The Magazine

They're No Angels

Los Angeles's pay-to-play politics.

Jun 7, 2004, Vol. 9, No. 37 • By DAVID DEVOSS
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Los Angeles

EARLY ONE MORNING in April, Los Angeles commuters on the Hollywood Freeway thought their prayers had been answered. On the radio, Mayor James Hahn was promising to eliminate traffic congestion on the main highway that runs from downtown to the San Fernando Valley. "Tomorrow we'll be beginning construction on a $5 billion remake of the 101 Freeway," he chirped. "The only problem for commuters is we will have to be shutting down all lanes in both directions on the freeway for the next 12 months."

Hahn waited a beat, and then admitted that his fleeting promise of orderly transportation was just a joke. "April fools!"

Tall, slim, and handsome, James Hahn, 53, could play a mayor on TV if he weren't one in real life. The son of a South Los Angeles pol beloved for opening municipal government jobs to blacks, Hahn rode his pedigree, prior service as city attorney, and unswerving loyalty to the Democratic party to City Hall three years ago. At his inauguration Hahn vowed to create a service-oriented, user-friendly city attuned to the needs of its neighborhoods. Today, however, Hahn's administration is in shambles. A month seldom passes when the city controller doesn't discover some new instance of fiscal mismanagement in L.A.'s wildly politicized departments, all monitored by 350 commissioners handpicked by Hahn and the City Council. The U.S. attorney, the L.A. district attorney, and a local grand jury all are investigating the city's opaque procedures for awarding municipal contracts. Four deputy mayors already have resigned, along with several tainted commissioners. Those still connected to City Hall recently learned that all their emails relating to city contracts are being subpoenaed.

The federal and county investigations are both focusing on the appointed commissioners overseeing the city's airports, the harbor, and water and power, three enormous municipal monopolies that collectively account for more than $3.5 billion in annual revenue. At issue is whether the building contractors, political consultants, union bosses, and property developers often appointed as commissioners have turned the process of civilian oversight into a "pay-to-play" shell game where campaign contributions and unsolicited gift-giving are unspoken prerequisites to doing business with the city.

"L.A. basically is a clean city, but its tolerance for corruption is increasing," says City Controller Laura Chick, a self-proclaimed "truth-teller" who gets ready for work by listening to skirling bagpipes on her car stereo. "We have an environment ripe for fraud." Chick's performance reviews of city departments have shown a pattern of waste among commissioners. The pattern extends from the Department of Water and Power--which signed a $3 million contract with a politically connected public relations firm, despite already having a $13 million in-house publicity staff--to Van Nuys airport, which has lost more than $15 million since 1990 by failing to renegotiate leases to reflect fair market value.

The first woman ever elected to citywide office in Los Angeles, Chick often rails against the "sexist, good-old-boys work environment" at City Hall that has produced "an arrogance in city government that's so thick you could cut it with a knife." To get her point across she created an "Ethics Brigade" of community activists ready to testify at public hearings at a moment's notice. Two months ago, the brigade scored a major triumph when it forced an embarrassed City Council to pass an ordinance prohibiting future city commissioners from soliciting campaign contributions. The mayor's office was quick to make its irritation known. A few days after testifying in favor of the ordinance, Bonny Herman, who represents the San Fernando Valley on the Metropolitan Water District's board of directors, was summarily dismissed. Says Herman: "I was doing a fabulous job, but now I'm gone and the 1.8 million people of the San Fernando Valley have no representation on the MWD."

The idea of city commissions headed by irreproachable community leaders was introduced to Los Angeles almost a century ago by progressive reformers from the Midwest who believed civilian oversight of politicians and bureaucrats would insure independent, nonpartisan government. With the exception of a few decades colorfully recounted by James Ellroy, the system largely worked until the arrival of Hahn. "A mayor can appoint independent thinkers or robots to serve on city commissions," says David Fleming, a former member of the city's Ethics Commission who is now executive director of the Economic Alliance of the San Fernando Valley. "This mayor prefers robots."

