribution Credit Reserve. PURPOSE The Los Angeles County (LAC) and LACERA were chosen by the Civil Grand Jury (CGJ) for in- depth review based on its status as the largest plan in the region and relatively high dollar amount of liability. LACERA also has a better than average funded ratio and multiple plan tiers, as well as the County’s substantial pension obligation bond debt and retiree health benefit unfunded liability.
Additional Recommendations
10
Not linked to specific findings.
R1:
Decisions regarding approval of PPDs be made on a more timely basis after the determination of the PPD. A two (2) year waiting period is unacceptable.
R2:
Updates on the status of requested PPDs be readily available on line and accessible upon request. 2010 – 2011 REQUEST FOR RESPONSE California Penal Code Sections1 §933 (c) and §933.05 requires a written response to all Recommendations contained in this Report which shall be made no later than ninety (90) days after the Civil Grand Jury publishes its Report (filed with the Clerk of the Court). Respond to: Presiding Judge Los Angeles County Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street Eleventh Floor, Room 11-506 Los Angeles, CA 90012 All responses for the 2010-2011 CGJ Report’s Recommendations must be submitted to the above address on or before the end of business September 30, 2011. Responses are required from: Recommendation Number(s) Responding Agency 1 City of Los Angeles (Department of Transportation) 2 City of Los Angeles (Department of Transportation) 1 Reference California Penal Code Sections §933(c) and §933.05 at the beginning of this 2010-2011 Civil Grand Jury Report 178 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY ACRONYMS DOT Department of Transportation PPD Preferential Parking District PPP Preferential Parking Program LAMC Los Angeles Municipal Code 2010 – 2011 THIS PAGE INTENTIONALLY LEFT BLANK 180 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY TRANSITION AGE YOUTH (TAY) JOURNEY Committee Members Chairperson - George E. Candler, Jr. Co-Chairperson: Laura M. Holmes James R. Boyd Linda Loding Wardah Shakir Susan Stetson TRANSITION AGE YOUTH (TAY) JOURNEY SUMMARY Los Angeles County (LAC) Department of Children and Family Services (DCFS) is charged with providing services and resources to assist Transition Age Youth (TAY) to transition successfully from dependency to self-sufficiency. The Youth Development Services Division (DCFS/PD) receives a budget each year from State and Federal government resources to implement and operate these programs and services. This Report addresses the Findings and corresponding Recommendations of the 2010-2011 Civil Grand Jury (CGJ) for data collection systems and mechanisms needed to effectively provide services to build TAY self-sufficiency. PURPOSE The CGJ investigation assessed the effectiveness of DCFS and the LAC’s Department of Children and Family Services (PD) programs in establishing TAY self-sufficiency.
R3:
Submit ILP and transition housing participation data to the State as part of the reporting requirement for funds.
R4:
Define and develop methodologies, frequency and reliability of work data collection methods and systems to clearly define recorded data so that participation data is more reliable.
R5:
Develop and maintain consistent criteria participation data for ILP and other TAY services.
R6:
Initiate the process of tracking youths’ denial of ILP services if offered and record date and follow up to reinitiate the ILP.
R7:
Evaluate effectiveness of the existing data management system and explore new software that could streamline data collection and analysis which improves identification of service gaps and accomplishments.
R8:
Increase and improve communication efforts with TAY participants to raise awareness of ILP housing and other TAY related services by improving data collection efforts and maintaining contact with participants after they leave the program.
R9:
Establish confidential e-mail distribution lists and send regularly scheduled e-mails to provide awareness of scholarships, ILP services, available resources, and job opportunities.
R10:
Increase frequency in which participants provide progress updates and complete surveys that measure progress, satisfaction and solicit input and suggestions. Improved and increased communication between participants and staff may allow the recommended evaluation plan to be effectively implemented. The second method for maintaining ongoing communication with youth participants could involve the increased use of social networking, such as facebook.com, since most youths are already using these social networking sites. 198 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY REQUEST FOR RESPONSE California Penal Code Sections6 §933 (c) and §933.05 requires a written response to all Recommendations contained in this Report which shall be made no later than ninety (90) days after the Civil Grand Jury publishes its Report (filed with the Clerk of the Court). Respond to: Presiding Judge Los Angeles County Superior Court Clara Shortridge Foltz Criminal Justice Center 210 West Temple Street, Eleventh Floor, Room 11-506 Los Angeles, CA 90012 All responses for the 2010 - 2011 CGJ Report’s Recommendations must be submitted to the above address on or before the end of business September 30, 2011. Responses are required from: Recommendation Number(s) Responding Agency 1 County of Los Angeles (DCFS, Probation Department) 2 County of Los Angeles (DCFS, Probation Department) 3 County of Los Angeles (DCFS, Probation Department) 4 County of Los Angeles (DCFS, Probation Department) 5 County of Los Angeles (DCFS, Probation Department) 6 County of Los Angeles (DCFS, Probation Department) 7 County of Los Angeles (DCFS, Probation Department) 8 County of Los Angeles (DCFS, Probation Department) 9 County of Los Angeles (DCFS, Probation Department) 10 County of Los Angeles (DCFS, Probation Department) 6 Reference California Penal Code Sections §933(c) and §933.05 at the beginning of this 2010-2011 Civil Grand Jury Report 2010 – 2011 ACRONYMS AA Associate of Arts ACT American College Testing (formerly) AFDC-FC Aid for