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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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.