FINAL REPORTS &

RECOMMENDATIONS

RE: BUSINESS & ECONOMIC DEVELOPMENT and COLLECTIONS & EFFICIENCIES

EIGHT REPORTS OF THE CITY OF LOS ANGELES AD HOC COMMISSION ON REVENUE EFFICIENCY

Ron Galperin, Chair Hon. Cindy Miscikowski, Vice Chair

Mark Ames, Commissioner David Farrar, Commissioner

Michael Gagan, Commissioner Cheryl Parisi, Commissioner

Brandon Shamim, Commissioner

www.core.lacity.org March 2012

COMMISSIONERS

Ron Galperin (Chair) concurrently serves as President of the L.A. City Quality & Productivity Commission and as a member of L.A. County’s Quality & Productivity Commission. He is Vice President of the Bel Air-Beverly Crest Neighborhood Council, a member of the United Way / L.A. Area Chamber of Commerce Homelessness Task Force, and former Chair of the L.A. Jewish Federation’s anti-hunger initiative. Mr. Galperin is an attorney, business owner, Cantor and the author of hundreds of articles for The L.A. Times, L.A. Business Journal and other local and national publications. (Councilmember Garcetti appointee)

Hon. Cindy Miscikowski (Vice Chair) represented the 11th District on the Los Angeles City Council from 1997 through 2005. Previously, she was an aide to Councilman Marvin Braude and the Executive Director of the Skirball Cultural Center. She is currently the President of the Board of Harbor Commissioners, overseeing the Port of Los Angeles. (Mayor Villaraigosa appointee)

Mark Ames is a private investor. From 1993 through June 2007, he worked for Lehman Brothers where he was a Managing Director in the Fixed Income Division, working both in New York and London. During his time at Lehman, Mr. Ames ran various businesses within Fixed Income and has extensive experience in finance, corporate credit and securitization. He was a member of the Global Fixed Income Operating Committee and the European Fixed Income Operating Committee. Mr. Ames has a BA in Economics from Princeton University. (Mayor Villaraigosa appointee)

David Farrar served of counsel at Linebarger, Goggan, Blair & Sampson, LLP, a law firm which specializes in collecting government receivables. In 1998, Mr. Farrar served as a member of Los Angeles County's Economy and Efficiency Commission. He has also served as Chairman of the Los Angeles Community Redevelopment Commission as well as an appointee to the Board of the Metropolitan Water District of Southern California. (Councilmember Koretz appointee)

Michael Gagan is the founder of Kindel Gagan, a public affairs consulting firm. He has previously served as Chief Deputy State Treasurer under Jess Unruh and as Chief Deputy Secretary of State under March Fong Eu. While working for Treasurer Unruh, Mr. Gagan served on thirty-five financing boards and commissions as well as the governing boards of CalPERS and STRS. (Councilmember Parks appointee)

Cheryl Parisi is the Executive Director of AFSCME District Council 36. Ms. Parisi also chairs the Coalition of L.A. City Unions comprised of six unions representing 22,000 City employees. The Coalition is the voice of L.A. City workers championing quality City services for L.A.’s diverse communities. (Councilmember Garcetti appointee)

Brandon Shamim is the President and CEO of Beacon Management Group and Chairman of the Small Business Council for the Greater Los Angeles Area Chamber of Commerce. He served as a U.S. Department of Commerce director, worked at a national public policy think tank and is a professor at UC Riverside's Institute for Global Business Management. (Controller Greuel appointee)

EXECUTIVE SUMMARY OF REPORTS

PROJECTED REVENUE & SAVINGS IMPACTS

he City of Los Angeles Ad-Hoc Commission on Revenue Efficiency (CORE) was formed in the spring of 2010 to evaluate and recommend improvements in collections, billing and new revenues. Comprised of seven volunteer Commissioners, CORE issued its Blueprint for Reform of City Collections in the fall of 2010, identifying potential revenues and savings of up to $100 million annually. The Commission has

concluded its second and final phase of work with eight comprehensive reports – four focused on Business & Economic Development and another four on Collections & Efficiencies. These eight reports identify and detail the potential for additional combined revenues and savings of $100 million annually – with opportunities for up to $350 million* in such additional revenues and savings annually:

BUSINESS & ECONOMIC DEVELOPMENT:

1. Promoting Local Procurement and Business Preference Review: Dollars & Jobs Lost by the City in Contracts with non-L.A. Businesses for Goods & Services – Proposals to generate more business opportunities and sales tax revenues for the City. CORE estimates the potential for combined revenues and savings of at least $10 - $15 million annually – with significant opportunities for in excess of $100 million annually. (Jobs & Business Development) **

2. Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations – CORE’s survey of all City departments and bureaus for their best new revenue and savings ideas. This report summarizes the responses, highlights the ideas and offers ways to encourage and support more entrepreneurial initiatives. CORE estimates the potential for combined revenues and savings of approximately $25 million annually – with significant opportunities for in excess of $100 million annually. (Budget & Finance / Audits & Governmental Efficiency)

3. Assessing Business-Related Police Permits & Fees – Opportunities to streamline and simplify the currently 59 distinct police permits for local businesses. CORE estimates the potential for combined revenues and savings of approximately $1 - $5 million annually. (Jobs & Business Development / Public Safety)

4. Failure to Manage City Properties Leased to Non-Profits: Time for Accountability – Evaluation of the more than 100 City-owned properties occupied rent-free. CORE estimates the potential for combined revenues and savings of at least $1 - $5 million annually. (Information Technology & General Services / Budget & Finance / Arts, Parks, Health & Aging)

COLLECTIONS & EFFICIENCIES:

5. Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars – Options for reform of collections, ordinances, etc. CORE estimates the potential for combined revenues and savings of $20 - $30 million annually. (Audits & Governmental Efficiency / Budget & Finance)

6. Managing Our Money: Intergovernmental Revenue Sources – Strategies to monitor & maximize City revenues from (a) real property, business personal property, documentary transfer and sales taxes, and (b) court fees/fines. CORE estimates the potential for combined revenues and savings of $40 - $100 million annually. (Budget & Finance)

7. Improving Collection of Unpaid Parking Tickets: Rental Cars & New Technologies -Recommendations to improve collections on parking tickets issued to rented vehicles and use of new technologies. CORE estimates the potential for combined revenues and savings of $3 - $10 million annually. (Budget & Finance / Transportation)

8. Follow-up to C.O.R.E.’s Blueprint for Reform of City Collections -- Status report on implementation of C.O.R.E.’s Oct. 2010 Blueprint and Accompanying Recommendations Tracker. Per the Blueprint, CORE estimates the potential for combined revenues and savings of $10 - $25 million in the coming fiscal year, and within three years, as much as $100 million or more annually. (Budget & Finance / Audits & Governmental Efficiency)

Ad Hoc Commission on Revenue Efficiency

Ron Galperin, Chair Hon. Cindy Miscikowski, Vice Chair Mark Ames, Commissioner David Farrar, Commissioner Michael Gagan, Commissioner March 2012 Cheryl Parisi, Commissioner Brandon Shamim, Commissioner Website: http://core.lacity.org/

* Each report describes the enquiries, assumptions and conditions upon which evaluation of estimates of potential revenues and savings are necessarily based. ** City Council Committee(s) to which reports might be assigned, and/or with interests in the respective subject matters thereof.

T

Letter re Final Reports & Summary of Work

March 22, 2012 Page 1 of 5 Pages

March 22, 2012 The Honorable Antonio Villaraigosa, Mayor The Honorable Wendy Greuel, City Controller The Honorable Carmen Trutanich, City Attorney Honorable Members of the City Council

FINAL REPORTS & SUMMARY OF WORK

The City of Los Angeles Ad-Hoc Hoc Commission on Revenue Efficiency (CORE) is

pleased to report that it has completed its work and herewith submits its Final Reports and

Summary of Work.

A. EIGHT FINAL REPORTS

In the fall of 2010, CORE completed its first phase of work in issuing the Commission’s

Blueprint for Reform of City Collections -- identifying potential revenues and savings of up to

$100 million annually. As of January 2012, the Commission has concluded its second and final

phase of work with eight comprehensive reports – four focused on Business & Economic

Development and another four on Collections & Efficiencies. These eight reports identify and

detail the potential for additional combined revenues and savings of $100 annually – with

opportunities for up to $350 million1

in such additional revenues and savings annually.

Attached hereto is a 1-page Summary of Reports & Projected Revenue & Savings

Impacts. Copies of all eight Final Reports, Appendices and the Blueprint – along with copies of

archived Commission Agendas, Minutes and background and research documents and reports

are all available on the Commission’s website: www.core.lacity.org. Each of the Final Reports

have also been individually transmitted through the City Clerk and distributed to the City offices,

Department(s) and Council Committee(s) listed, respectively, in each of the individual Reports.

1 Each report describes the enquiries, assumptions and conditions upon which evaluation of estimates of potential revenues and savings are necessarily based.

Letter re Final Reports & Summary of Work

March 22, 2012 Page 2 of 5 Pages

In brief, the eight Reports encompass:

BUSINESS & ECONOMIC DEVELOPMENT:

1. Promoting Local Procurement and Business Preference Review: Dollars & Jobs Lost by the City in Contracts with non-L.A. Businesses for Goods & Services.

2. Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations.

3. Assessing Business-Related Police Permits & Fees.

4. Failure to Manage City Properties Leased to Non-Profits: Time for Accountability.

COLLECTIONS & EFFICIENCIES:

5. Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars.

6. Managing Our Money: Intergovernmental Revenue Sources.

7. Improving Collection of Unpaid Parking Tickets: Rental Cars & New Technologies.

8. Follow-up to C.O.R.E.’s Blueprint for Reform of City Collections.

B. THE COMMISSION AND ITS WORK

C.O.R.E. was created by the City Council in 2010 to evaluate and recommend

improvements in collections, billing and revenue and efficiency enhancements. (Council File No.

09-2560). Since the Spring of 2010, our seven-member Commission, appointed by five of the

City’s elected officials, has conducted more than 45 public meetings. The Commission met

with, and received reports from, various City departments, including representatives from offices

of the Mayor, City Attorney, City Controller, Council offices, City Administrative Officer, Chief

Legislative Analyst, Office of Finance, Animal Services, Police Commission, Transportation,

Bureau of Sanitation, LAHD, Building and Safety, LAFD, and others. CORE has also received

input from consultants to the City, the Coalition of L.A. City Unions, businesses, business

associations, members of the public, and independent entities that specialize in the areas of

revenue collections and accounts receivable management and Neighborhood Council budget

representatives. The Commission also met with representatives of the County of Los Angeles

and Commissioners individually conducted extensive research and inquiries to bolster the work

of the Commission.

Letter re Final Reports & Summary of Work

March 22, 2012 Page 3 of 5 Pages

C. BLUEPRINT FOR REFORM OF CITY COLLECTIONS

In its first phase of work, CORE issued its Blueprint for Reform of City Collections in the fall

of 2010 -- and presented said Report to Council on May 3, 2011 (10-0225). The Blueprint details 65

specific recommendations, including CORE’s recommendation of an Inspector General for Revenue

& Collections. Further, the Blueprint offers a comprehensive roadmap for reform of billing and

collections activities, and the potential for the City to realize revenues and savings of $10 - $25

million in the coming fiscal year, and within three years, as much as $100 million or more annually.

Some of the Blueprint’s recommendations have been implemented, or partially

implemented, others have not. CORE’s Final Report No. 8: Follow Up to CORE’s Blueprint for

Reform of City Collection – and Accompanying Recommendations Tracker – follows which of our

Commission’s Recommendations we believe have been implemented, partially implemented or are

still awaiting implementation. Our Commission urges that implementation of the Recommendations

should remain a priority to generate much-needed revenues and savings for the City.

D. INSPECTOR GENERAL

Central to CORE’s recommendation was the creation of a post of Inspector General for

Revenue & Collections. Pursuant to the City Council’s approval of such a position, the City

advertised therefor in August 2011, and again in the fall of 2011. To date, the position remains

unfilled. It continues to be CORE’s very strong recommendation that the City create this post for

a 1-2 year period to independently report on, and aid in, the implementation of, the City’s

Collection Guidelines, the Controller’s recommendations and the recommendations of CORE’s

Blueprint. As we stated in the Blueprint: Reports, audits, Mayoral directives, Council directives

and Collection Guidelines have proven to be insufficient by themselves in bringing about reform

of collections.

CORE recommends that the IG be assigned to focus on several distinct pools of collections

where the City can achieve significant and timely results. And, as detailed CORE’s Final Report

No. 8: Follow Up to CORE’s Blueprint, if the IG focuses on these areas – even without achieving a

thorough overhaul of collections – we believe the IG will have been a great success. Specifically:

• Emergency Medical Services (EMS) billings;

• Parking citations; and

• Parking (occupancy) tax.

The Commission encourages and looks forward to an IG beginning work forthwith in

order to carry forth our recommendations and assure their implementation and success.

Letter re Final Reports & Summary of Work

March 22, 2012 Page 4 of 5 Pages

E. THANK YOU

The Commissioners would like to express our gratitude for the assistance of myriad

individuals in and out of City government, and for the honor and privilege of being of service to

the people of the City of Los Angeles. And, we also thank each of the City officials who had a

role in appointing the members of CORE. A list of Acknowledgements is also attached hereto.

While the Commission’s formal work is hereby concluded, each of the Commissioners

intends to remain available and on-call to further assist in any way. The Commission is grateful

for the opportunity to be of service, and we look forward to your consideration of this Report.

Respectfully submitted, Commission on Revenue Efficiency

Ron Galperin, Chair Hon. Cindy Miscikowski, Vice Chair Mark Ames, Commissioner David Farrar, Commissioner Michael Gagan, Commissioner Cheryl Parisi, Commissioner Brandon Shamim, Commissioner

Attachments / Enclosures

CC: Arts, Parks, Health & Aging Committee

Audits and Governmental Efficiency Committee Budget and Finance Committee Information Technology and General Services Committee Public Safety Committee Jobs & Business Development Committee Transportation Committee

Neil Guglielmo, Deputy Mayor, Budget & Financial Policy

Listed Acknowledgements

Contacts:

Ron Galperin, Chair Ad Hoc Commission on Revenue Efficiency ron@rongalperin.com

Jon Dearing, Analyst Office of Chief Legislative Analyst Jonathan.dearing@lacity.org

Website:

http://core.lacity.org/

Letter re Final Reports & Summary of Work

March 22, 2012 Page 5 of 5 Pages

ACKNOWLEDGEMENTS

The Commission would like to express its appreciation and thanks to the following:

• Appointing officials. The Commissioners are grateful to the elected officials who honored us with appointments to the Commission on Revenue Efficiency: o Hon. Mayor Antonio Villaraigosa; o Hon. Controller Wendy Greuel; o Hon. Councilmember and former Council President Eric Garcetti, who introduced the

Council Motion wherein CORE was created; o Hon. Councilmember and Budget & Finance Committee Chair Bernard Parks; o Hon. Councilmember and former Audits & Governmental Committee Chair Paul Koretz;

Additional thanks to each of their staff.