Families with Dependent Children/Foster Care CAPIT CA State Child Abuse Prevention, Intervention and Treatment program CSW Children Social Worker DCFS Department of Children and Family Services DPO Deputy Probation Officer GED General Educational Development GR General Relief HC Housing Coordinator ILP Independent Living Program KinGap Guardianship Assistance Payment Program LAC Los Angeles County LAHSA Los Angeles Homeless Services Authority LST Life Skills Training PPM Permanent Placement Mode PD Probation Department SAT Scholastic Aptitude Test TAY Transitional Age Youth TC Transition Coordinator 200 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY THP Transitional Housing Program THP+ Transitional Age Program Plus THPP Transitional Housing Placement Program TILP Transitional Independent Living Plan TRC Transitional Resource Centers YDS Youth Development Services 2010 – 2011 THIS PAGE INTENTIONALLY LEFT BLANK 202 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY WHOA! THE STATE OF PUBLIC PENSIONS IN LOS ANGELES COUNTY Committee Members Chairperson - Meg George Beverly T. Kishimoto Susan Stetson Max E. Van Doren ASSESSMENT OF THE STATE OF PENSION PLANS IN LOS ANGELES COUNTY INTRODUCTION The 2010-2011 Los Angeles County Civil Grand Jury (CGJ) conducted an investigation of pensions in Los Angeles County (LAC) entitled: Assessment of the State of Pension Plans in Los Angeles County. This investigation was conducted in accordance with the authorities defined in the California Penal Codes (CPC) §914 through §939. Pursuant to CPC §926 et al, the CGJ engaged the services of an auditing firm to assist it with the pension investigation. This assessment was designed to accomplish the following objectives:
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Findings & Recommendations
18 findings
F1:
The governance of the Department of Water and Power is distributed among several different groups including the Board of Water and Power Commissioners, the Mayor, the City Council, the City attorney and IBEW.
F2:
There has been a significant turnover in both Commissioners and General Managers for the LADWP, especially in recent years, which diminishes the overall governance continuity.
F3:
There is a perception that political contributions rather than specialized skills or experience may play a primary part in the decision to appoint personnel to the Commission or other governance positions.
F4:
There are a variety of governance structures in place at other municipal utilities; there is no one structure that meets all needs.
F5:
Although there was originally some concern that personnel were taking higher paying jobs at LADWP for only a short time (pension spiking) in order to increase lifetime pensions, such does not appear to be the case. However, the number of transfers from the City to the Department may have a negative impact on the pensions for the Department.
F6:
Succession planning does not take place within LADWP to any meaningful extent.
F7:
The IBEW is very active in local and state elections, local and state legislation and in ongoing City politics. It also contributes substantial time and money to the election of City politicians, including various Council members, the Mayor and the City Attorney which potentially allows for a substantial amount of power in the day-to-day governance of the Department.
F8:
There is considerable belief that the unions are increasingly involved in the operations and management of the Department.
F9:
The public sector unions, especially IBEW, have been successful for their members by accomplishing a higher level of salary and benefits than other employee unions. This information is of concern to many ratepayers since it will increase the rates developed to pay for services.
F10:
The IBEW represents about 88% of all LADWP employees which is an unusually high percentage for utilities.
F11:
Although the LADWP and the IBEW engage in “mutual gains bargaining” through a Joint Labor Management Resolution Board (JRB), the bargaining results are reportedly more in favor of the Union. The number of grievances filed by the Union has not materially changed as a result of this process.
F12:
The LADWP is at risk by having a high percentage of essential personnel in the same Union and does not have a current “strike plan” to continue operations and serve the citizens of Los Angeles in case of a work action.
F13:
The Department has provided substantial funds to the City of Los Angeles in the form of Power and Water transfers for many years.
F14:
Although the Department had numerous reasons for not wanting to make the transfer without a rate increase that it felt it deserved, holding the City “hostage” under these circumstances was inappropriate since the Department had the cash to make the transfer, although they had it reserved for other uses.
F15:
The ECAF as currently constituted at LADWP contains several elements that typically would not be found in a Cost Adjustment Factor.
F16:
The current ECAF design does not provide for adequate oversight and transparency into long-term commitments made by the Department, particularly with respect to Renewable Portfolio Standard (RPS) and Demand Side Management (DSM).
F17:
The implementation of a Ratepayer Advocate at LADWP would be unusual in the municipal utility industry.
F18:
Some people believe that the impact of the Ratepayer Advocate ballot measure is minimized because other proposed Charter amendments were not approved for the same ballot.
Additional Recommendations
18
Not linked to specific findings.
R1:
The governance of the Department of Water and Power is distributed among several different groups including the Board of Water and Power Commissioners, the Mayor, the City Council, the City attorney and IBEW.
R2:
There has been a significant turnover in both Commissioners and General Managers for the LADWP, especially in recent years, which diminishes the overall governance continuity.
R3:
There is a perception that political contributions rather than specialized skills or experience may play a primary part in the decision to appoint personnel to the Commission or other governance positions.