WITH 3.8 MILLION RESIDENTS, Los Angeles has a larger population than 25 states. The area it covers is so extensive that St. Louis, Milwaukee, Cleveland, Minneapolis, San Francisco, Pittsburgh, and Manhattan all could nestle within the city limits and have room to spare. Centrifugal forces in a city of this size are enormous. Civic leaders know that boroughs would provide better government than what L.A. has now--a mayor and 15 city councilmen. The 15-member city council system was setup in 1876 when Los Angeles had 9,000 residents. Today, each council member represents more than 230,000 residents. But change would decentralize power and jeopardize the grip that unions, property developers, and political contributors have on the existing power structure.

The seeds of the current morass were sown in the depths of L.A.'s worst nightmare. In 2002, after years of fruitless lobbying, neighborhood activists in the San Fernando Valley finally succeeded in placing a proposition on the ballot that would have allowed the Valley to secede from L.A. and form an independent city if a majority of voters approved. Used as a cash cow for decades, the Valley is home to 35 percent of the city's population and encompasses roughly 50 percent of its geographic area. Yet the Valley receives less services for its tax dollars than any other part of the city. There are fewer libraries, police stations, and museums in the Valley. The L.A. Basin has the beginnings of three subway lines, but despite paying $1.3 billion into a mass transit fund, the Valley has only clogged freeways. A new Valley municipality, secessionists claimed, would rank as the safest city among the nation's top ten and the sixth largest city overall. The main effect of dividing Los Angeles, they argued, would be the creation of two smaller, more efficient, and representative city governments.

There was little chance of the measure passing given that people throughout Los Angeles were allowed to vote on it. But City Hall took no chances, especially since Hollywood was trying to secede along with the Valley. Even San Pedro, the community where James Hahn lives, wanted to jump ship. If the Valley and Hollywood left, why couldn't affluent Brentwood, West Los Angeles, and Pacific Palisades? Troublemakers on the Westside already had a plan to create a city called Rancho San Vicente if the Valley managed to break free. Was it L.A.'s destiny to consist of Watts, the eastern barrios, and a civic center only Ridley Scott could love?

For Hahn and his minions at City Hall there could be no compromise in the fight to save Los Angeles. City contractors were urged to contribute to the L.A. Unified campaign by the commissioners overseeing their contracts. Commissioners favoring Valley cityhood, even those who tried to remain neutral, were pressured to resign. Supervisors solicited donations from city employees; unions with city contracts asked their members for money. In the end, Mayor Hahn collected $6.2 million that he used to finance a massive disinformation campaign. A majority of voters in the San Fernando Valley did elect to form their own city, but they were far outnumbered by No votes from people in the rest of the city.

Backroom deals made in the rush to defeat secession are being investigated. St. Louis-based public relations firm Fleishman-Hillard, for example, was awarded a two-year $560,000 contract to "develop key messages" for the Port of Los Angeles after its executives paid $10,000 to dine with the mayor at an anti-secession fundraiser. Until last month, when the company cut all ties with Los Angeles, Fleishman-Hillard had contracts worth nearly $3 million with city agencies. The relationship has been profitable for both sides. Since 1998, Fleishman and its executives have contributed more than $135,000 to candidates and their political committees. Over the same period of time, the Department of Water and Power alone awarded Fleishman-Hillard $20 million worth of business.

Law firms that host political fundraisers for Hahn and City Attorney Rocky Delgadillo are remarkably successful at obtaining city contracts. Last year, Los Angeles paid $18.9 million for outside legal assistance, much of it going to firms whose partners contribute heavily to city campaigns and are registered as lobbyists for clients doing business with the city. According to research conducted by Los Angeles Times investigative reporter Patrick McGreevy, lucrative contracts for outside work that could have been done by some of the 820 lawyers on the city attorney's staff were approved or expanded within weeks of political fundraisers' being held.

In 2001, Los Angeles construction firm Tutor-Saliba was fined $29.5 million for submitting false claims on a subway construction project. Despite this lapse, the company last year received a $34 million contract to build a terminal for L.A. airport shuttle buses. Why did Tutor-Saliba get another contract? A $100,000 donation to Hahn's 2002 anti-secession campaign didn't hurt. Neither did the $114,000 the company and its executives gave Hahn the year before when he ran for mayor.