• City Attorney’s Office: o City Attorney Carmen Trutanich o Beverly Cook, Supervising Attorney, Finance Section

• City Administrative Officer Miguel Santana

• Office of Finance: o Antoinette D. Christovale, Director of Finance / City Treasurer o Ed Cabrera, Assistant Director o Jeff Whitmore, Revenue Manager, Revenue Management Division o Todd Bouey, Senior Mgmt. Analyst II, Centralized Accounts Receivable Reporting

• Chief Legislative Analyst. We thank the CLA for all of its ongoing staff assistance. We particularly wish to thank: o Jon Dearing, Legislative Analyst –our outstanding staff person for the Commission o John Wickham, Legislative Analyst

• Police Commission: o Richard Tefank, Executive Director, LAPD Board of Commissioners

• City Departments and offices that have appeared before the Commission: o Animal Services Department o Department of Transportation o Bureau of Sanitation o Housing Department o Department of Building and Safety o Fire Department

• Los Angeles Parking Association:

o Robert Hindle, Chairman. V.P. of Parking Concepts Inc. o Ken Spiker, Ken Spiker & Associates, Inc., Association Executive Director.

• Los Angeles County Assessor: Hon. John R. Noguez

• Neighborhood Council stakeholders and budget representatives.

• Members of the public for valuable input.

• Coalition of L.A. City Workers.

• Outside consultants and others.

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 1 of 30 pages

Report Re: PROMOTING LOCAL PROCUREMENT & BUSINESS PREFERENCE REVIEW

DOLLARS & JOBS LOST BY THE CITY IN CONTRACTS WITH NON- L.A. BUSINESSES FOR GOODS & SERVICES

____________________________________________

TO: The Honorable Antonio Villaraigosa, Mayor The Honorable Wendy Greuel, City Controller The Honorable Carmen Trutanich, City Attorney Honorable Members of the City Council DATE: March 2012 I. Summary

THE PROBLEM – The City of Los Angeles has long ignored its own pronouncements to buy local – spending billions of dollars each year nearly everywhere but in L.A. As a result, Los Angeles has missed the opportunity to support local businesses and to create local jobs. It has denied itself millions of dollars in tax revenues each year.

THE SOLUTIONS – In recognition of the serious problems, the City Council

in October adopted an 8% local business preference to try to begin to address the problems of inequality in procurement. As Council considers next steps, this report details the inquiries and findings of the Commission on Revenue Efficiency (C.O.R.E.) about the City’s procurement of goods and services from businesses outside of Los Angeles – and our specific recommended solutions. These include more outreach to local businesses, streamlining the procurement and contracting process, simplifying bid packages, revising the definition of what a “lowest responsible bidder” means and a more strategic use of cooperative purchasing alliances.

C.O.R.E. also offers its analysis of the City’s just-adopted Ordinance to

establish an 8% Local Business Preference Program, along with what the Commission recommends as clarifications and follow-ups – including proposals for a possible City Charter amendment to more clearly authorize City business preferences.

C.O.R.E. Report Re: Promoting Local Procurement January 2012 Page 2 of 30 pages

The Ad Hoc Commission on Revenue Efficiency (C.O.R.E.) has examined approximately $1

billion in Los Angeles City contracts for goods and services over recent six-month periods. Disturbingly, the Commission found that Los Angeles City businesses accounted for less than 8% of these contracts. Worse yet: In a nine-month period, three departments bought $60 million in vehicles – none were purchased from dealers located in the City of Los Angeles.

With its procurements, the City of Los Angeles is generating business and jobs outside the

City and millions of dollars in tax revenues to jurisdictions other than itself. And, while the City rightly encourages its residents to “Shop LA,” the City itself is shopping elsewhere. The City reportedly spends just 16% of more than $1 billion in General Fund procurement dollarsi on businesses in the City, and, it appears, an even lesser percentage for purchases by its Proprietary Departments: the Los Angeles Department of Water & Power, Los Angeles World Airports and the Port of Los Angeles.

The City Council’s charge to C.O.R.E. (Council File No 09-2560) was to evaluate and recommend improvements in billing, collections and compliance – and in the area of new revenues. Our seven-member Commission can think of few better and more important ways to generate new City revenues than to encourage, support and buy from local businesses – and to create more local jobs. And, with some plain old common sense, the City of L.A. can help our businesses, create jobs and achieve millions of dollars in new City revenues annually -- merely by resolving to focus more of the money it already spends on purchase and service contracts into local businesses. Finally, we can further help our businesses, residents and our own City Treasury by working to encourage the County of L.A. and other local public agencies, to award the many billions they already spend annually to local businesses.ii

Imagine all that money now going elsewhere staying in the City – to maintain vital City

services.

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 3 of 30 pages

TABLE OF CONTENTS

I. SUMMARY – Page 1

II. LEGAL BACKGROUND & ISSUES OF CONCERN – Page 5

1. L.A. CITY CODE & CHARTER PROVISIONS RE COMPETITIVE BIDS AND PROPOSALS – Newly Enacted Preference Ordinance: Questions & Issues

2. LOCAL BID PREFERENCES – AND FEDERAL & STATE LAWS 3. LOCAL HIRING PREFERENCES GENERALLY 4. L.A. CITY CONTRACTS AWARDED TO SMALL BUSINESSES AND

BUSINESSES OWNED BY MINORITIES, WOMEN AND DISABLED VETERANS III. LOCAL BUSINESS PREFERENCE PROGRAM – Page 8

1. 2011 ORDINANCE RE 8% LOCAL PREFERENCE INITIATIVE -- and notable provisions

2. C.O.R.E.’s ANALYSIS OF THE 8% LOCAL PREFERENCE – AND NECESSARY NEXT STEPS

A. 8% Local Preference – the Favorable B. 8% Local Preference – the Limitations C. On Balance D. Moving Forward – and Necessary Next Steps

IV. RECOMMENDATIONS – Page 12

V. BACKGROUND: SCOPE OF L.A.’S CONTRACTING WITH NON-L.A. BUSINESSES – Page 16

1. CONTRACTS BY PROPRIETARY DEPTS. WITH NON-L.A. COMPANIES FOR GOODS

2. CONTRACTS BY PROPRIETARY DEPTS. WITH NON-LOS ANGELES COMPANIES FOR PERSONAL SERVICES AND CONSTRUCTION

3. FLEET PURCHASES BY THE CITY 4. PURCHASE ORDERS PLACED THROUGH GSD FOR NON-PROPRIETARY

DEPARTMENTS

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 4 of 30 pages

VI. REVENUE IMPACTS – Page 18

1. SALES TAX

A. L.A.’s Sales Tax Revenues B. L.A.’s Sales (and Use) Tax Expenses

2. LOST BUSINESSES & JOBS

3. LOST BUSINESS TAX REVENUES

4. OTHER LOST REVENUES

ENDNOTES – Page 21

APPENDICES – Page 23

Appendix A – C.O.R.E.’s REVIEW AND ANALYSIS OF U.S.C. REPORT(S) ON LOCAL VENDOR

PREFERENCES FOR CITY CONTRACTS

1. FOUR VERSIONS OF THE U.S.C. REPORT

2. QUESTIONS AND CONCERNS RE THE U.S.C. REPORT(S)

Appendix B – L.A. COUNTY / CITY SALES AND USE TAX RATE

Appendix C – SURVEY OF SELECTED LOCAL PREFERENCE PROGRAMS

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 5 of 30 pages

II. Legal Background & Issues of Concern

The scope of actions, incentives, preferences and other options that may be available to the City to achieve more local sourcing of goods and services is subject to various federal, state and local laws. Some of the more notable legal considerations are outlined below for informational purposes, and to serve as background information for C.O.R.E.’s Recommendations section. The application and interpretation of these laws is, of course, the purview of the City Attorney’s Office and of legal counsel to the City.

1. L.A. CITY CODE & CHARTER PROVISIONS RE COMPETITIVE BIDS AND PROPOSALS – Newly Enacted Preference Ordinance: Questions & Issues The L.A. City Charter (Vol. 1, Article III, Sec. 371) requires that most contracts be

competitively bid and awarded to the lowest responsive and responsible bidder. There are, however, certain exceptions:

A. LOS ANGELES CITY CHARTER -- (Vol. 1, Article III, Sec. 371) references two

types of competitive procurement/contracting methods: “Competitive Bidding” and “Competitive Sealed Proposals”:

(a) “Competitive Bidding. Contracts shall be let to the lowest responsive and responsible bidder….. Notwithstanding the provision of this subsection requiring award to the lowest responsive and responsible bidder, a bid preference can be allowed in the letting of contracts for California or Los Angeles County firms, and the bid specifications can provide for a domestic content and recycled content requirement. The extent and nature of the bid preference, domestic content and recycled content requirement and any standards, definitions and policies for their implementation shall be provided by ordinance.”

(b) “Competitive Sealed Proposals. As an alternative to an award pursuant to open and competitive bidding, a contract can be let pursuant to a competitive sealed proposal method, in accordance with criteria established by ordinance adopted by at least a two-thirds vote of the Council.”

(e) “Exceptions. The restrictions of this section shall not apply to: … (8) Contracts for cooperative arrangement with other governmental agencies for the utilization of the purchasing contracts and professional, scientific, expert or technical services contracts of those agencies and any implementing agreements, even though the contracts and implementing agreements were not entered into through a competitive bid process.”

Questions and Issues -- The language of the Charter creates some uncertainty. While C.O.R.E. does not seek to opine on the laws of the City of Los Angeles, or the interpretation thereof, we note the following:

County vs. City preference: There is a permissible bid preference for letting of contracts for “Los Angeles County Firms” – and the “extent and nature of the bid preference … and any standards, definitions and policies for their implementation shall be provided by ordinance.” Does this mean that the current City Charter could be interpreted to allow a “City” preference by Ordinance? Or, (as the Office of the City Attorney has opined to the Council) that the City may create a preference only for County firms and not specifically for City firms – unless the Charter is amended?

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 6 of 30 pages

Preference permitted for both “Competitive Bidding” and “Competitive Sealed Proposals”?: The local preference authorized in Subsection “(a) Competitive Bidding”, is defined as a “bid preference” – and arguably applies only to bids – and not to proposals. The distinction between these two contracting methods is further underscored by the fact that Subsection “(b) Competitive Sealed Proposals” describes such proposals “as an alternative” to bidding.

A careful reading of the authority granted in the Charter to create a “bid preference” might reasonably be interpreted to apply only to “Competitive Bidding” and not to “Competitive Sealed Proposals”. Furthermore, the L.A. Administrative Code (as detailed below) states that “Section 371(a) of the City Charter authorizes bid preferences …” (emphasis added). Accordingly, insofar as the City’s just adopted Local Business Preference Ordinance would apply the preference both to “Bidding” and to “Proposals” – one is left to wonder whether the Ordinance might at a future date be deemed to be in conflict with the City Charter.

NOTE: In response to a query from C.O.R.E., the Office of the City Attorney related to C.O.R.E. that its reading of the provision related to bid preferences is not limited to 371(a). Given the fact that the matter is perhaps less than optimally clear, it may be an appropriate matter for further inquiry and/or for clarification as part of a possible Charter Amendment.

Cooperative Purchase Agreements -- Another exception to competitive bids is in Sec. 10.15, Par. 8, which exempts from competitive bidding: “Contracts for cooperative arrangement with other governmental agencies for the utilization of the purchasing contracts and professional, scientific, expert or technical services contracts of those agencies and any implementing agreements, even though the contracts and implementing agreements were not entered into through a competitive bid process.”

B. LOS ANGELES ADMINISTRATIVE CODE -- (L.A. Admin Code, Div. 10, Chapter 1, Article 9, Sec. 10.35), entitled “Bid Preference Based on Location of Firm”. states:

“Section 371(a) of the City Charter authorizes bid preferences based on the geographical location of a bidder. Only the Council shall grant such preference and no preference shall be granted other than for the award of the contracts for the automated refuse collection containers. The Council, in determining the particular geographical area, be it within the State of California or County of Los Angeles, or any sub-area thereof, in which a business needs to be located, or agree to locate, in order to qualify for a bid preference, shall state the reason for such determination. The Council shall further determine the nature and extent of such preference. The adoption of this section shall be deemed authorization for any action by the City Council granting such preference. What constitutes the locating of a business within the geographical area, as to the award of a particular contract, shall also be determined by the City Council.”

Questions and Issues -- The language of the Admin. Code also would seem to create some confusion:

This section of the Admin Code would, curiously, seem to limit the authority of the Council in the granting of preferences pursuant to Sec. 371(a) to none “other than for the award of the contracts for the automated refuse collection containers.” If this were to be the case, the new Ordinance may need to be supplemented or amended to strike from the Admin Code the language that seemingly limits preference(s) to “contracts for the automated refuse collection containers”.

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 7 of 30 pages

NOTE: In response to a query from C.O.R.E., the Office of the City Attorney related to C.O.R.E. that it would have been optimal to simultaneously amend the above provision of the Admin Code (or to strike the provisions related to refuse containers). Notwithstanding, the City Attorney’s Office believes the new Local Business Preference Ordinance would de facto supersede Sec. 10.35. Again, given the fact that the matter is perhaps less than optimally clear, it may be an appropriate matter for further inquiry and/or for clarification as part of a follow-up “clean up” ordinance.

2. LOCAL BID PREFERENCES – AND FEDERAL & STATE LAWS There exist limitations on how and when local bid preferences may be implemented.

These limitations stem, in large part, from other laws meant to make sure government gets the best deal it can on contracts, to help avoid favoritism in government contracting and to comply with the “Commerce Clause” of the U.S. Constitution – which is interpreted to forbid most restraints on open and free commerce by, between and within jurisdictions in the U.S.iii

The City may also have limited rights or abilities to mandate local bid preferences for

Proprietary Department expenditures that use non-City funds – such as airline or passenger fees, tidelands revenues, etc.