R4:
There are a variety of governance structures in place at other municipal utilities; there is no one structure that meets all needs.
R5:
Although there was originally some concern that personnel were taking higher paying jobs at LADWP for only a short time (pension spiking) in order to increase lifetime pensions, such does not appear to be the case. However, the number of transfers from the City to the Department may have a negative impact on the pensions for the Department.
R6:
Succession planning does not take place within LADWP to any meaningful extent.
R7:
The IBEW is very active in local and state elections, local and state legislation and in ongoing City politics. It also contributes substantial time and money to the election of City politicians, including various Council members, the Mayor and the City Attorney which potentially allows for a substantial amount of power in the day-to-day governance of the Department.
R8:
There is considerable belief that the unions are increasingly involved in the operations and management of the Department.
R9:
The public sector unions, especially IBEW, have been successful for their members by accomplishing a higher level of salary and benefits than other employee unions. This information is of concern to many ratepayers since it will increase the rates developed to pay for services.
R10:
The IBEW represents about 88% of all LADWP employees which is an unusually high percentage for utilities.
R11:
Although the LADWP and the IBEW engage in “mutual gains bargaining” through a Joint Labor Management Resolution Board (JRB), the bargaining results are reportedly more in favor of the Union. The number of grievances filed by the Union has not materially changed as a result of this process.
R12:
Ensure that the Ratepayers function is clearly defined and that the function is not captured by politicians or a bureaucracy that will stagnate their independence and ability. It is important to identify what the function will be focused on and, as importantly, what it will not be focused on. The Ratepayer Advocate will have enough work to do without taking on the “savior of LADWP operations and public perception” role. The position should not be involved in the management of the Department or have the right to veto management decisions or set rates. The OPA should not be involved in holding LADWP accountable for meeting the City’s or Mayor’s goals, some of which will be extremely expensive to the ratepayer. That should be the job of the Board of Commissioners, City Council and the Mayor. They should, however, have input into various rate alternatives and timing differences prior to the policy decision being made so that the impact to the ratepayer is known. The OPA should take a long-term perspective on its review of rates. For example, it should shine the light on long-term plans that will have massive implications for residential and commercial rates, not just on the rate increase that may be mentioned for next year. It is important that the position provide advice and counsel to lawmakers on balancing LADWP’s plans to invest in clean power, as one example, with its need to fulfill Charter responsibility to keep rates lower than others. The primary focus should be what is best for the ratepayer. The Advocate can highlight the long term implication of these decisions. This long term perspective and visibility is more important than just blocking specific rate hikes, which may be desired by many, but may not be in the long term best interest of the City or the ratepayer. In summary, the function should provide visibility to the public and guidance to the Council on various anticipated rate increases, and provide expert advice on rate actions and strategies which will protect the ratepayer by identifying the most economical method to accomplish the City’s policy goals and the LADWP’s long-term interests. The ratepayer should be placed first in implementing the Advocate’s responsibility. The Advocate can also be instrumental in ensuring that large categories of costs, such as DSM, RPS and the City Transfer, have visibility on the customer bills. (Also see Recommendation 10.)
R13:
Ensure that the public has primary input into the appointment of the Ratepayer Advocate. The “citizen’s committee” should have ample representation from Neighborhood Councils and other citizen-based organizations. It is only with broad based input that the public will have the confidence that the position won’t bend to any specific political will. As important as the actual information provided by the Ratepayer Advocate is the fact that the existence of the position itself should be viewed by the public to be honest, independent, trustworthy and knowledgeable. This is probably the single best opportunity for the City and Department management to improve the perception of LADWP with the rate paying public. 124 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY Summary of Report Findings and Recommendations
R14:
Although the Department had numerous reasons for not wanting to make the transfer without a rate increase that it felt it deserved, holding the City “hostage” under these circumstances was inappropriate since the Department had the cash to make the transfer, although they had it reserved for other uses.
R15:
The ECAF as currently constituted at LADWP contains several elements that typically would not be found in a Cost Adjustment Factor.
R16:
The current ECAF design does not provide for adequate oversight and transparency into long-term commitments made by the Department, particularly with respect to Renewable Portfolio Standard (RPS) and Demand Side Management (DSM).
R17:
The implementation of a Ratepayer Advocate at LADWP would be unusual in the municipal utility industry.
R18:
Some people believe that the impact of the Ratepayer Advocate ballot measure is minimized because other proposed Charter amendments were not approved for the same ballot. RECOMMENDATIONS
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Findings & Recommendations
7 findings
F1:
The LAPD Communications Division (Division) is comprised of five hundred eighty-three (583) PSRs, police officers and administrative personnel who are assigned to the two (2) ERC facilities, as well as various police stations and specialized divisions throughout the City of Los Angeles. The personnel allocation for the Division is 617. Because of the current hiring freeze and the budget constraints, the Division is limited to 583 employees. The current vacancies will be filled when budgetary limitations are withdrawn.
F2:
There are five (5) work shifts in place providing 24/7 coverage.
F3:
The number of PSRs per shift varies and functions with approximately seventy-five (75) personnel.