If there is a smoking gun amidst all this questionable activity, it probably will be found at LAX, where Hahn's administration is promoting a $9.1 billion airport expansion designed to harden the facility against terrorist attack. The project--the second largest municipal development in U.S. history behind only Boston's "big dig"--is highly unpopular in neighborhoods surrounding the airport. Even L.A.'s spendthrift city council has criticized it. A Rand Corporation analysis concluded last year that it would create as many security problems as it solved. But the Hahn administration--which claims it lacks the funds to keep many libraries and swimming pools open this summer--is pushing ahead nonetheless, many believe, because it's the type of development that prompts companies competing for contracts to make political contributions.

A San Francisco-based engineering company called URS Corporation says it lost a multimillion-dollar contract because of its refusal to contribute $100,000 to the anti-secession campaign. Federal investigators say the president of the Airport Commission, a pugnacious attorney appointed by the mayor because of his fundraising prowess, told URS's corporate lobbyist that no future contracts could be expected when money was not forthcoming. Both individuals deny the exchange. But the fact remains that a new multimillion-dollar contract for continuing the work URS currently conducts has been given tentatively to another consortium which contributed a total of $141,000 to the anti-secession effort.

Los Angeles eventually may get its ethical house in order, but even if it institutes a transparent contracting process the city will remain crippled for years because of profligate administrators. Los Angeles has the highest paid city employees in the country. If streetlights, asphalt, and library books seem in short supply it's because 85 percent of the city budget goes to salaries. It's unlikely that generous annual raises will ever be reduced since union leaders who negotiate the contracts also sit on commissions monitoring public works.

Several years ago, the Los Angeles police union negotiated what may be the best compensation package in America. Under the new guidelines, a cop with 33 years on the force can retire at age 54 with full medical benefits and 90 percent of his annual salary, which for a lieutenant amounts to around $100,000. Naturally, with a deal like this, everyone who had 33 years of service immediately applied for retirement. Hiring more junior officers might have eased the ensuing labor crisis. Instead, the city council agreed to a program that pays people with 33 years of seniority to keep working for an additional five years while simultaneously allowing them to collect their retirement benefits. Not only do police continue to receive pay raises and promotions during their five additional years of service, but they also get 6 percent interest on their accruing pension, which is held in a special tax-free account. The result is that a lieutenant who agrees to work for 38 years can walk away with a $600,000 nest egg in addition to his regular pension benefits.

In return for union support three years ago, Hahn promised the police a "compressed" work week consisting of three 12-hour days. Police loved the idea since, freed from the daily commute, they could move their families out of Los Angeles. Unfortunately court schedules remain unchanged, which means police often must drive back to L.A. on their days off to testify. Says one LAPD insider: "Not too many of the guys mind since this gets them into double overtime pretty quickly."

Until recently, the city and county of Los Angeles covered ballooning salaries and pensions with bonds, increased fees, half-cent sales tax hikes, and surcharges. But now L.A. faces a $250 million budget deficit thanks to the fiscal crisis in Sacramento. L.A. sheriff Lee Baca releases around 130 prisoners a day because, he claims, reduced funding has forced him to close jails. Many are car thieves, abusive spouses, and sexual predators who serve less than 10 percent of their sentence.

L.A.'s pay-to-play climate does not necessarily make the city a less attractive place to work. Witness the rise of Cody Cluff, a 45-year-old accountant who nine years ago persuaded City Hall to let him start the Entertainment Industry Development Corporation. Created to promote film production in L.A. (talk about coals-to-Newcastle), the EIDC was a great place to work. Cluff paid himself a $200,000 salary plus a $1,800-a-month housing allowance. His travel and entertainment expenses averaged $30,000 a month. Cluff had so much money that he even gave $10,000 to the Pittsburgh Film Office, an act of generosity later explained by the fact it was headed by his mistress.

You might ask why the EIDC's board of directors allowed such behavior. Because the board consisted of L.A.'s 15 city council members plus L.A. county's five supervisors. Informed by the district attorney in late 2002 that Cluff had embezzled $59,000 for strip club parties and other personal extravagances, the board pronounced itself shocked by his behavior. One reason for their lack of oversight may have been that Cluff gave $170,000 of the public money he collected to his board members in the form of campaign contributions. As extra insurance he even gave $25,000 to fight the secession of San Fernando Valley.

Last week, Cluff pleaded guilty to a felony and agreed to make restitution in the amount of $80,000. It is a manageable sum under the circumstances: The elected officials on the EIDC board awarded him a $287,000 severance package when the scandal broke.

David DeVoss, East-West News Service editor, reports on California politics.