For those expenditures for which the City may be able to apply certain local bid

preferences, the manner and extent to which the City may grant these preferences is subject to the City’s own ordinances and Charter, to California statutes (including the California Public Contract Code), and to Federal codes and case law. Improperly drafted and/or overbroad local preferences are vulnerable to being struck down by the courts. (See analysis of a proposed Fresno ordinance)iv A Memorandum (opposing local preferences per se) of the Municipal Research and Services Center of Washington State also delineates various practical and legal issues governmental entities should consider.

3. LOCAL HIRING PREFERENCES GENERALLY Local hiring preferences have become increasingly popular among cities and other

jurisdictions. Where a City may consider a local employment preference, the policy, ordinance, or resolution establishing the preference should generally be worded to reflect a legitimate interest of the City, such as encouraging local industry, reducing local unemployment, or enhancing the local tax base. Municipal counsel generally advises that said preference(s) should target qualified unemployed resident workers -- such as workers that have signed up for unemployment assistance -- rather than targeting all residents, regardless of their qualifications or employment status. It is also generally considered advisable that local preferences establish a goal rather than a quota – especially in local hiring preferences.

4. L.A. CITY CONTRACTS AWARDED TO SMALL BUSINESSES AND BUSINESSES OWNED BY MINORITIES, WOMEN AND DISABLED VETERANS

The City of Los Angeles has established programs and policies intended to encourage and assist small businesses and businesses owned by minorities, women and disabled veterans. Most recently, on January 11th, 2011 the Mayor signed Executive Directive 14 which established the Business Inclusion Program. This program’s purpose is to increase the number of City contracts awarded to such small businesses and businesses owned by minorities, women and disabled veterans. The Mayor has set department goals for small and disabled veteran business procurement as well as anticipated minority and women business participation levels. Each department is allowed to experiment and create methods to reach these goals on a quarterly

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 8 of 30 pages

basis and general managers are held accountable to ensure that the goals outlined are met. There is also an advisory committee – and quarterly Compliance Reports are being posted on the City’s website. The method and process outlined in the Mayor’s program would be an excellent paradigm to extend to encouraging local procurement generally.

Per the webpages of the Mayor’s Los Angeles Works initiative, the Business Inclusion Program requires that all City Departments use the Los Angeles Business Assistance Virtual Network (BAVN). This network allows businesses to identify themselves as either being a certified small business, certified minority owned business, or a certified disabled veteran business. Again, C.O.R.E. recommends something similar for all local business.

III. Local Business Preference Program

1. 2011 ORDINANCE RE 8% LOCAL PREFERENCE INITIATIVE

On October 14, 2011, the L.A. City Council approved an Ordinance prepared by the Office of the City Attorney to create an “8% Local Preference Initiative”. (CF: 11-1673).

The origin of this new Ordinance was in September 2010. Then, the Mayor along with

Council Members Krekorian and Parks announced support for an “8% Local Preference Initiative”, and issued a Press Release related to the initiative. In October 2010, a Motion was introduced in Council. Thereafter, on Nov. 4, 2010, the Council considered and approved establishing a local business preference ordinance to grant an 8% preference incentive to qualified local businesses that submit competitive bids or respond to an RFP. (CF 10-2414-S1).1 The intended preference incentive was to be in addition to existing programs for small and minority-owned businesses.

The new Ordinance approved by the Council amends the L.A. Administrative Code to

establish a local business preference program for procurement of goods equipment and services when the contract involves an expenditure exceeding $150,000.

Among the notable provisions:

i. The preference shall apply to all Los Angeles County businesses. (Accordingly, the

preference would not be limited to City of Los Angeles businesses – based on interpretation of the L.A. City Charter’s language permitting preferences for Los Angeles County firms (See Sec. II.5 hereinabove).

ii. Awarding authorities in the City would be required to apply an 8% bid preference in the form of additional points to the final score of proposals from qualified Local Businesses.

iii. Awarding authorities in the City would be required to apply a preference (based on a sliding scale of 1% to 5%) to a bid or proposal where – notwithstanding that contractor does not qualify as a Local Business – a local subcontractor will perform work on the contract.

iv. The maximum preference shall not exceed $1 million. v. Shall apply only to contracts that involve expenditures entirely within the City’s control – and

shall not apply to contracts that involve expenditure of funds not entirely in the City’s control – such as state and federal grant funds.

vi. The Ordinance shall not apply to Proprietary and certain other agencies and expenditures, including the Dept. of Water & Power, Los Angeles World Airports and the Port of L.A. “The Draft Local Business Preference Order strongly encourages the Proprietary Departments, the Dept. of Recreation & Parks, the Library Dept. and the Community Redevelopment Agency to adopt a local preference program consistent with the ordinance.”

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vii. A qualified Local Business must satisfy all of the following criteria: A. The business occupies work space within the County. B. The business must submit proof to the City demonstrating that the business is in

compliance with all applicable laws. C. The business must submit proof to the City demonstrating one of the following:

(1) The business must demonstrate that at least 50 of full-time employees of the business perform work within the boundaries of the County at least 60 percent of their total, regular hours worked on an annual basis, or; (2) The business must demonstrate that at least half of the fulltime employees of the business work within the boundaries of the County at minimum of 60 percent of their total, regular hours worked on an annual basis; or (3) The business must demonstrate that it is headquartered in the County. For purposes of this Article, the term "headquartered" shall mean that the business physically conducts and manages all of its operations from a location in the County.

2. C.O.R.E.’s ANALYSIS OF THE 8% LOCAL PREFERENCE – AND NECESSARY NEXT STEPS

As detailed in this report, an abysmally low percentage of L.A. City contracts for goods and

services are entered into with L.A. businesses. Many local businesses are struggling – and the fact that our City looks everywhere for goods and services seems only to add insult to injury. The City must do everything it can to better support local businesses – for the sake of our businesses, for the sake of local jobs and for the sake of the City’s own financial well being, which depends on a strong economy and the revenues that follow therefrom.

Supporters of an 8% local business preference see it as a great way to retain and attract

local business – and to generate more revenues for the City. Critics of an 8% local business preference raise philosophical questions about interfering with the free market, and concerns about the City potentially paying more than it otherwise needs to for goods and services.

Both the supporters and the critics of local preferences generally – and of the City’s

new Ordinance specifically -- have salient points. Yet both may also be overstated. Moreover, calculating the costs and benefits of an 8% preference inevitably entails much guesswork. Below we summarize the favorable and potential limitations of the 8% preference – and, on balance, the benefits that may be realized. C.O.R.E. also offers our perspective on ways to minimize the downsides and to maximize the benefits of a preference. The Commission also recommends pairing the local preference with our Recommendations in Sec. IV. And, most critically, C.O.R.E. recommends clarifying and resolving the legal issues and impediments to a comprehensive “City” preference – if, need be, by Charter amendment placed before the voters of Los Angeles.

A. 8% Local Preference – the Favorable:

i. The scope of the new Ordinance is limited – The City Attorney’s Office added into its draft

of the now-approved Ordinance (see Sec. III.1, above) several limiting provisions that supplement the Council’s original Motion. In the opinion of C.O.R.E., these limitations –

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including an overall dollar limit on the preference – are, taken together, thoughtful and appropriate.

ii. We need to “level the playing field” -- We are already operating in something less than a free market. As detailed in Appendix “C”, and in the City Attorney’s report to the Council, many other local governments have local preference ordinances that serve to support their local businesses – placing L.A. businesses at a disadvantage in many of those other jurisdictions. This fact, coupled with the acknowledged higher costs of doing business in L.A., suggest that local preferences can serve to simply “level the playing field” for our local businesses.

iii. We need to try something new -- The City has in place certain incentives to assist and encourage contracting with, and purchasing from small businesses and businesses owned by minorities, women and disabled veterans. While these are very important programs, they have, unfortunately, not succeeded in helping our City focus a substantial percentage of its contracting locally. We need to do more.

B. 8% Local Preference – the Limitations:

C.O.R.E. would be remiss if we did not also point to some of the potential limitations to an 8% local preference (separate and apart from the issues and concerns detailed in our discussion of the Charter and Admin Code, above):

i. The scope of the Ordinance is limited – Just as this fact serves as “pro” argument for the

local preference; it can also serve as a limitation in that it will not apply to Proprietary departments of the City or expenditures that involve certain grants. With the City spending more on outside goods and services through its Proprietaries than through the General Fund, the ultimate benefit of the Ordinance will be limited. That said, the Proprietaries can and should be encouraged to follow suit.

ii. The Ordinance would help L.A. County competitors to L.A. City businesses -- The new Ordinance creates a local incentive for Los Angeles County businesses, not specifically Los Angeles City businesses. This means that a Burbank company would benefit equally from the initiative as a City of Los Angeles business. Take as an example the recent $60 million in vehicle purchases by the City’s Proprietary departments (See into to this Report, and Sec. V.7, and Endnote viii below). While shockingly none of the purchased were from L.A. City dealers, more than half of the purchases were from L.A. County dealers in Alhambra and West Covina. Imagine if we had provided them with an 8% bid preference on the multiple bids they won. It would have potentially needlessly cost the City millions of dollars.

iii. Is an 8% local preference really revenue-neutral? / Problems with underlying Report(s) -- Among the justifications underlying the Council’s November 2010 Motion for an 8% preference, and the resultant Ordinance, was a July 2010 report by Professor Charles Swenson from U.S.C.’s Marshall School of Business, entitled: "The Potential Impact to Los Angeles of Local Vendor Preferences for City Contracts". The U.S.C. Report predicted the City would likely recoup the added costs associated with an 8% bid preference, and likely make money in the form of other new revenues. Unfortunately, at the time the Motion was adopted – and through today – there has been no independent analysis of the numbers in the U.S.C. Report. Neither the CAO nor the CLA had completed a financial analysis.

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Furthermore, C.O.R.E.’s analysis (Specifically detailed in Appendix “A”, below), suggests that the projections are questionable. As detailed in Appendix “A”, C.O.R.E. has serious questions about the assumptions and projections in the U.S.C. Report – including questions about (a) assuming a 2X multiplier for each dollar spent by the City within the City, (b) the report’s gross receipts tax assumptions, (c) accounting for the economic impact of businesses that may not be located in L.A. but doing businesses here nonetheless, and (d) avoiding “bid inflation”. Adding to C.O.R.E.’s concerns is the fact that that the U.S.C. Report has been repeatedly revised each time problems about it have been brought to the fore. (Again, see Appendix “A”).

Accordingly, after much discussion, the Commission cannot say with confidence that

an 8% local bid preference would be revenue-neutral. Accordingly, it will be for the decision-makers in the City to determine other balancing benefits to an 8% local preference.

iv. No empirical evidence of effectiveness of the a local preference – Even the above-

referenced U.S.C. Report states: “For cities which have local bidding preferences, there is no empirical evidence as to 1: how often a local bidder wins; 2. When the local firm wins, if the price is inflated beyond the price offered by a non-local vendor; and 3. When the non-local bidder wins, how much the City gains in terms of more competitive pricing resulting from the bidder preference option.” (See Appendix “A”, Sec. 1.C.).

C. On balance:

The consensus among the Commissioners of C.O.R.E. is that local bid preferences can, in

fact, be helpful. Is 8% the right number – and will it be revenue neutral? These are questions that are difficult to answer with certainty given the numbers we have seen. As the Commission has also noted in the “pro” and “con” sections above, the likely limited scope of the application of the preferences will be both an advantage in limiting potential downsides for the City, and a disadvantage in limiting potential upsides. That said, every governmental initiative inevitably involves some pros and some cons. And there are inevitably ancillary benefits to supporting our local businesses.

D. Moving Forward – and Necessary Next Steps:

When the Council voted to approve the new Local Preference Ordinance, there was general acknowledgement by the Council and by the Office of the Mayor that it was not a perfect Ordinance – perhaps there’s no such thing. And while there was consensus that a “County” preference was less desirable than a “City” preference, the Council approved the Ordinance drafted by the Office of the City Attorney – with a request by the Council for recommendations to address this shortcoming – along with others.

Accordingly (as detailed in Sec. IV. of this report, below), C.O.R.E.’s offers its

Recommendations for immediate clarifications of questions related to the new Ordinance, for moving forward and for what we believe are necessary next steps.

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IV. Recommendations

The Commission offers below its recommendations for actions we believe can be immediately achieved and impactful in boosting local business, jobs and revenues for the City. In brief, the Commission believes a little bit of common sense by procurement officers and decision makers in the City could go a long way.

C.O.R.E. recommends:

LOCAL VENDOR PREFERENCES AND LOCAL BUSINESS PREFERENCE PROGRAM FOLLOW-UPS

1. C.O.R.E. recommends the following clarifications and follow-ups to the City’s just-adopted 8% Local Business Preference:

a. Clarifying accord of the Ordinance with the Charter and Admin. Code.

i. Application of New Ordinance to Competitive Sealed Proposals: Is application of a preference to “Competitive Sealed Proposals” possibly in conflict with the Charter? As detailed in the paragraphs, above, entitled: “Questions and Issues” (Sec. II.1.A & B), the authority granted under the Charter for a local preference could be read to relate only to Sec. 371(a) of the Charter: “Competitive Bidding” – and not to Sec. 371(b) - “Competitive Sealed Proposals”. C.O.R.E. recommends requesting the Office of the City Attorney to memorialize its construction of the Charter extending the bid preference of Sec. 371(a) to Sec. 371(b).

ii. Potentially Limiting Language in the Admin. Code: Again, as detailed in

the paragraphs, above, entitled: “Questions and Issues” (Sec. II.1.A & B), C.O.R.E. recommends clarifying whether the language of the Admin. Code (L.A. Admin Code, Div. 10, Chapter 1, Article 9, Sec. 10.35) may need to be amended to avoid conflicting with the new Ordinance. Referencing Charter Sec. 371(a), the Admin Code perplexingly states “no preference shall be granted other than for the award of the contracts for the automated refuse collection containers.” Even if provisions of Sec. 10.35 that are in conflict with the new Ordinance are deemed to be superseded by the new Ordinance, leaving the conflicted language of 10.35 in place is less than optimal.

b. Seeking further guidance as to whether the Charter could reasonably be

interpreted to allow a “City” preference to be adopted by Ordinance. While the City Attorney has opined that such a City preference would require a Charter amendment, and while C.O.R.E. has the highest regard and respect for the judiciousness of said office, C.O.R.E. recommends further inquiry into this interpretation of the current Charter.

c. Possible Charter Amendment – If, in fact, the current City Charter is interpreted

to mean only L.A. “County” and not L.A. “City” preferences are permissible, C.O.R.E. recommends that a Charter amendment be drafted and presented to the voters as early as practicable. Recommended components:

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i. Language specifically authorizing L.A. “City” preferences. ii. Language to make clear the Council’s authority to adopt preferences under

Sec. 371(a), (b) and other sections, as may be appropriate. iii. Revisions of various other definitions and requirements in Charter Sec. 371. iv. Language that might in some way either authorize a preference that could be

imposed upon the City’s proprietary departments – or, if that would not be legally permissible, perhaps some language re minimal steps the departments must take to reach out to local bidders. (It may be possible to accomplish the latter through an Ordinance instead of through an amendment to the Charter).