F4:
The majority of PSRs are members of the American Federation of State, County and Municipal Employees (AFSCME) union: 80% are female and 20% are male. Only thirty (30) PSRs are not members of AFSCME.
F5:
The starting salary for a PSR is $52,000 per year, advancing to approximately $70,000 per year, with a two-week starting vacation allowance.
F6:
Three (3) million calls are received per year, while 2.1 million are legitimate emergency calls.
F7:
LAPD is confident that work disruptions can be managed by administrative staff, as well as by combining available Division radio frequencies to consolidate all incoming emergency calls.
Additional Recommendations
3
Not linked to specific findings.
R1:
The current status of the renovation of the Hall of Justice
R2:
Whether further investigation of the project was warranted
R3:
To assist investigative committees by recommending, arranging, and participating in interviews with audit firms best suited for a particular investigation
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Findings & Recommendations
4 findings
F1:
The community input process in the Port of Los Angeles community has degraded and does not have the organizational strength to be effective. Status of the Port Community Advisory Committee (PCAC) PCAC exists and operates today though there have been several changes made in its funding and organization. The biggest changes occurred in 2009 when the Port (not BOHC) eliminated staff support for five (5) of the nine (9) original PCAC subcommittees. This was accomplished by reducing the overtime budget that allowed Port staff to attend PCAC subcommittees in the evening. The Port also eliminated the funding of private consultants that formerly had performed work on behalf of PCAC and its subcommittees. Finally, the Port eliminated funding for renting space at a hotel in San Pedro for PCAC meetings. The rationale for these changes was that Port revenues had decreased due to the economic recession, and operating expenses were cut as a result. Also, many subcommittee meetings were lightly attended, often by the same people; and their scopes tended to overlap with other subcommittees. PCAC now has four (4) subcommittees: Steering, Wilmington Waterfront, San Pedro Coordinated Plan and EIR/Aesthetic Mitigation. The scopes of defunded subcommittees that dealt with specific 160 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY environmental issues such as water, air, and noise have been rolled into the EIR/Aesthetic subcommittee. Though PCAC is a standing committee of BOHC, these changes were never formally vetted nor approved by BOHC. Another issue with PCAC is the composition of membership. As originally envisioned, PCAC was to include a broad representation of constituents in the harbor community including neighborhood and residential associations, labor and business groups, educational institutions, representatives from local government and economic development agencies. As it has unfolded in the last ten (10) years, certain groups have failed to appoint members and some appointed members have failed to consistently attend. This has resulted in PCAC being dominated by members from the Neighborhood Councils and residential groups. Business groups have been under- represented. Several constituent organizations either no longer exist or they lack any legal structure as a registered corporation with the State. Lack of a legal structure makes it more difficult to ensure that an organization has bylaws, elects officers, conducts periodic meetings and maintains a legitimate address for notices and agendas. Some of the existing PCAC constituent organizations are reportedly nothing more than a small, informal group of neighbors. Table 2 shows the status of some of these organizations: Table 2. PCAC Member Organization Status Organization Current Status # of votes Wilmington Community Advisory No legal structure 3 Committee Harbor City/Harbor Gateway Chamber Suspended 1 of Commerce Pacific Avenue Corridor Task Force No legal structure 1 Wilmington Commercial Dissolved 1 District/Business Improvement District Crescent Area Residents Association No legal structure 1 Dana Strand Residents Association No legal structure; 1 No appointed member Point Fermin Residents Association No legal structure 1 Rancho San Pedro Residents No legal structure; 1 Association No appointed member San Pedro & Peninsula Homeowners Suspended 3 Coalition Wilmington Citizens Committee No legal structure 1 At large member from Council Dist 15 No appointed 1 member Education at large – LA Harbor College No appointed 1 member Total 16 2010 – 2011 Some of these organizations such as Point Fermin and Crescent are, in fact, active but do not meet regularly lack bylaws. Dana Strand and Rancho San Pedro Residents have not appointed a representative. Representatives from Council District 15 and Los Angeles Harbor College have resigned and have not been replaced. In total, sixteen (16) out of thirty-six (36) voting seats are unfilled, have never been filled, or represent organizations that no longer exist or lack a legal structure. It may be time to address the composition of PCAC to ensure that it has equitable representation from legitimate organizations that have a stake in Port operations and appoint active members. Existing PCAC bylaws provide for no term limits for PCAC members. This is left up to the appointing organizations. The voting Co-Chair of PCAC is elected for a one-year term but can be re-elected with no term limit. This has resulted in institutional memory among PCAC membership. It has also led to domination by entrenched interests, particularly among representatives of homeowner groups which form the largest constituency within PCAC. Attendance has been an issue for PCAC for years. PCAC bylaws require a quorum of 50% of the voting membership of eighteen (18) members. Beginning in late 2008, attendance began to decline at the monthly PCAC meetings. In late 2009, attendance declined to the point that a quorum was not present at three (3) consecutive meetings. Meetings that did have quorums were razor thin. The last time a PCAC meeting had twenty (20) or more members attend was in June 2009, a standard that formerly was often achieved. The sub-committees have been meeting sporadically. The EIR Sub-Committee has met only once since July 2010. The Wilmington Waterfront and San Pedro Planning Sub- Committees have been meeting fairly regularly but sometimes miss a month or two. Along with declining attendance is