GATHERING THE FACTS:

2. That the Council request that the Department of General Services (GSD), with the

Chief Administrative Officer (CAO) and the Chief Legislative Analyst (CLA), prepare and present a report to detail:

a. Annual expenditures for taxable goods by the City and each of its Departments, including information about where these goods are being purchased, general categories of such goods, and a breakdown of sales and use taxes paid on those purchases. C.O.R.E. believes that there is significant potential to boost the amounts of sales tax back the City receives for its purchases. By way of illustration, the City may place an order for office supplies from Staples in L.A. or through, for example, La Mirada. This can make a difference in which jurisdiction gets the sales tax.

b. The type and amount of purchases made through cooperative purchase agreements with other government entities.

c. Possible recommendations to update purchasing guidelines to achieve a higher percentage of City contracts entered into, and with, L.A. City businesses. (Note: C.O.R.E. recommends target and/or goals as distinguished from quotas).

3. That the Council instruct the Office of Finance to report on Business Taxes paid

by all L.A. City vendors. Said report to include a breakdown of said tax paid by vendors located both in and out of the City of Los Angeles. Roughly 66,000 businesses based outside of Los Angeles paid a total of $38 million in gross receipts taxes in 2010 – for all business conducted within the City of L.A. These businesses, however, only represented less than 15% of the total businesses paying such taxes, and they paid less than 10% of the total business tax revenues realized by the City of Los Angeles in that year. These numbers lead the Commission to wonder whether the City is adequately tracking and billing those businesses outside of L.A. who are doing business in the City – including those who are City vendors. These businesses should, if they are not already, be required to obtain and maintain a business license, and to pay all applicable business tax for all business conducted by said businesses within the City, prior to – and during the term of -- any business conducted with the City.

4. That the Council requests a presentation from the Mayor’s ShopLA Team. This team has been working to encourage more local purchasing, and the information and methods gathered by the Team have valuable application to City purchasing.

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IDENTIFYING, RECRUITING & ENCOURAGING LOCAL BIDDERS

5. Council instruct the Department of General Services (GSD) and all City Departments that purchase goods and services to implement a policy to identify and recruit local bidders. GSD and City Departments would be required to independently ascertain whether or not there are appropriate local bidders for contracts exceeding a given threshold (say $50,000). If such local bidders exist, there should be an assertive policy of reaching out to them. The stage at which such identification of, and outreach to, local bidders would occur should be early on in the procurement and contracting process.

6. Council instruct the Department of General Services (GSD) and the contract and procurement divisions of the City’s Proprietary Departments to report on their efforts and initiatives to improve outreach to local businesses – and to encourage and assist in their submission of bids for City contracts. Further, GSD should report on any coordinated outreach efforts with the Mayor’s Business Team, and also report on what type of coordination may exist with departments that do substantial amounts of purchasing and contracting independently of GSD.

7. Council instruct the Department of General Services (GSD) and the contract and procurement divisions of the City’s Proprietary Departments to report on recommendations for simplification and streamlining of bid packages. The longer and more complicated the bid packages have become, the more difficult it has become for businesses to bid.

8. Council instruct the Department of General Services (GSD), in coordination with the Office of the Mayor, to compile, maintain, update and distribute quarterly reports on the dollar amounts and percentages of contracts awarded to local business by General Fund Departments, Proprietary Departments and Enterprise Departments (such as the Bureau of Sanitation) – and on the effectiveness of the Local Preference Initiative.*

* NOTE: C.O.R.E. recommends a paradigm similar to that created pursuant to the Mayor’s January 11, 2011 Executive Directive 14, establishing the Business Inclusion Program. (See Sec. II.8, above). Included in said paradigm are an advisory committee and quarterly Compliance Reports posted on the City’s website. The Los Angeles Business Assistance Virtual Network (BAVN) also allows businesses to identify themselves as being certified in advance.

9. Consolidate all information about bidding and local business preferences and programs in one place. Currently, there is information on BAVN, on an outdated webpage of the Mayor’s Business Team, on the webpages of the Mayor’s Los Angeles Works initiative, and other locations. C.O.R.E. recommends “one-stop-shopping”.

COOPERATIVE PURCHASING ALLIANCESv

10. That the Council instruct the Department of General Services (GSD) to report on the percentage of purchases currently made through cooperative purchasing alliances. The City of L.A. is a party to several cooperative and multi-jurisdictional purchasing agreements, whereby the City buys certain goods at prices negotiated by the cooperative. The government purchasing alliance, U.S. Communities, is one such example.

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We must note the irony that while all other bids must follow competitive bidding procedures in the City, the use of purchasing alliances essentially bypasses the complexities of the City’s own system – potentially creating a two-tier system.

One way to increase business generated for local vendors is to make sure that L.A. companies are actively engaged in providing goods and services through such cooperatives. The City might also consider creating its own cooperative.

NOTE: the City of L.A. is a registered agency with U.S. Communities Government Purchasing Alliance -- more than 44,000 registered public agencies utilize U.S. Communities government cooperative contracts to procure more than 1 billion dollars in products and services annually.

11. That the Council and Mayor work with officials of Los Angeles County, the Los Angeles County Metropolitan Transportation Authority (Metro), the Los Angeles Unified School District (LAUSD) and other major local agencies to encourage their implementation of comprehensive local procurement strategies. The County of Los Angeles alone issued more than $5 billion in purchase orders and contracts for goods and services in FY 2010-2011. In July of 2011, the County’s Board of Supervisors approved an 8% local preference for County goods and services contracts. (11-3343). This update to the County Code will only apply to select small businesses, which make up a small portion of overall County contracts. If the City can get the County and others to buy more locally, the City will be a substantial and direct beneficiary in jobs and in local business and sales tax revenues.

TAKING SALES TAX IMPACTS INTO CONSIDERATION

12. That the Council request that the City Attorney prepare the draft of an ordinance amending the definition of “lowest responsible bidder” in the City’s Code(s). C.O.R.E. recommends including a provision whereby the term takes into consideration the sales tax the City would receive back (“tax back”) for purchases it makes from businesses in the City vs. businesses outside the City (approximately 1%). (See Appendix “A”). (See also Endnote ix for additional information, resources and caveats re the 1%).

Taken together, C.O.R.E. believes we can correct the current contracting imbalance – to the benefit of the City, its businesses and its residents.

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V. Background: Scope of L.A.’s Contracting With Non-L.A. Businesses While contracting with non-Los Angeles-based businesses does not necessarily mean that

all the money and businesses associated with a particular contract accrue outside the City (see Endnote vii), a significant number of such non-local contracts means overall less business and money staying locally.

Both the City itself, and the June 2010 U.S.C. Report, have previously reported that the City

was spending in excess of $1 billion annually on contracts with outside vendors -- of which only $180 million (16%) was spent on City-based firms. Billions more are being spent by the City’s Proprietary Departments: L.A. Dept. of Water & Power, L.A. World Airports and the Port of L.A. The June 2010 U.S.C. Report also found that 32% of state and local governments surveyed had some sort of local procurement preference – while L.A. did not.

More recently, as noted above, C.O.R.E. has examined approximately $1 billion in L.A. City

contracts for goods and services over recent six-month periods. L.A. City businesses accounted for less than 8% of these contracts.

Specifically, C.O.R.E. found:

1. CONTRACTS BY PROPRIETARY DEPTS. WITH NON-L.A. COMPANIES FOR

GOODS

A mere 2% of nearly $322 million in goods procured by three proprietary City departments over recent six-month periods were purchased from City of Los Angeles businesses. C.O.R.E. examined a total of 67 contractsvi awarded by these departments: 49 by L.A. Dept. of Water & Power (from July 1 – Dec. 31, 2010), 11 by Los Angeles World Airports and 7 by the Port of L.A. (both from Jan. 1 – June 30, 2011). 41% of the contracts were awarded to companies located in other states. In each case, the purchases were subject to sales tax payable by the City – to other jurisdictions.

28 bids valued at $132,047,450.00 were awarded to companies located in other states

(40% of the winning bids, 41% of the dollar value).

Four valued at $18,819,983.00 were awarded to companies located in other countries (6% of the winning bids, 6% of the dollar value).

33 valued at $164,529,434.00 were awarded to companies located in California jurisdictions outside of the City of Los Angeles (47% of the winning bids, 51% of the dollar value).

Five bids valued at just $6,578,585.00 were awarded to companies located within the City. (7% of the winning bids, 2% of the dollar value).

2. CONTRACTS BY PROPRIETARY DEPTS. WITH NON-LOS ANGELES COMPANIES FOR PERSONAL SERVICES AND CONSTRUCTION

A mere 11.5% of more than $632 million in professional service and

construction contracts examined by C.O.R.E. were awarded to City of Los Angeles businesses. Of the 71 contracts studied by the Commission by L.A. Dept. of Water &

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Power, L.A. World Airports and the Port of L.A., 67.3% of the dollars were spent with companies located in other states -- a total of 71 such contracts valued at $632,129,195 were awarded.vii

17 contracts valued at $425,258,621 were awarded to companies located in other states

(24% of the contracts, 67.3% of the dollar value).

Nine contracts valued at $4,113,701 were awarded to companies located in other countries (12.7% of the contracts, .06% of the dollar value).

33 valued at $120,615,930 were awarded to companies located in California jurisdictions outside the City (46.5% of the contracts, 19% of the dollar value).

One contract valued at $9,500,000 was awarded to the US Army Corps of Engineers (1.4% of the contracts, 1.5% of the dollar value).

Eleven contracts valued at $72,640,943 were awarded to companies located in the City of Los Angeles (15.5% of the contracts, 11.5% of the dollar value).

(Note: Certain contracts by their nature require contracting abroad – such as Port contracts with foreign trading agents.)

3. FLEET PURCHASES BY THE CITY

Worse yet, zero percent of more than $60 million in vehicles purchased by proprietary departments since July 2010 were purchased from City of Los Angeles dealers.viii A total of eight bids were awarded by LADWP and the Port of LA for various vehicles. Roughly $6 million in sales tax was paid by the City of L.A. for these purchases – largely to the benefit of the state and seven other local jurisdictions. At least $600,000 of the tax (about 1% of the purchases) would have come back to the City (for the benefit of its general fund) had the purchases been made within the City. Instead, other cities such as Costa Mesa, Fontana and Sacramento now have more money to repave their streets and maintain their police and fire departments. (See Endnote viii and ix for additional information, resources and caveats re the 1%).

4. PURCHASE ORDERS PLACED THROUGH GSD FOR NON-PROPRIETARY DEPARTMENTS:

Purchase orders using vendors within City & County January 1, 2011 to June 30, 2011

Source: City of L.A. GSD

# of PO's $ Amount

LA City only 11,322 $22,229,626.87 LA County (outside of City) 18,115 $67,580,870.69 Total LA County 29,437 $89,810,497.56 Total Purchases made (irrespective of Vendor Location): 45,416 $190,607,636.17

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VI. Revenue Impacts

The City of L.A. expends billions of dollars annually through its contracts for myriad goods and services. With better procurement practices, the City will realize enhanced sales tax revenues, lower sales tax expenses – along with the multiplier effect of more businesses, jobs and various other tax and permit revenues. For every $100 million in taxable purchases the City itself makes, we have the opportunity to achieve more than $1 million in sales tax revenues back to the City. Moreover, if the City merely increased its sales tax revenues per capita to the average for all other cities in L.A. County, the City could generate another $61 million in additional annual general fund revenues – just from sales tax. And, getting other local agencies to buy local would have a significant impact in and of itself. Applying an exact dollar estimate to all of the benefits of local purchasing is an inexact science. Notwithstanding, with more emphasis on local procurement by the City, CORE estimates the potential for combined revenues and savings of at least $10 - $15 million annually – with significant opportunities for in excess of $100 million annually.

1. SALES TAX Sales tax is both a substantial revenue source and a substantial expense for the City of Los Angeles. A. L.A.’s Sales Tax Revenues:

Sales tax revenue constitutes the 5th largest source of General Fund revenue for the City of L.A. – totaling roughly $300 million annually.

Currently, however, L.A. is a net exporter of sales tax revenues to outlying municipalities. In fact, L.A. ranks 16th out of 17 contiguous cities in per capita sales tax revenue generation – and 8th among California’s 10 largest cities. (Per CA State Board of Equalization annual reports).

While the City of L.A.’s population makes up approximately 40% of L.A. County’s nearly 10 million residents, taxable sales in the City of L.A. make up just under 30% of taxable sales in L.A. County ($39.3 billion in the City vs. $131.9 billion Countywide in 2008).

The City of L.A.’s lagging taxable sales results in significantly reduced sales tax revenues per capita for the City – which has been realizing annual sales tax revenues per capita, 21% lower than the average for other cities in L.A. County, and 35% lower for other cities in California.

If the City merely increased its sales tax revenues per capita to the average for all other cities in L.A. County, the City could realize another $61 million in additional annual general fund revenues.

Increasing L.A.’s sales tax revenues per capita to just ½ of the County cities average would yield more than $30 million per year for the City of L.A. Thus, a concerted effort to increase consumer and business purchases will yield vital dollars for the City’s General Fund, as would a concerted effort by City government to buy goods and services from City businesses.

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B. L.A.’s Sales (and Use) Tax Expenses:

The City of Los Angeles pays sales tax on nearly every good it purchases in California (As of July 1, 2011, the rate in most parts of the County is 8.75%). For purchases outside of California, an equivalent use tax is due and payable. This translates into well over $100 million in sales (or use) tax paid by the City each year for its purchases. Generally, for purchases made in the City of L.A., 1% of the purchase price (or about 11% of the sales tax paid) is distributed to L.A. for the benefit of its General Fund. The City also benefits from another 1.5% of the purchase price (or about 29% of the sales tax paid) that goes to the County for transportation (including Measure R money). See Appendix “A” for a breakdown.

Purchases made by the City from businesses in other California jurisdictions typically mean the other jurisdictions – and not L.A. – benefit. Purchases made out of state are subject to “use tax” (equivalent to the sales tax) that must typically be paid by the purchaser. While a portion of the use tax paid by the City comes back to us, it is not as beneficial to the City as if the purchase had been made from a business located here. It must be noted that the rules for distribution, allocation, sharing and countywide pooling of sales tax revenues are very complex. Moreover, the distribution of the City’s and/or County’s share of sales tax can depend on many factors, including where the good is purchased, where it is delivered, the location of the seller, the location of the buyer, whether the seller has multiple business locations, and what type of good is being sold. (See Endnote ix for additional information and resources).ix

Interestingly, the purchasing power of Proprietary Departments might be viewed as a way to generate sales tax revenue for the City’s General Fund. The Proprietaries use non-General Fund money to buy taxable goods; any sales tax generated by purchases from businesses located in the City accrues to the benefit of the General Fund. Unfortunately, the departments rarely purchase taxable goods from businesses located in the City, which means that the City’s General Fund does not receive the local share of sales taxes on the vast majority of purchases made by the departments. Instead, again, the local share in most instances goes to other jurisdictions.

2. LOST BUSINESSES & JOBS Different reports may have different numbers – but one thing is clear: Local purchasing

boosts businesses and jobs. The failure to do so costs businesses and jobs.

3. LOST BUSINESS TAX REVENUES When the City of L.A. contracts with non-city businesses for goods and services, those non-city businesses are required to pay local business tax on the gross receipts they realize from doing business in the city. However, enforcement and collection of the gross receipts tax is often less effective with non-L.A.-based businesses. (The Commission recommends that evidence of a City Business Tax Certificate be provided either at the time of bid or before contract execution.) Moreover, by failing to buy in L.A., we lose all or part of the local “multiplier effect” – and the concomitant business taxes that would have resulted therefrom.

4. OTHER LOST REVENUES When the City contracts for goods and services within the City, local businesses prosper in a multitude of ways. Among other things: they make improvements and expand their business locations – which results in increased L.A. Dept. of Building & Safety permitting fees; expanding businesses mean more property tax revenues for the City of L.A.; and as local businesses buy more equipment, machinery and supplies, they pay more Personal Property Tax Assessments to the County -- a portion of which is shared with the City.

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 20 of 30 pages

Respectfully submitted, Ad Hoc Commission on Revenue Efficiency

Ron Galperin, Chair Hon. Cindy Miscikowski, Vice Chair Mark Ames, Commissioner David Farrar, Commissioner Michael Gagan, Commissioner Cheryl Parisi, Commissioner Brandon Shamim, Commissioner

CC: Budget & Finance Committee Jobs & Business Development Committee Information Technology and General Services Committee Miguel A. Santana, City Administrative Officer Gerry F. Miller, Chief Legislative Analyst Antoinette Christovale, Director, Office of Finance Neil Guglielmo, Deputy Mayor, Budget & Financial Policy

Tony Royster, General Manager, Department of General Services

Contacts:

Ron Galperin, Chair Jon Dearing, Analyst Ad Hoc Commission on Revenue Efficiency Office of Chief Legislative Analyst ron@rongalperin.com jonathan.dearing@lacity.org

Website:

http://C.O.R.E..lacity.org/

+ The Commission would like to specially acknowledge and thank Commissioner Michael Gagan for contributing his outstanding research to this report, along with Patrick Lantz, an Associate at Kindel Gagan.

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 21 of 30 pages

ENDNOTES

i The City of L.A. purchases in excess of $400 million annually through its Supply Management System. This

number does not reflect purchases made outside of the SMS system, including those made by Proprietary Departments such the L.A. Dept. of Water & Power, World Airports and the Port of L.A., nor does it include capital improvements.

ii C.O.R.E.’s Chair simultaneously serves on the County of L.A. Quality & Productivity Commission. In said

capacity, he is currently working on a motion that would be introduced by members of the Board of Supervisors to request report-backs to the BOS re the County’s purchases, percentages of local purchases, and distributions of sales and use tax paid by the County and its Departments.

iii Per the U.S. Constitution, Article I, Section 8, Clause 3: “[The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes …” This clause was intended, and is interpreted to preclude states (and other government entities and jurisdictions in the U.S.) from discriminating against one another. Thereafter, in response to rapid industrial development and an increasingly interdependent national economy, Congress enacted the Interstate Commerce Act in 1887 and the Sherman Antitrust Act in 1890.

iv Note: The analysis of the proposed Fresno ordinance by the Assoc. of General Contractors is the association’s

analysis – and not necessarily accepted universally or in whole.

v Multi-Jurisdictional Purchasing Alliances & Associations:

U.S. Communities Government Purchasing Alliance: www.uscommunities.org

National Council of Public Procurement & Contracting: www.goncppc.org

Western States Contracting Alliance: www.aboutwsca.org

California Association of Public Procurement Officials, Inc. (formerly California Association of Purchasing Officers, Inc.): www.cappo.org

National Association of State Procurement Officials: www.naspo.org

Los Angeles Metro Public Purchasing Agents’ Cooperative: www.lamppac.org

vi The $321,975,452.00 in contracts were based on competitive low-bid awards. Not included were purchases made under previously-approved purchase orders or purchases made under the respective General Managers’ authority.

vii While there may be sales tax components embedded in these contracts, no effort was made to determine what

those components might be. It is also acknowledged that much of the work under these contracts will be undertaken within the City.

viii Below are 6 months of fleet purchases by the City on which the City paid sales taxes. The local share of the

sales tax went in the amounts listed to the non-L.A. jurisdictions:

LADWP Product Cost Dealer Location 5/11 234 pickups $ 6,732,789.00 Alhambra 678 pickups 21,359,896.00 West Covina 102 rough terrain vehicles 3,877,849.00 Alhambra 8/10 2-axle stake bed trucks 5,762,954.00 Fontana 2-axle dump trucks 1,398,482.00 Alhambra 2-axle dump trucks 16,022,084.00 Fontana 9/10 160 ¾-ton pickups 4,848,970.00 Sacramento

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 22 of 30 pages

PORT OF L.A. 3/11 11 Ford Escape Hybrids $368,902.00 Costa Mesa Sales Amount Local Sales Tax Share Fontana $21,785,038.00 $217,850.00 West Covina 21,359,896.00 213,359.00 Alhambra 12,009,120.00 120,091.00 Sacramento 4,848,970.00 48,490.00 Costa Mesa 368,902.00 3,689.00 Total: $60,371,926.00 $603,719.00

ix

Sales Tax Rates and Allocations: Under the Bradley-Burns Uniform Local Sales and Use Tax Law, most retail sales are deemed to occur at the retailer’s place of business in this state where the sale is negotiated. (Exceptions may include certain auctioneers, vending machine operators, and construction contractors). If the retailer has more than one place of business in this state, the sale is deemed to occur at the location where the principal negotiations take place. Generally, the combined 1 percent state and local sales tax portion of the statewide 7.25 percent sales and use tax is allocated to the jurisdiction where the retailer’s place of business is located, and the local use tax is generally allocated through the countywide pool where the property is used. District taxes are additional transactions (sales) and use taxes imposed within special tax districts. For purposes of distributing the district tax, the tax generally follows the merchandise. That is, the tax is distributed to the district where the goods are delivered (and presumably used). District tax distributions are, therefore, affected by the definition of place of sale, which relies on several factors that also determine if district tax is applicable.

CA Board of Equalization Regulation 1823.4, Place of Delivery of Tangible Personal Property-Generally, provides an exemption for the purposes of the use tax, not the transactions (sales) tax. A retailer may be relieved of the obligation to collect the use tax (for sales other than vehicles, aircraft, and vessels) imposed by a district when you ship or deliver merchandise (tangible personal property) outside of that district to a purchaser's principal residence address or principal business address.

Under a Board of Equalization resolution adopted in 1994, an installing construction contractor or subcontractor may elect to obtain a sub-permit for the job site of a contract valued at $5,000,000 or more. As such, construction sites can be deemed a point of sale, and local jurisdictions have the opportunity to receive the local tax on materials consumed and fixtures furnished by the contractor directly, rather than through the countywide pooling process.

Motor Vehicles:

The tax rate applicable to certain “commercial vehicles” depends on the location where they are used. For the purposes of Regulation 1823.5, “commercial vehicle” means a vehicle required to be registered under the Vehicle Code, used or maintained for the transportation of persons for hire, compensation, or profit or designed, used, or maintained primarily for the transportation of property. Passenger vehicles which are not used for the transportation of persons for hire, compensation, or profit are not commercial vehicles. The place of use determines the tax rate regardless of the location of the property when it is first purchased. See publication 44, Tax Tips for District Taxes, and BOE Publication No. 34, Motor Vehicle Dealers. Note: “motor vehicle” means a passenger vehicle (designed to carry no more than ten people, including the driver) such as an automobile, minivan, or sport-utility vehicle. The term also includes light-duty pickup trucks (payload capacity under one ton). Different rules apply to other vehicles.

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 23 of 30 pages

APPENDIX “A”

C.O.R.E.’s REVIEW AND ANALYSIS OF U.S.C. REPORT(S) ON

LOCAL VENDOR PREFERENCES FOR CITY CONTRACTS Among the justifications underlying the Council’s November 2010 Motion for an 8%

preference – and the resulting Ordinance approved October 14, 2011 -- was a July 2010 report by Professor Charles Swenson from U.S.C.’s Marshall School of Business, entitled: "The Potential Impact to Los Angeles of Local Vendor Preferences for City Contracts". The July 2010 U.S.C. Report stated that a very broad 8% local preference would likely be of no net cost to the City.

As detailed below, C.O.R.E. has serious questions about the assumptions and projections in

the 2010 U.S.C. Report, along with the three subsequent revisions thereto. These include questions about (a) assuming a 2X multiplier for each dollar spent by the City within the City, (b) the report’s gross receipts tax assumptions, (c) accounting for the economic impact of businesses that may not be located in L.A. but doing businesses here nonetheless, and (d) avoiding “bid inflation”.

1. FOUR VERSIONS OF THE U.S.C. REPORT A. June 2010 Report -- (Ver. 1.0)

Among the justifications underlying the new L.A. Ordinance was a July 2010 report by

Professor Charles Swenson from U.S.C.’s Marshall School of Business, entitled: "The Potential Impact to Los Angeles of Local Vendor Preferences for City Contracts" (the “U.S.C. Report Ver. 1.0”). Most notably, the U.S.C. Report Ver. 1.0 estimated that for each $1 million in locally awarded bids, the City would “be better off by approximately 10 jobs” and “at a preference rate of 8%, the City should make money on local preference.” iv

B. September 7, 2011 Report – (Ver. 2.0)

Based on C.O.R.E.’s questions and concerns posed to the author of the U.S.C. Report, the

author issued a revised report Sept. 7, 2011 (the “U.S.C. Report Ver. 2.0). The new report states that: “This paper should be viewed as a replacement to the July 2010 paper.”

While the U.S.C. Report Ver. 1.0 stated that “at a preference rate of 8%, the City should

make money on local preference”, the U.S.C. Report Ver. 2.0 is more qualified in its predictions and uses a preference rate of 5% as the basis for its conclusion that “such preferences can potentially increase City of Los Angeles jobs at no cost to the City.” The report estimates that adding together the sales and other tax gains from contracting locally could bring “the estimated total revenue effect to roughly 5%.”

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 24 of 30 pages

This second Report further qualified its predictions:

“A local bidding preference of 5% for City of Los Angeles contracts would appear to be beneficial to the City in terms of increased local employment at potentially no net cost to the City. However, this conclusion should be moderated by two factors. First, there is a recommendation that the City’s business tax be repealed over time. Should this occur, any potential increased revenues from local bidders winning a contract, calculated above, would be reduced. Second, the City should consider methods to ensure that firms which represent themselves as Los Angeles companies do in fact have a real presence in the City. This would help obviate situations where non locally-based firms set up “shell” companies in the City in order to receive preference points. Finally, while increased awarding of contracts to Los Angeles based firms would certainly increase City revenues, it should be noted that even non-locally based firms which win contracts still pay City taxes, although these taxes would certainly be much higher if these companies were in Los Angeles.”

C. September 18, 2011 Report – (Ver. 2.1)

On September 18, 2011, the author of the U.S.C. Report issued a subsequent revision of the

report: (U.S.C. Report Ver. 2.1). Said version seeks to offer calculations where a 5% local vendor bidding preference might be beneficial to the City. The new report also includes a significant caveat:

“For cities which have local bidding preferences, there is no empirical evidence as

to 1: how often a local bidder wins; 2. When the local firm wins, if the price is inflated beyond the price offered by a non-local vendor; and 3. When the non-local bidder wins, how much the City gains in terms of more competitive pricing resulting from the bidder preference option.” This third Report repeated the same qualification of its predictions as the second version

(see above) – except, now the author again was predicting based on 8% vs. 5%. D. September 20, 2011 Report – (Ver. 2.1b) On September 20, 2011, the author of the U.S.C. Report issued a subsequent revision of the

report: (U.S.C. Report Ver. 2.1b). Said revision was, according to the author, reflecting comments received by the author from Mayor’s Office. Said fourth version did not contain significant changes from the third version – nor, however, did it address many of the same concerns about the accuracy of the numbers and predictions outlined by C.O.R.E., and detailed hereinbelow:

2. QUESTIONS AND CONCERNS RE THE U.S.C. REPORT(S) C.O.R.E.’s specific (and ongoing) questions and concerns regarding the U.S.C. Report(s)

are as follows:

A. Direct cost(s) to City – i. Initial Report -- The initial U.S.C. Report’s calculations and projections are based on a

supposed example where a non-local bidder bids $990,000 while the local bidder bids $1 million. In this example, awarding the contract locally with an up to 8% local preference has a direct cost differential to the City of only 1%, or $10,000.

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 25 of 30 pages

Problem: The Report uses an example where the direct cost to the City is just 1%. With an 8% local bid preference, however, there could be up to an 8% or $80,000 direct cost differential for the City. While an 8% local preference will not always mean an 8% price differential, what's the basis for only a 1% differential, and how would the projections be impacted if the actual differential exceeds 1%?

ii. Subsequent Reports -- In the 3 subsequent versions of the Report, the author offers

calculations and projections as follows:

a. The author offers a supposed example of a contract where the local bidder cannot bid below $100,000 and still make a profit. Without a preference, a non-local competitor would (the author predicts) win with a bid of $99,000. With a 5% preference rule, the author of the U.S.C. report reasons, the competing national firm would be forced to bid below $95,000 to win the bid. The author then assumes the non-local bidder would bid $94,000 – and the City would be better off by $5,000 even if the non-local bidder wins ($99,000 - $94,000).