the problem of light agendas. Meetings in recent months have featured agendas that were light on substance or major action items. Agendas are often light at the Sub-Committee meetings as well, with agendas featuring more status reports than action items. In 2010 only three (3) motions were approved by PCAC for referral to BOHC, two (2) of those dealing with the Battleship USS Iowa. In contrast, in 2007, twelve (12) motions were approved by PCAC for referral to BOHC. In 2008, fourteen (14) motions were approved. In 2009, nine (9) were approved. Clearly, PCAC is running out of things to do. This paucity of substantive business is partially the price of success. Many of the projects and mitigation measures that were the focus of PCAC deliberations in earlier years have been completed. As mentioned above, PCAC has notched many successes in how these projects have been shaped or influenced. Many of these projects such as the Wilmington Buffer, San Pedro Waterfront, Pier 300/400, the Plan, etc. are now completed, in development or nearing construction. In recent years, there have not been as many projects with EIRs that required debate. This may change in the future as the Port contemplates a new generation of major projects such as Pier 300 expansion, main channel deepening and development of near-dock intermodal rail facilities. This last project, in particular, may produce new community relation challenges as the rail facilities will be close to residential areas. However, until these new EIRs are at the point where PCAC can review them, monthly meetings may be too often. Another factor in the declining PCAC agendas is that the Port staff is bypassing PCAC and transferring the Committee’s mission of organizing community input and working on environmental mitigation projects either to itself or to newly created entities. The Port has taken upon itself the task of organizing community input related to the development of the San Pedro waterfront. Port staff have successfully organized several workshops to present 162 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY the project and gather input, something that PCAC may not be set up to do. But whereas PCAC had a role in collecting and shaping community input and presenting
F2:
The Clean Air Action Plan Is Not Analytically Sound Clean Air Action Plan The Plan was originally prepared and approved by the governing boards of both San Pedro bay ports in 2006 and then updated in 2010. The Plan sets emission reduction goals for three (3) types of pollutants a. Diesel Particulate Matter (DPM) b. NOx or Oxides of Nitrogen c. SOx or Oxides of Sulfur 2010 – 2011 The Plan also sets a goal of reducing of Particulate Matter less than 2.5 microns in diameter (PM ) but assumes that DPM reductions will also result in reductions in PM . 2.5 2.5 rather than setting a specific target. The Plan establishes a baseline of 2005 emission levels and emission reduction goals for the years 2014 and 2023. The goals are expressed as percentage reductions such as 77% reduction for DPM, 59% reduction for NOx and 93% reduction for SOx by the year 2023. These goals are not controlled for cargo growth so the reductions have to be achieved irrespective of cargo volumes. These goals also dovetail with overall basin- wide air quality goals established by the South Coast Air Quality Management District (SCAQMD). The Plan, if implemented successfully, will achieve the Port’s “fair share” of emission reduction as required by the SCAQMD. By far the major polluters are ocean going vessels and heavy duty trucks. Technologies and capital investments for achieving reduction goals are heavily weighted toward these polluters. These strategies include: d. Reducing vessel speeds up to 40 nautical miles from Point Fermin, thereby burning less fuel as they approach the ports e. Setting emission standards for heavy duty trucks that exceed EPA standards, along with incentives for truck operators to replace older trucks with those running cleaner burning engines f. Switching fuels on ocean going vessels with cleaner burning fuels g. Setting standards for cleaner burning engines for ocean going vessels h. Using shore-based power sources for ocean going vessels when docked at berth, instead of running heavily polluting auxiliary engines i. Establishing an Emission Control Area (nationwide) that sets pollution standards for ocean going vessels up to two hundred (200) nautical miles off the coast Table 3 shows the emission reduction targets vs. current emission levels vs. the emissions forecast given the current cargo volume forecast through the year 2023. Table 3 Emission Reduction Standards and Forecasts (Figures are annual tons of emissions. Deficit number in parentheses means that target reduction is not met.) 2005 2009 2014 2014 2014 2023 2023 2023 Pollutant Baseline Actual Target Forecast Deficit Target Forecast Deficit DPM 2,025 1,004 567 576 (9) 459 527 (68) NOx 34,444 21,755 26,866 27,865 (999) 14,286 28,244 (13,958) SOx 12,421 6,358 869 890 (21) 1,010 994 16 As shown in the Table 3, the combined Port effort is forecast to nearly meet the targeted emission reduction standards for each pollutant. A major exception to this is NOx in the year 2023. There is less confidence in the forecast for NOx reductions because of uncertainties regarding the reduction strategies and technologies, particularly for improvements in ocean going vessel engines. As these technologies are tested and proven, the ports may be more confident in upgrading the forecast in future updates to the Plan. 164 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY The Plan shows a serious commitment on the part of the ports of Los Angeles and Long Beach to limit the environmental impacts of port operations. The Plan includes ambitious goals for emission reductions and wide ranging and controversial strategies for achieving those reductions. No doubt, implementation of the Plan will result in cleaner air and increased health status for area residents. The Plan expresses a goal to reduce health risk from Port operations. Increased health risk is assumed to be positively correlated with exposure to DPM, which is considered to be a carcinogen. The Plan further assumes that reducing DPM will reduce the risk of cancer and improve the health status of nearby residents, as cancer is a reliable proxy for many health risks. In fact, health risks are impacted by all particulate matter, not just DPM. Particulate matter in general is highly correlated with respiratory disease and impaired lung development. Most of the emission sources at the Port are diesel engines which explain the reliance on DPM as a marker for particulate matter in the Plan. However, given the enormous costs associated with implementing the Plan, the Port may want to take the extra step of targeting and measuring total particulate matter (PM and PM ) in addition to DPM. 2.5 10
F3:
Los Angeles County could benefit from a Regional Port Authority consolidating the Ports of Long Beach and Los Angeles. Existing Coordination Between Ports The ports of Los Angeles and Long Beach are both municipally controlled by their respective cities. Each port is governed by a Board of Harbor Commissioners. The two (2) ports are adjacent to each other and are roughly the same size both in terms of area and workload. The ports also share much of the same infrastructure, including the outer harbor (the waterways between the breakwater and the piers). The transportation infrastructure such as freeways, railways and rail yards are also shared by the customers of both ports. Both ports are financial guarantors for the Alameda Corridor Transportation Authority (ACTA) which operates a major rail corridor between the ports and the rail yards in east Los Angeles. In the past few years, the two (2) ports have widely coordinated on environmental programs. This is a recognition that the ports have to implement similar mitigation programs to ensure that costs are shared equitably, and neither port can benefit by foregoing participation. For example, the ports have coordinated in producing a joint Plan. Specific programs from this Plan are implemented jointly. For example, both ports have enacted similar regulations on vessel speed reductions and cleaner fuels, powering ships with shore based power when they are in port and replacing older truck engines with newer, cleaner burning engines. The ports are now working on a joint WRAP that will require the same type of joint effort and coordination. Both ports are dominated by container terminals. In the past, both ports also served other types of shippers such as liquid bulk, autos, break bulk, and cruise ship operators. In recent years, there has been some consolidation. The Port of Los Angeles has largely gotten out of the liquid bulk; e.g., petroleum business: and this type of cargo has consolidated in Long Beach. Wood products have largely consolidated at the Port of Long Beach as well. 2010 – 2011 Detriments of Current Port Structure In the past, the ports did not often compete for shipping traffic. Usually, there was little excess terminal capacity so steamship lines and terminal operators would have little choice in properties. In other cases, the steamship line or terminal operator worked with one port to develop a facility specifically for their requirements. Terminals were never built without a tenant in mind. In the past two (2) or three (3) years as cargo growth has trailed off and even decreased, the ports have started to compete for shipping traffic. For example, Hyundai Merchant Marine recently moved from Long Beach to Los Angeles. This is a concern since both ports serve the same market, use the same landside transportation infrastructure; and longshoremen are covered by the same collective bargaining agreement. The ports do not have many ways differentiating themselves other than lease rates or the configuration of a specific property. Should the ports engage in rate-based competition, it would result in a transfer of economic value from the publicly owned ports to privately held lessees, contrary to sound public policy goals which should preclude this type of subsidy. This may become a larger problem when the Panama Canal expansion is completed in three (3) years as shipping traffic potentially bypasses the West Coast altogether. There is duplication in some specialized facilities. For example, both ports operate cruise ship terminals (though the Port of Long Beach cruise terminal is technically leased out by another city department). Los Angeles is planning to open yet a third cruise ship terminal at Kaiser Point in the next few years. Should the cruise ship business lessen, there may be temptation to compete for this business resulting in a transfer of economic value from the publicly owned ports to private cruise ship lines. Finally, the ports compete for the same staff which theoretically increases personnel costs. There are duplicative administrative structures at both ports which precludes the ability to economize by sharing management positions. Potential Benefits of Consolidation Consolidating the control and governance of the two (2) ports could realize significant benefits. One major benefit is already being realized. As mentioned earlier, the two (2) ports are coordinating on environmental mitigation efforts such as the Plan and WRAP. This coordination requires negotiations between the environmental management units of each port as well as the approval of the two (2) governing boards. Consolidation would eliminate the need for these negotiations and the potential tradeoffs, compromises and uncertainty that undoubtedly occur with these negotiations. Consolidation would also be an explicit recognition that the two (2) ports share the same ecosystem and the source of pollutants is difficult to trace from one port or another. Consolidated ports would remove temptation for the two (2) ports to compete for shipping traffic on financial terms. This would ensure that private shipping interests are not being subsidized by publicly owned agencies through favorable lease terms. The consolidated port would still have to compete for shipping traffic with other port authorities in North America; but due to its location, sheer size and access to a vast local market, it could still compete effectively with other 166 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY West Coast ports. The distraction of competing with a nearby port authority would be removed. The combined port authority could compete as a united front. A consolidated port could benefit from a streamlined management structure including a consolidated governing board. This would result in unified decision making over port operations and development. In addition to more streamlined decision making, it would realize economies by reducing the number of management positions needed to staff the consolidated management structure. Infrastructure decisions may be streamlined through consolidation of ensuring that all facilities are used optimally