Problem: It is the opinion of C.O.R.E. that these numbers are nothing but sheer

and utter conjecture.

b. The author offers a second supposed example where a non-local bidder bids $990,000 while the local bidder bids $1 million. In this example, awarding the contract locally with up to a 5% local preference again has a direct cost differential to the City of only 1%.

Problem: As with the initial version of the Report, this is an example where the direct

cost to the City is just 1%. With a 5% local bid preference, however, there could be up to a 5% or $50,000 direct cost differential for the City. While a 5% local preference will not always mean a 5% price differential, what's the basis for only a 1% differential, and how would the projections be impacted if the actual differential exceeds 1%?

B. Multiplier effect – i. Initial Report -- The initial U.S.C. Report’s calculations and projections are based on what

are known as “Type II” Multipliers – which the author states “average about 2” in California. Therefrom, the author assumes an X2 local multiplier effect for projected additional local business activity (and local revenues) generated when the City gets its goods and services locally.

Problem: There seems to be no such multiplier effect figured into the report

projections for non-local contracts. It would be helpful to know how the following would inevitably change the projections in the reports:

a) The multiplier effect can vary significantly depending on the goods/services

contracted for, and depending on many other variables. More detailed information would be very useful.

b) Many non-local contracts still may have some sort of local multiplier effect. (For example, a non-local consulting firm may have local subcontractors, or tile purchased out of L.A. would still require local handling and installation).

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 26 of 30 pages

ii. Subsequent Reports -- In the 3 subsequent versions of the Report, the author projects an

additional 1.147 cents in revenues to the City from a local contract (from all sources other than business tax). The author further estimates another 2.25 cents in sales tax from resulting employment. Adding in other factors, the author concludes the City would get a revenue gain of 3.92 cents for each dollar of local contracting – plus another 1 cents (or 1%) – approaching a total of 5%. Again based thereupon, the author postulates a 5% local preference might be of potentially no cost to the City. Problem: Same as for the Initial Report.

C. Gross Receipts Tax – i. Initial Report -- The initial U.S.C. Report’s calculations and projections appear to be

based on a tax rate of .4%* for local businesses contracted to provide goods/services to the City, with none calculated for non-local businesses. This is also the underlying basis for the X2 multiplier effect calculated when the City contracts with local businesses. Problem: The following factors would inevitably change the projections in the Initial

U.S.C. Report: a) Non-local businesses are required to pay local Gross Receipts Tax on revenues

generated from work in L.A. b) Only one of nine businesses tax categories in L.A. pay in excess of .356%, and

most pay under .2% (See table). There are also various exemptions where a business may pay no tax. Basing projections on a .4% tax could result in very different estimates of the benefits of local contracting.

c) If the Gross Receipts tax is cut or phased out the estimates could be quite different.

ii. Subsequent Reports -- In the 3 subsequent versions of the Report, the author uses an average gross receipts tax rate of .0022. Problem: As above for the initial Report, and there is no explanation for either rate or

for why the 2010 and 2011 reports use different rates.

D. “Bid inflation” and competition –

Problem: How might the calculations and projections take into account certain unintended consequences that could increase the costs to the City of goods and services it procures? Specifically:

i. Competition could decrease, causing “bid inflation”, when non-local bidders opt

to not bid because they determine that they cannot afford to compete with an 8% local bid preference. This could particularly chase away non-local bids for goods/services from businesses with low profit margins.

Qiao,Y., Thai, K., and L. Cummings (2009). “State and Local Procurement Preferences: A Survey”. Journal of Public Procurement (9): 371-410: The survey indicated that local governments believed prices on average slightly increased due to bid preferences. (It is important to note that respondents were asked about price inflation due to all types of preferences (gender, ethnicity, disabled, etc) and not just local preferences).

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 27 of 30 pages

ii. Non-local businesses currently providing goods/services to the City may find a

local partner to submit future bids in excess of what the City is currently paying. If the local partner now gets the award based on an up to 8% preference, one of the main beneficiaries could very well be the non-local business now partnered with the local one. There are some anecdotal reports that some non-local businesses are looking into just such a strategy in anticipation of a new City local preference ordinance.

E. Reverse auctions – This process is becoming an increasingly popular method of getting

the best deal on goods and services. While this issue was not addressed in the July 2010 U.S.C. Report, its author added references thereto in subsequent versions of the Report. It remains somewhat unclear, however, how a local business preference would impact the effectiveness of employing reverse auctions.

F. Mitigating considerations – Each of the questions/issues hereinabove could adversely

impact the City if a local preference of 8% (or some other percentage) turns out to be more expensive to the City’s budget than the benefits therefrom. However, certain other calculations and projections might positively impact the cost/benefit analysis. The following are not currently included in the calculations and projections, but may be worthy of consideration:

i. For purchases of goods, the City pays sales tax. Approximately 1% of the

purchase price comes back to the City for purchases made locally, plus additional benefits from that portion of the sales tax that goes to local transportation, law enforcement, etc.;

ii. When local businesses realize more revenues, they make improvements and expand their places of business – which results in increased L.A. Dept. of Building & Safety permitting fees;

iii. Expanding businesses mean more property tax revenues for the City of L.A.; and iv. As local businesses buy more equipment, machinery and supplies, they pay

more Personal Property Tax Assessments to the County -- a portion of which is shared with the City.

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 28 of 30 pages

APPENDIX “B”

L.A. County / City Sales and Use Tax Rate: (tax rate): The City of Los Angeles pays sales tax on nearly every good it purchases (As of July 1, 2011, L.A.

County’s rate is 8.75%). This likely translates into well over $100 million in sales tax paid by the City each year for its purchases. Generally, for purchases made in the City of L.A., 1% of the purchase price (or about 11% of the sales tax paid) is distributed to L.A. for the benefit of its General Fund. The City also benefits from another 1.5% of the purchase price (or about 29% of the sales tax paid) that goes to the County for transportation (including Measure R money).

Rate Jurisdiction Purpose Authority

3.6875% State Goes to State's General Fund Revenue and Taxation Code Sections 6051, 6201

0.25% State Goes to State's General Fund Revenue and Taxation Code Sections 6051.3, 6201.3

(Inoperative 1/1/01 – 12/31/01)

0.25% State Goes to State's Fiscal Recovery Fund, to pay off Economic Recovery Bonds

(2004)

Revenue and Taxation Code Sections 6051.5, 6201.5

(Operative 7/1/04)

0.50% State Goes to Local Public Safety Fund to support local criminal justice activities

(1993)

Section 35, Article XIII, State Constitution

0.50% State Goes to Local Revenue Fund to support local health and social

services programs (1991 Realignment)

Revenue and Taxation Code Sections 6051.2, 6201.2

1.0625 State Goes to Local Revenue Fund 2011 Revenue and Taxation Code Sections 6051.15 and 6201.15

1.00% Local 0.25% Goes to county transportation funds

0.75% Goes to city and county operations

Revenue and Taxation Code Section 7203.1 (Operative

7/1/04)

Subtotal:

7.25% State/Local Total Statewide Base Sales and Use Tax Rate

L.A. County Add-on:

1.50% Local Add-on For transportation (including 0.50% for Measure R)

Total:

8.75% State/Local Total Statewide Base Sales and Use Tax Rate – and L.A. County local add-

on

SOURCE: http://www.boe.ca.gov/news/sp111500att.htm

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 29 of 30 pages

Appendix “C”

Survey * of Selected Local Preference Programs

Local Business Preferences Nationwide See: Long Island Indexiv* City of Anaheim Local Preference - Vendors located within Anaheim city limits are given a 1% pricing allowance when calculating the lowest responsive bid due to the ultimate receipt by the City of a proportionate return of sales tax. City of Burbank City Code Sec. Section 2-2-122 J - Purchasing Code: Based on “payment of local sales or use taxes that will accrue to the City,” Burbank has a 1% local preference for taxable purchases, related to determining the lowest responsible bidder. City of Calabasas Title III, Chapter 3.4 of Calabasas Muni Code – Awards of Contracts to Businesses Located in the City: “The City shall give preference to businesses located in the City (“local businesses”) when the difference between the bids from Calabasas businesses and those outside the City is less than the current sales tax benefit the City would receive from local sales tax and the local business will be able to provide goods or services which are equal in quality…” (See: http://www.cityofcalabasas.com/pdf/agendas/council/2010/042810/item3-staff-report.pdf). City of Camarillo City Code, Subsection 6 – Vendor Relations: “When feasible to do so, vendors within the City of Camarillo should be utilized for supplies, services and equipment.” City of Cerritos City Code Sec. 3.20.065 – Granting Local Business Preference: “A local business which responds to a bid solicitation by the City of Cerritos for the purchase of equipment, supplies or services required for public use shall be granted a credit of 1% of its submitted bid in the city’s determination of lowest and most responsible bidder.” City of Downey Municipal Code Sec. 2910 – Local Vendor Preference: (a) For the purpose of calculating the lowest responsible bidder, vendors whose business or sales office or place of manufacture is located in the

C.O.R.E. Report Re: Promoting Local Procurement & Business Preference Review March 2012 Page 30 of 30 pages

City of Downey shall be given a (3%) percent credit in their bid in order to reflect the advantages that accrue to the City by the award of a bid to a local vendor. (b) This section will apply only to purchases of greater than an amount established by City Council resolution. City of Long Beach Municipal Code Sec. 2.84.030 – A bid from a Long Beach vendor for furnishing materials, equipment, supplies and non-professional services shall be reduced by 10%. In no case shall the maximum preference under this section exceed $10,000 for any bid. City of San Diego So-called bid discounts of up to 5% and up to a maximum of $50,000 for qualified Small Local Business Enterprises and Emerging Local Business Enterprises. City of San Jose Bids for goods and services from businesses located in Santa Clara County will now be viewed more favorably than non-local competitors while still including factors such as cost and experience. Small businesses with 35 or fewer employees will also benefit. For bids on goods, local businesses will have a 2.5% cost advantage and small, local companies a 5% cost advantage. In reviewing services provided through a request for proposal process local businesses will receive a 5% point advantage and small, local companies a 10% point advantage. City of Thousand Oaks Municipal Code Article 5, Chapter 10, Title 3 – Purchasing: Bid Evaluation Procedures: “Quality and service being equal, a local preference of five (5%) percent but not more than Five Thousand and no/100th *($5,000.00) Dollars shall be given to local vendors….” http://www.toaks.org/civica/filebank/blobdload.asp?BlobID=20638

* C.O.R.E. thanks the ShopLA Team of the Mayor’s Office for its assistance in compiling comparison information.

** The Long Island Index was compiled by prepared based on data compiled by the Center for Governmental Research (CGR). New York State research was based on telephone interviews with purchasing agents and/or public works staff. A Lexis search engine review was conducted to identify all state statutes referring to public bidding and preferences. (See http://www.longislandindex.org/).

Report Re: Survey of City Departments & Bureaus: - Strategies to Foster Efficiencies & Innovations

_____________________________________________ TO: The Honorable Antonio Villaraigosa, Mayor The Honorable Wendy Greuel, City Controller The Honorable Carmen Trutanich, City Attorney Honorable Members of the City Council DATE: March 2012

I. Summary The City’s budget challenges have presented a new reality for City government and

maintaining City services. C.O.R.E. was charged with examining ways to enhance both revenue and efficiency in City departments. To that end, C.O.R.E. undertook a survey of 21 City departments, bureaus and offices to better understand the areas where additional revenue or efficiency options may exist, and also identify the efforts that City departments have initiated and achieved.

C.O.R.E. posed five questions to each of the Departments, including inquiries of their

proposals for new and enhanced revenues, for new and enhanced savings, whether they have a Joint Labor Management Committee – as is encouraged by the City’s Charter. Attached as Appendix “A” hereto is a Summary Sheet of all responses; attached as Appendix “B” is a list of the 115 revenue-generation and cost-savings ideas presented by the Departments to C.O.R.E. Some of the ideas presented by the Departments are new, some aren’t. Moreover, some ideas are stronger, or more impactful, than others. Yet, C.O.R.E. recommends that the City examine each of the ideas, prioritize them, and undertake the ones deemed most do-able and meaningful. As detailed below, C.O.R.E. also recommends that a similar survey be conducted annually.

Perhaps even more important than the 115 ideas we have compiled herein are the lessons

we believe that can be drawn from the responses in developing strategies to foster efficiencies and innovations in City government. To that end, our Commission draws particular attention herein to the strategies employed by the City’s Bureau of Sanitation. Every Department, of course, has its strengths and its challenges. Moreover some Departments have more opportunities to be entrepreneurial than do others. It is worth noting, however, that the Bureau of Sanitation’s ideas constituted nearly 23% of the ideas received from the 20 out of 21 departments, bureaus and offices that responded to our survey. In numerous meetings with the Bureau we were impressed by the culture of entrepreneurialism and the fostering of creative ideas.

Among the factors C.O.R.E. identified as fostering efficiencies and innovations were an

effective Joint Labor-Management Committee, a strategic plan, good management, teamwork, use of a management and ideas matrix, worker recognition – and institutionalized ways to solicit, incubate, develop and implement ideas to increase revenues and effect operational efficiencies.

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 2 of 16 Pages

II. Recommendations

C.O.R.E. recommends that:

1. All departments be required to fully put in place:

a. A joint labor-management committee or similar process borrowing, if appropriate to the size and mission of the department, from the template of the Bureau of Sanitation.

b. A robust strategic planning process modeled, if appropriate to the department, on the template of the Bureau of Sanitation.

c. A “Scorecard Matrix” to keep track of good ideas – and to keep them on track.

d. Meaningful programs for acknowledging employees in a conspicuous way for ideas they introduce to generate revenue or reduce operational costs. (The City might, under some circumstances, even consider the possibility that as part of effective worker recognition, the City might have bonuses to employees or teams that provide exceptional money making or money-saving ideas. The Commission is, however, cognizant of the potential pitfalls of such a program).

NOTE: Departments that already some of the above in place may want to consider examining the way the Bureau of Sanitation integrates these activities for numerous purposes -- including budget planning, throughout the year.

2. The CAO and CLA consider for inclusion in their respective periodic reports on revenue-generation and cost-savings opportunities for the City the ideas submitted by the departments surveyed.

3. The City develop a training program for departments to establish and conduct joint-

labor management committees. 4. The City bolster the resources and work of the City’s Quality & Productivity

Commission:

a. Allocate appropriate funds to the Productivity Incentive Revolving Fund (PIRF) to encourage the expansion of demonstrated revenue-generation and cost-savings measures

b. Reconstitute the Quality and Productivity Managers Network. The Network provided a way for departments to exchange ideas and programs which have translated to cost savings, greater efficiencies, or increased productivity.

c. Charge the QPC with conducting henceforth an annual survey of City departments and bureaus based upon C.O.R.E.’s survey.

d. Expand the QPC’s awards program. Recognition of City worker, teams and good ideas are needed now more than ever.