throughout the port. For example, cruise ship operations could be consolidated at one or two facilities rather than the three that are either in operation or in the construction stage. Challenges to Consolidation Port consolidation faces some serious challenges. A major legal hurdle is that the two ports are located on separate land grants from the State. These grants would have to undergo some sort of consolidation which would require an act of the State Legislature. All existing lease contracts would also have to be assigned to the new port entity. Depending on the lease terms, some tenants may want to negotiate new terms. The consolidated port would most likely be governed through a port authority, a special district dedicated to operating the port. This would also require an act of the Legislature to create this special district. The region has precedents for a special district of this magnitude. The Metropolitan Water District of Southern California or the Los Angeles County Metropolitan Transportation Authority is successful examples of regional special districts. The role of the two (2) cities (Los Angeles and Long Beach) would have to be determined. The two (2) mayors might have appointment powers over the authority’s governing board, or the board might be elected region wide. Consolidation would also require consolidating, assuming or refinancing the existing port revenue bonds that each city has issued. It is conceivable that the bond markets may perceive less financial risk in a consolidated port authority than in the current city controlled structure. This would result in less debt service, reduced financing costs and more rate flexibility. Perhaps the most serious hurdle would be the loss of local control. A consolidated port authority would mean less control for the cities of Los Angeles and Long Beach unless they retained appointment powers for the governing board. A hybrid structure for the governing board where the mayors appoint some portion of the board while the remaining seats are elected region wide may make the most sense. In any scenario, amendments would have to be made to both city charters. 2010 – 2011
F4:
The Port of Los Angeles is adequately secured from external threats. Current Security Mandates and Level of Compliance The mandate for security of Port facilities is divided by jurisdiction. The Federal government has jurisdiction for ensuring security in all cargo and cruise terminals. This jurisdiction is further divided as follows: The U.S. Coast Guard has authority for securing the terminal facilities. This authority is granted by the Maritime Transportation Security Act (as enabled by the Code of Federal Regulations 33 CFR 105). These regulations require operators of deep draft; e.g., container terminals and cruise terminals to prepare a Facilities Security Plan which is approved by the Coast Guard. Each terminal lessee has a plan for their terminal property. The Coast Guard is responsible for enforcing the terms of these plans at the Port and has a small force of armed security staff to respond to violations of the plans. The Coast Guard has the authority to shut down a terminal in the event of a serious violation. A primary enforcement tool for the Coast Guard is the Transportation Worker Identification Credential (TWIC) which is required for access to any Coast Guard secured areas such as container terminals. The Port Police does not have access to the terminals unless requested by the Coast Guard or the terminal operator. The Coast Guard also has shared jurisdiction over the waterways with the Port. The U.S. Customs and Border Patrol has jurisdiction over the actual cargo. They monitor incoming containers through examination of records and will inspect certain high risk cargoes and containers such as those originating in the Middle East. Customs and Border Patrol also operates gamma radiation detection equipment at the exit gates of all container terminals. This equipment detects the presence of radiation and flags containers for more extensive inspection including opening the container and examining the contents. Security for other leased facilities at the Port, other than cargo and cruise terminals, is the responsibility of the individual lessees, which can include restaurant and hotel operators, warehouse operators and other industrial property lessees. This responsibility is established in the terms of individual leases and is similar to those found in standard commercial leases. Security for non-leased Port property is the responsibility of the Port Police. This includes waterways, roadways, common areas, parks and Port operated facilities. The Port Police have no mandate or responsibility for Homeland Security or counter terrorism. Instead, the Port Police is responsible for enforcing the Port Tariff; i.e., rules promulgated by BOHC for Port users, the Los Angeles Municipal Code and the State Penal and Vehicle Codes. The Port Police have a staff of 217, including 131 sworn police officers. The Port Police use an array of cameras, water-born sonar devices and patrol craft to monitor Port property. The Port Police augments the capabilities of the Federal authorities for certain functions such as water patrol and inspections using divers. Port divers inspect the hulls of ships if warranted. Drugs have been found hidden in hull cavities in the past. Water craft will provide a protective screen around cruise ships as they enter and exit the Port. 168 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY History of Security Incidents at the Port Since 2006, there have been only two (2) security breaches on Port property. Both involved fake TWICs and were investigated by the Coast Guard and prosecuted by the U.S. Justice Department. No further details are available. The Port Police tracks crimes and arrests on Port property involving violations of State or local laws. Reported crimes are approximately two hundred (200) per year with about two-thirds of these classified as Part I crimes; e.g., violent and property crimes. Theft and vandalism are frequent crimes reported at the Port in addition to traffic infractions. Port Police also make 400-500 arrests each year. About half of these arrests involve apprehending persons with outstanding warrants or for failure to appear. Rather than Homeland Security related issues, Port Police workload is similar to that of a municipal police force with the addition of a sizeable surveillance function.
Additional Recommendations
4
Not linked to specific findings.