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 3 of 16 Pages

III. Background

A. C.O.R.E. Survey of City Departments Beginning in June 2011, the Commission surveyed 21 departments and bureaus and

solicited their responses re:

1. New Revenues 2. Cost Savings 3. Joint Labor-Management Partnerships 4. Strategic Plan 5. Rewarding Good Ideas

A copy of the letter soliciting the departments is attached as Appendix “C-1” and a copy of

the survey itself is attached as Appendix “C-2”. All except the City Attorney responded.

Departments identified 115 ideas they have to either generate new revenues or effect cost efficiencies. 51 of these are from seven departments that have a joint labor-management committee and all but one of them has a dynamic strategic planning procedure. Interestingly, nearly 23% of all the ideas came from the Bureau of Sanitation – they used nearly every category surveyed from recognizing good ideas to implementing annual strategic plans. (A summary of Survey results is attached as Appendix “A”; and a full list of the 115 ideas is attached as Appendix “B”).

The Commission realizes that the survey itself has limitations. A department could respond

that it has a joint labor-management committee, for example, but further examination would find that the committee functioned predominantly as a forum for hearing and resolving grievances rather than as a forum for introducing ideas on how to make or save money for the department. We also realize that some departments who responded that they have a strategic plan do indeed have plans, but they have not been updated in several years and are not genuinely “planning” documents.

B. Strategies to Foster Efficiencies & Innovations – Bureau of Sanitation Case Study

Early in its deliberations, the Commission came to realize that when it comes to innovative ways to make or save money for the City, the Bureau of Sanitation is noteworthy. Not without its challenges, it seeks to develop ways to turn potential environmental liabilities into economic assets -- and seeks to do more with less.

Joint Labor-Management Committee: An examination of minutes from the Bureau’s joint labor-management committees from

January through September 2010 reflect a discussion of 26 ideas to generate new revenue or bring about efficiencies. Some of the revenue-generating ideas are in the process of implementation. A recent report of the City’s Chief Administrative Officer noted that the Bureau has implemented $27 million in operational efficiencies in its Wastewater Division in the past two years.

Section 234 of the City Charter provides that “the City shall encourage joint labor-

management partnerships to set goals, encourage agreements, solve problems, create incentives for outstanding individual or team performance and encourage flexibility and innovation.” Best exemplified by the Bureau of Sanitation, the joint labor-management

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 4 of 16 Pages

committee process, combined with a robust strategic planning process, is a way to institutionalize the introduction, discussion, and ultimate implementation of ideas to generate revenue or reduce operational costs.

Strategic plan: The Commission also reviewed the Bureau’s strategic planning process and concluded

that the use of the joint labor-management committee and strategic planning processes by the Bureau contributed to a thriving culture of entrepreneurship.

Following up on good ideas – the Scorecard Matrix:

One of the things that CORE found to distinguish the Bureau of Sanitation is its use of

a “Scorecard Matrix”. The Bureau uses this matrix to track ideas, goals and projects -- along with status and timelines. The Bureau assigns both a “Grade” and a “GPA” to each of the tracked ideas/initiatives/projects. The Bureau also assigns a lead division contact (that it has referred to as the project “owner” to each of the ideas/initiatives/projects. The lead / ”owner” gets the recognition and carries the responsibility for a project’s implementation. (Both a 1-page Sample and a 1-page filled Example of the Bureau’s Scorecard Matrix are attached as Appendix “D”).

C. Conclusions

The combination of joint labor-management committees, dynamic strategic planning procedures, a management-teamwork matrix and programs that recognize employees for good ideas are not simply prudent management practices. They can and do create an institutional process that produces a culture of entrepreneurship. That culture encourages and recognizes the introduction of new ideas and those ideas can and do result in ways to generate or save money for the City without compromising the quality of service the City provides. In addition to the survey, C.O.R.E. was presented with a few other solutions for enhancing revenue and improving productivity. The Bureau of Street Services presented an overview of the City’s asphalt operations and the two asphalt plants owned and operated by the City. The Bureau discussed the possibility of exploring a way to maximize the output of the City’s two plants and providing asphalt to other jurisdictions and entities in the region. C.O.R.E. recommends this option be explored by policymakers.

IV. Revenue Impact

CORE’s survey yielded 115 ideas from departments and bureaus for revenue generation and cost savings. The ideas are in various stages of exploration or implementation – and some will, inevitably, be better than others. What is most crucial is that the City begin to cultivate a more entrepreneurial and proactive approach in every aspect of its operations and in the potential of putting the City’s vast assets to their best possible uses. By implementing even a few of the 115 ideas presented and by focusing on ongoing money-making and money-saving proposals, CORE estimates the potential for combined revenues and savings of approximately $25 million annually – with significant opportunities for in excess of $100 million annually.

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 5 of 16 Pages

Respectfully submitted, Ad Hoc Commission on Revenue Efficiency Ron Galperin, Chair Hon. Cindy Miscikowski, Vice Chair Mark Ames, Commissioner David Farrar, Commissioner Michael Gagan, Commissioner Cheryl Parisi, Commissioner Brandon Shamim, Commissioner

CC: Audits and Governmental Efficiency Committee Budget and Finance Committee Miguel A. Santana, City Administrative Officer Gerry F. Miller, Chief Legislative Analyst Antoinette Christovale, Director, Office of Finance Neil Guglielmo, Deputy Mayor, Budget & Financial Policy

Contacts:

Ron Galperin, Chair Jon Dearing, Analyst Ad Hoc Commission on Revenue Efficiency Office of Chief Legislative Analyst ron@rongalperin.com jonathan.dearing@lacity.org

Website:

http://C.O.R.E..lacity.org/

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 6 of 16 Pages

Appendix “A”

C.O.R.E. Survey of Selected City Departments, Summary Sheet

City Department / Bureau

Proposals for new or enhanced revenues?

Proposals for new or enhanced savings?

Is there a Joint Labor -Management Committee?

If have JLMC, does it consider revenue or efficiency proposals?

If no JLMC, is there another process to introduce ideas?

Have strategic plan?

Employee recognition for good ideas?

No. of ideas presented by Dept./Bureau

1 Animal Services Y Y N n/a Y Y Y 10

2

Building & Safety N Y N n/a Y Y Y 0

3 City Attorney 0

4 City Clerk N N N n/a Y Y Y 0

5

Community Development Y Y N n/a Y Y Y 2

6

Finance / Treasurer Y Y N n/a Y Y Y 2

7 Fire Y Y Y Y n/a Y Y 2

8

General Services Y Y Y Y n/a Y Y 5

9 Housing Y Y N n/a Y Y Y 9

10

Information Technology Y Y N n/a Y N Y 14

11

LA Convention Center Y Y N n/a Y Y Y 12

12 Library Y N Y Y n/a N Y 2

13 Personnel N Y Y Y n/a Y N 1

14 Planning Y Y N n/a Y Y Y 5

15 Police N Y Y Y n/a N Y 2

16

Police Commission Investigation Div.

Y Y N n/a Y Y Y 2

17

Public Works- Sanitation Y Y Y Y n/a Y Y 26

18

Public Works - Engineering Y Y Y Y n/a Y Y 2

19

Public Works - Street Services Y Y Y Y n/a Y Y 3

20

Recreation & Parks Y Y Y Y n/a Y Y 12

21 Transportation Y Y N n/a N N N 4

TOTALS (Y) 16 18 9 9 10 16 18

TOTAL IDEAS:

115

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 7 of 16 Pages

Appendix “B”

City Department and Bureau Revenue-Generation and Cost Savings Ideas:

Summer 2011 C.O.R.E. Survey Results 1. Animal Services

1. On-line registration of new dog licenses.

2. Administrative citation program.

3. Increase license fees, create new fees, add penalties.

4. Utilize DWP database for licensing.

5. Create on-line vet portal to reduce processing time for spay/neuter program.

6. Consolidate spay/neuter trust funds.

7. In-house spay/neuter surgery to reduce contracting costs.

8. Determine feasibility of in-house dog licensing to increase revenue.

9. Contract with non-profit organizations to provide marketing assistance.

10. Solicit outside funding to provide marketing assistance.

2. Building & Safety No ideas presented.

3. City Attorney No survey response.

4. City Clerk No ideas presented.

5. Community Development

1. Redesign programs to reduce the number of contracts administered.

2. Improve automated systems.

6. Office of Finance / Treasurer

1. Sale of delinquent accounts receivable.

2. (Consolidation of the Office of Finance and Treasurer, effective August 17, 2011).

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 8 of 16 Pages

7. Fire Department 1. Institute inspection fees for mid-size and smaller industrial and commercial buildings.

2. Implement 2011 Deployment Plan.

8. Department of General Services 1. Increase customer base at parking facilities by offering specialized incentive programs such as

group rates, early bird rates and validation programs.

2. Increase revenue for services provided to proprietary departments such as fleet services to LA World Airports.

3. Continue to install energy and water conservation measures at City facilities to reduce energy and water costs.

4. Use automated equipment to increase productivity in Custodial Services.

5. Increase participation in the Barcode Automation Program to reduce postage costs.

9. Housing 1. Improve accuracy of property data.

2. Application of liens on properties with unpaid bills.

3. Explore new collection practices.

4. Cell phone cost reductions.

5. Consolidate City contracts for property data.

6. Institute on-line payment system.

7. Use temporary staff services for temporary services.

8. Leverage community organizations to enhance service and reduce costs.

9. Consolidate Department contracts to reduce administrative costs.

10. Information Technology Agency

1. Digital Assets advertisement (RFP).

2. Telecom Asset Leasing.

3. City-wide WiFi feasibility report.

4. Satellite TV Franchise Fee.

5. Cable Franchise Auditing Oversight.

6. Los Angeles Business Assistance Virtual Network (LABAVN) users fee.

7. Landline/Telcom Optimization:

8. Cell Phone Optimization.

9. Enterprise Software Licensing Agreements.

10. Multi-sourcing.

11. ITA Space consolidation (reduce external leases).

12. Enterprise Email/Collaboration Software Cloud Solution.

13. Financial Management System (FMS) implementation.

14. Centralized Accounts Receivable Reporting (CARR) project.

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 9 of 16 Pages

11. Los Angeles Convention Center 1. Market demand parking rates.

2. Improve parking programs to produce additional revenue.

3. Flexible Space rental rates for events that would otherwise not be held at the LACC.

4. Advertising revenue opportunities from web site links, utilization of the facility exterior.

5. Strategic advertising campaigns to create brand recognition.

6. Attract more filming and photo shoots.

7. Identify and pursue grant-based funding opportunities.

8. "LACC's Journey to be Green Turns to Gold” water and energy efficiencies and cost savings.

9. Escalator repair and replacement program to reduce energy costs by 25%-30%.

10. Install Variable Frequency drives (VFDs) for all air handlers to save 50% to 80% on energy.

11. Install Carbon Monoxide (C02) sensors to allow parking exhaust fans to turn on & off based on actual C02 levels to produce energy savings of 30% to 50%.

12. Evaluating options to reduce monthly cell phone service plans.

12. Library

1. Commemorative library card.

2. Pilot an office supply vending machine in one of the busier libraries.

13. Personnel Department

1. Working on the Mayor’s proposal to centralize the City’s Human Resources services.

14. Planning Department

1. Increase planning and land use fees.

2. Generate fee revenue from sign district applications.

3. Partner with sign companies for signage on City properties.

4. Explore the use of part time or contract planning staff.

5. Seeking funding to streamline permitting and land use applications.

15. Police Department

1. Implement the “E-Rotor” program to post certain publications on-line

2. Reduce overtime “time banks”

16. Police Commission, Investigation Division

1. Cost recovery fee for charitable solicitation permit applications

2. Authorize Executive Director on behalf of the Commission to approve Police Permits

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 10 of 16 Pages

17. Bureau of Sanitation These ideas were extracted from minutes of the Bureau of Sanitation’s Joint Labor-Management Committee meetings (January 2010 through September 2010).

1. Develop Recycling Rewards Program.

2. Tapping the revenue potential of recyclables.

3. Marketing water rights at Green Acres Farm (A 4,688-acre farm near the City of Bakersfield in Kern County. Acquired in 2000, the farm is owned and operated by the City of Los Angeles).

4. Contract with the farm operator at Green Acres to grow pistachios on unused acreage.

5. Central LA Recycling and Transfer Station (CLARTS): Maximize the remaining capacity for revenue; sort materials that come into CLARTS and recycle materials such as plastic, steel and aluminum.

6. Hyperion – Biogas / Digester Capacity: increase the role of the Fats, Oil and Grease (FOG) project.

7. Work with the Solid Resources Division to recycle food waste.

8. Treat additional water at Hyperion to generate revenue.

9. Commercially develop and use Nitrogen Gas produced at Hyperion.

10. Hyperion: Attach a series of Electrical Generating Hydraulics to the 5-mile pipeline.

11. Create a phosphorus product from wastewater at the treatment plants that can be used for fertilizer, as the supply of phosphorus is decreasing and the demand is increasing.

12. Explore revenue opportunities associated with the sequestration of CO2 at the Terminal Island Renewable Energy project.

13. Contract with the City of Malibu on its wastewater treatment plant.

14. Greenwaste: Market a new compost mix.

15. Lopez Canyon -- Mulching Operation: Market compost produced at Lopez Canyon. (in process).

16. Lopez Canyon – use for LADWP green energy generating facility.

17. Lopez Canyon -- site for solar panels.

18. Franchise private haulers to operate in the wasteshed (from 140 haulers to five or six in the multi-family sector).

19. Contract with small outlying cities to pick up their trash.

20. Provide refuse collection at LAUSD.

21. Oversee and pay own liability claims.

22. On-board cameras in waste collection trucks.

23. Scavenger Reduction Task Force.

24. Recover costs from the County for the Safe Center program.

25. Program for replacing warrantable containers (as opposed to City paying for replacements).

26. Working with the Toy District and Fashion District regarding placement of bins and collection.

18. Bureau of Engineering

1. Update cell phone service contract to reduce costs.

2. Salvage and redeploy 19 fleet equipment items.

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 11 of 16 Pages

19. Bureau of Street Services 1. Deliver Bureau services to other jurisdictions:

a. Street resurfacing b. Slurry sealing c. Tree trimming d. Motor sweeping

2. Sell hot asphalt mixes from City’s asphalt plants to other jurisdictions.

3. Retrofit asphalt plants to produce a 50% recycled asphalt mix to generate annual savings of between $5.4 to $10.8 million.