R1:
BOHC to restructure PCAC, improving the efficiency and effectiveness of the Committee and refocusing its mission: a. Rename PCAC to Port Region Advisory Committee. Note: the committee will still be referred to as PCAC in this recommendation for ease of understanding b. Adopt a resolution that fulfills the requirements of the ASJ, Article IX-B and better define the role of PCAC: i. Article IX-B requirement is, “(a) the Board will consider all resolutions adopted by PCAC in an expeditious and timely manner; and (b) the Board shall issue a written statement of reasons and appropriate findings for any PCAC resolution rejected by the Board.” ii. Make the resolution clear and specific in defining the types of actions and decisions in which PCAC should engage, including reviewing CEQA documents, mitigation measures costing more than $1 million, as well as, those vetted by the TraPac related non-profit Board. c. Enhance the governance role of BOHC by establishing an annual work plan for PCAC. Require quarterly updates on deliberations through a standing agenda item on the BHS agenda. Furthermore, the BHS resolution should include a requirement that a BOHC member serve as a Co-Chair of PCAC. The role of this Co-Chair would be to ensure that PCAC fulfills its advisory role to BOHC and focuses on mission related activities. d. BOHC to amend PCAC’s by-laws so that PCAC and its sub-committees meet quarterly instead of monthly. e. BOHC to amend PCAC’s by-laws regarding composition of PCAC constituent organizations and voting membership to reflect the relative impacts of Port operations on the groups. For example, residential composition should be weighted higher than business composition insofar as Port operations impact residents more than businesses. The by-laws should also reduce the total composition of PCAC by 40%, thereby eliminating groups that are not as 2010 – 2011 established or lack certification standards, such as a legal structure, elected officers, etc. Table 4 shows how one such restructuring would look: Table 4 Proposed PCAC Composition Type of constituency Organization # of reps Total # Total % Neighborhoods/Residential Central SP 1 Coastal SP 1 Harbor City 1 NW SP 1 Wilmington 2 CD 15 ‐ SP 2 CD 15 ‐ Wilmington 1 Total Neighbor/residential 9 45% Civic Wilmington Comm Advisory 1 1 5% Business/Econ Dev Harbor Assoc of industry 2 SP C of C 1 PMSA 1 Wilmington C of C 1 Total business/econ dev 5 25% Labor ILWU 1 Non‐ILWU 1 Total labor 2 10% Education LA Harbor College 1 1 5% At Large BHC appointed 1 CD 15 appointed 1 Total at large 2 10% Totals 20 20 100% f. BOHC to amend PCAC’s by-laws to include a certification process for PCAC constituent organizations. These organizations should: i. Be registered with the California Secretary of State ii. Have their own by-laws or articles of incorporation iii. Have a purpose that has a nexus or connection with Port operations or the impacts of Port operations iv. Meet at least quarterly in open session v. Elect officers vi. Organizations should be required to recertify annually. Any organization that has not recertified within six (6) months should be decertified and replaced. This requirement would not apply to governmental organizations or subdivisions such as Neighborhood Councils. g. BOHC to amend PCAC’s by-laws to include a certification process for PCAC voting members. The certification requirement should include: 170 2010 – 2011 LOS ANGELES COUNTY CIVIL GRAND JURY i. Prospective voting members should have a letter of nomination from their appointing constituent organization. BOHC would then certify their appointment. ii. Certification should be revoked if the voting member has two (2) unexcused absences or three (3) excused absences during a period of four (4) consecutive quarterly meetings. iii. Certification should also be revoked if the voting member is charged with code of conduct breaches in two (2) meetings during a period of four (4) consecutive quarterly meetings. iv. Upon revocation, the voting seat would be filled by the alternate voting member, or the constituent organization could nominate a new member. v. Existing PCAC members can be granted new five-year terms at the discretion of BOHC. h. BOHC to amend PCAC’s by-laws to limit terms for PCAC Co-Chair (not a BOHC member) and PCAC sub-committee chairs to two (2) consecutive one (1) year terms. Terms for all PCAC members should be limited to five (5) years. i. BOHC to amend PCAC by-laws to include a code of conduct for PCAC members. This code of conduct should be enforced by an appointed Sergeant-at-Arms. Breaches of the code of conduct should be documented and enforced pursuant to the revocation process as described above. j. Retain the current roster of sub-committees within PCAC plus the addition of a subcommittee that would assume the responsibilities of the planned non- profit organization to oversee the Port Community Mitigation Trust Fund. This new subcommittee would replace this planned non-profit organization. All recommendations from this subcommittee would then be vetted and approved by PCAC prior to recommendation to BOHC. k. Continue to assign technical and administrative support staff to PCAC meetings in order to provide expert advice and knowledge. The Port should continue to assign legal counsel to PCAC meetings.
R2:
Revisit the Plan to ensure that all particulate matter, not just DPM, is being tracked and those reduction goals are included for PM and PM . 2.5 10
R3:
BOHC to propose to the City of Long Beach the commissioning of independent study of the costs and benefits of a consolidated Port Authority in San Pedro Bay. The study should be overseen by a commission composed of experts in municipal finance, supply chain logistics, public health, and public policy plus representatives from the governments of Los Angeles County, City of Los Angeles, Long Beach and the State of California, including a representative from the State Lands Commission. Should the study suggest that the region would benefit from a consolidated Port Authority; the Commission would be well advised to develop a legislative action plan to enact the recommendations from the study. 2010 – 2011 SUMMARY OF FINDINGS AND RECOMMENDATIONS
R4:
The Port of Los Angeles is adequately secured from external threats. RECOMMENDATIONS