20. Recreation & Parks Department 1. Expand partner relationships to increase financial support for Department programs.

2. Identify and solicit program subsidy support from organizations new to the department.

3. Shift payment for utilities and waste removal to all organizations which have exclusive access to City facilities to run public programs.

4. Implement cost recovery fees for shared utilities and waste removal costs for organizations which provide public programs by sharing City facilities.

5. Solicit major Los Angeles-based retailers with an innovative sponsorship proposition.

6. Develop and charge consistent fees for use of facilities by LAUSD and other schools where a formal written reciprocal agreement is not in place.

7. Implement a “This is YOUR Neighborhood Resource” campaign to inform the public about room and field rental opportunities at recreation centers.

8. Generate revenue by leasing sites at Recreation & Parks facilities for telecommunication equipment (cell towers).

9. Implement water conservation and recycled water programs to reduce consumption and costs.

10. Greater staff efficiencies through landscape maintenance rerouting and clustering of multiple facilities for assignments.

11. Design landscape efficient parks with smart irrigation systems, solar trash cans, self-locking gates, drought tolerant landscaping and artificial turf.

12. Reduction in cell phones and cell phone usage.

21. Department of Transportation

1. Review City’s Vehicle Release Fee for impounded vehicles.

2. Implement an application and recovery fee on special events that reduce parking meter revenue.

3. Increase commercial loading zone and food truck parking revenue.

4. Combine City’s transit services (Commuter Express, Cityride, Dial-A-Ride and selected DASH routes) to create economies of scale, increase competition and reduce City costs by $15 to $20 million over a five-year period.

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 12 of 16 Pages

Appendix “C-1”

Copy of Survey Letter Sent to City Departments & Bureaus (June 2, 2011)

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 13 of 16 Pages

Appendix “C-2”

Copy of Survey Form Sent to City Departments & Bureaus (June 2, 2011)

C.O.R.E. Report Re: Survey of City Departments & Bureaus: Strategies to Foster Efficiencies & Innovations

March 2012 Page 14 of 16 Pages

Appendix “D”

Sample and Example of:

Scorecard Matrix Used by the Bureau of Sanitation to Track Projects / Initiatives

(See attached)

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Report Re: ASSESSING L.A.’s BUSINESS-RELATED POLICE PERMITS & FEES ____________________________________________

TO: The Honorable Antonio Villaraigosa, Mayor The Honorable Wendy Greuel, City Controller The Honorable Carmen Trutanich, City Attorney Honorable Members of the City Council DATE: March 2012 I. Summary

In this Report, C.O.R.E. offers its assessment of business-related police permits and fees in the City of Los Angeles – and the financial and business impacts thereof…

The City of L.A. Office of Finance licenses 430,0001 businesses based, or doing

business, in the City, and these businesses are required to renew their licenses annually. Businesses also pay applicable gross receipts taxes to and through the City’s Office of Finance. Somewhat less commonly familiar, however, is the L.A. Police Commission’s Permit Processing Section and its own Business Permit Fee Schedule. The Commission currently has 59 different types of business permits for various businesses – ranging from bowling alleys and antique shops to escort services and firearms vendors (See Appendix “A” attached hereto for the full list).

The City imposes application fees, annual renewal fees and change of address or

ownership fees on the various businesses regulated. And most recently this October, the City Council approved extending the fees from 57 to 59 classes of businesses, along with increases to many of these fees for the coming year.2

At the time each of the now-59 classes of businesses came to be regulated, the intent of

requiring special permits was to facilitate oversight and to enhance public safety. Having the Police Commission regulate the issuance of licenses for certain types of business is, arguably, often reasonable and necessary. Moreover, in the course of its inquiries, C.O.R.E. has consistently been impressed by the work and professionalism of the Police Commission and, notably, it’s Executive Director.

Government faces the ongoing challenge of balancing the need to reasonably regulate

commerce with the responsibility to promote business development – and sometimes, just to get

1 Total number of licenses issued includes multiple licenses which may be issued to one business entity.

2 Notably, as of the date of this Report, the listing of fees on the Police Commission’s website (Appendix

“B”) does not correspond to the current list (Appendix “A”). The online version has 57 (vs. 59) permit types – including a $106.00 permit for “Hill Climbing” (listed as no. 25 on the online list of 57). The Police Commission reported to C.O.R.E. that the “hill climbing” permit has been eliminated – but it remains on the list.

C.O.R.E. Report Re: Assessing L.A.’s Business-Related Police Permits & Fees

March 2012 Page 2 of 12 pages

out of the way. And, as we know, the costs and complexities of doing business in Los Angeles continue to hamper our local economy, job growth and the City revenues that would be realized with more streamlined and business-friendly regulation.

We have to ask ourselves if today we need to have special permits for bowling alleys,

skating rinks, or some of the other businesses we require to have special permits – including what C.O.R.E. was informed is the now-discontinued permit for “hill climbing”. And, we need to take a frank look at the appropriate scope of enforcement of certain businesses in the City – and the law enforcement resources we dedicate to such permitting. Accordingly, C.O.R.E.’s offers its assessment of the current permitting schedule – and the Commission urges the City to undertake a review of the efficacy and necessity of the classes of businesses currently regulated and permitted. II. Recommendations C.O.R.E. recommends:

1. That City Council request the Police Commission to present its most recent report on the Business Permit Fee Schedule to the Council’s Jobs & Business Development Committee.3 C.O.R.E. further recommends the Committee consider ways to simplify, prioritize and cut as many of the categories as possible.

2. That an ad-hoc working group be created to (a) examine the Business Permit Fee Schedule, (b) consider possible elimination, consolidation and/or simplification of certain fees and report to the Council and to its Jobs & Business Development Committee on recommendations. C.O.R.E. recommends that said ad-hoc working group be convened with representatives of the Police Commission, the Office of Finance, the Chief Legislative Analyst, the Economic & Business team of the Mayor’s Office and any other appropriate representatives. C.O.R.E. further encourages consultation with representatives of the business community, of the ad-hoc Business Tax Advisory Commission (BTAC) and the Quality & Productivity Commission (QPC) of the City.

III. Background

Per Los Angeles Municipal Code (LAMC) Section 103.12, the Police Commission is responsible for issuing permits for different businesses and activities within the City. The Police Permit Review Panel was introduced in 1992 through changes in the Los Angeles Municipal Code and is a subsidiary of the Board of Police Commissioners. The Permit Review Panel may approve or revoke police permits and review and approve conditions on new and existing police permits. On April 5, 2011, the Board of Police Commissioners approved its most recent report (dated March 30, 2011) on Commission permits, entitled: “Proposed Amendments to Police Permit Fees, Fees for Special Services and Establishment of a New Special Service Fee for Fiscal Year 2011-2012”.4 On October 21, 2011, said report was presented to the City Council,

3 The report has been previously submitted to the Council and its Public Safety Committee. However,

while the fees were examined, C.O.R.E. believes an examination by the Jobs & Business Development Committee would be beneficial.

4 The report describes permits in detail, along with the fees and costs to the City associated therewith.

Generally, the period in which permits are valid begin October 1st and are up for renewal by December 31st. Any permit that is renewed after December 31st is charged a re-application fee which is the same as

C.O.R.E. Report Re: Assessing L.A.’s Business-Related Police Permits & Fees

March 2012 Page 3 of 12 pages

along with a September 23, 2011 Memorandum from the Office of the City Administrative Officer recommending adoption of the amendments and fee increases. The Council voted to approve of the recommendations. (CF No. 11-1625). Among other things, the Office of the CAO noted in its Memorandum that many of the police permit fees currently do not fully recover the costs of providing those services. For 2010, the Police Commission reports 6,399 business permit renewals and 1,217 initial permit requests. C.O.R.E. referred to several sources in looking at the City’s panoply of fees:

(a) The Police Commission’s online Business Permit Fee Schedule5 currently lists 57 categories. (b) The CAO’s Memorandum lists 56 categories (several not corresponding to what is on the website. (c) A report provided by the Police Commission to C.O.R.E. listed 59 permit types (with 2 thereof blank). Again, this list was slightly different than the others. And (d) the Police Commission’s report of March 30 details a total of 70 categories of police permit fees and special services fee, plus the fee for Excessive (and for false) Alarms. Notably, this latter fee represents $6.3 million of the $9.3 million in 2010 revenues from all 71 fees combined.

Quite a number of the categories and fees raise questions about what the City is actually

accomplishing. And, we are sure, that many businesses don’t even realize they may be out of compliance. A few examples from the list of 71 categories (and fees):

Antique shop – 34 permit renewals in 2010 and 0 new permit requests. We all know there are well more than 34 antique shops in L.A. – and it’s inconceivable that not even one opened in 2010. It would seem that the very few antique shops that are paying are vastly outnumbered by those that aren’t. Either the City should determine that this is an important type of business to license – and do it right, or not do it at all.

Escort and Escort Bureau – For escorts, there were 0 renewals and 0 initial permit requests in 2010. For escort bureaus, there was 1 renewal and 1 initial permit request for 2010. What precisely, then is the point of these permits?

Family Billiard Room – 1 renewal and 0 initial permits in 2010.

Figure Studio -- 1 renewal and 0 initial permits in 2010.

Secondhand Books and Magazine(s) businesses -- 21 renewals and 1 initial permit in 2010. Is policing these businesses necessarily the best use of limited resources?

Skating Rink – 3 renewal and 0 initial permits in 2010. Same as above.

Auto Park – 884 renewals and 334 initial permits in 2010; total revenues: $223,000. We have very good reason to believe, however, that the number of auto parks may significantly exceed the numbers of those permitted. Moreover, $223,000 doesn’t seem

the initial permit fee. Typically, payment for a Police Permit is made to the Office of Finance; renewals are mailed out by the Office of Finance.

The Permit Processing Section investigates an applicant's qualifications and background. If the applicant meets the requirements and passes the background check, the permit is placed on the Permit Review Panel's calendar to be approved. If there is a reason for denial, the application is forwarded to the Enforcement Section for further investigation. The City Clerk can advise on the City's requirements for specific applications, such as the need for approvals from Building and Safety, Planning or Fire Departments. Requirements are contained in the Municipal Code and Police Commission Board Rules.

5 http://www.lapdonline.org/police_commission/content_basic_view/9139

C.O.R.E. Report Re: Assessing L.A.’s Business-Related Police Permits & Fees

March 2012 Page 4 of 12 pages

like nearly enough to properly watch over permitting for this type of business that has a track record of failures to comply with local laws – including shortchanging the City tens of millions of dollars annually in Parking Occupancy Tax (see C.O.R.E. report October 2011: “Lost in the Parking Lot”).

Other – The list of 71 includes categories that are, apparently, not operational including: Photographs, Sale of Audio, Sale of Video and Sale of Training (?).

Hill Climbing Permit -- Perhaps the Commission’s “favorite” of all the permit categories is the one for “Hill Climbing” (No. 25 of 57 permits listed on the Police Commission’s on-line Business Permit Fee Schedule (Appendix “B”). Interestingly, this business category is not on the other lists of current permits – not could we find a reference thereto in the Municipal Code – and the Police Commission says it has been discontinued. Nonetheless, as of the date of this Report, the online Schedule clearly indicates an initial fee of $106.

All the aforementioned inevitably leads us to the conclusion that reform is needed.

IV. Revenue Impact

The Police Commission’s recent report details well certain costs directly and indirectly associated with permitting various categories of businesses, but times change. Even as we increase certain fees to achieve so-called full-cost recovery, C.O.R.E. believes it would be valuable to reassess each of the business-related fees. In doing so, we have the opportunity to give a bit more meaning to the oft-repeated mantra of being more business-friendly – and to benefit financially as a City by just getting out of the way.

Increasing compliance for the police permits which have a

legitimately specialized or sensitive use will yield more revenues. At the same time, simplifying the process will reduce City overhead costs while encouraging business expansion. CORE estimates the potential for combined revenues and savings of approximately $1 - $5 million annually.

Respectfully submitted, Ad Hoc Commission on Revenue Efficiency

Ron Galperin, Chair Hon. Cindy Miscikowski, Vice Chair Mark Ames, Commissioner David Farrar, Commissioner Michael Gagan, Commissioner Cheryl Parisi, Commissioner Brandon Shamim, Commissioner

CC: Budget & Finance Committee Public Safety Committee Miguel A. Santana, City Administrative Officer Gerry F. Miller, Chief Legislative Analyst Antoinette Christovale, Director, Office of Finance Neil Guglielmo, Deputy Mayor, Budget & Financial Policy

Richard M. Tefank, Executive Director, LAPD Board of Commissioners

C.O.R.E. Report Re: Assessing L.A.’s Business-Related Police Permits & Fees

March 2012 Page 5 of 12 pages

Contacts:

Ron Galperin, Chair Jon Dearing, Analyst Ad Hoc Commission on Revenue Efficiency Office of Chief Legislative Analyst ron@rongalperin.com jonathan.dearing@lacity.org

Website: http://C.O.R.E..lacity.org/

* The Commission would like to specially acknowledge and thank Police Commission Executive Director Richard Tefank for his consistent availability and assistance to C.O.R.E.

C.O.R.E. Report Re: Assessing L.A.’s Business-Related Police Permits & Fees

March 2012 Page 6 of 12 pages

Appendix “A”

Business Permit Fee Schedule

Police Permits are required for the following business activities and professions. Application fees for new permits and for location changes shall be accepted by the City Clerk.

Type of Business Original Fee

Annual Police Permit Fee

Change of Location Fee

1. Alarm System, Proprietor or Subscriber, other than a mechanical audible alarm system as defined by Section 103.306 of the Code, Protecting a residential building

$ 30.00 $ 30.00 $ 31.00

2. Antique Shop $228.00 $ 76.00 $ 44.00

3. Arcade, Game $595.00 $124.00 $ 91.00

4. Arcade, Picture $540.00 $124.00 $ 90.00

5. Auto Park $154.00 $ 64.00 $ 90.00

6. Auto Rental $166.00 $ 51.00 $ 43.00

7. Bath $154.00 $ 94.00 $ 90.00

8. Bowling Alley $450.00 $ 87.00 $447.00

9. Cafe Entertainment and Shows, Except Live Theatrical Productions in a Theater with a Seating Capacity of 99 Persons or Less

$450.00 $100.00 $446.00

10. Card Club/School $191.00 $100.00 $189.00

11. Carnival $191.00 $ 76.00 $152.00

12. Collectors' Exchange of Antique Show Promoter

$250.00 $ 58.00 $ 83.00

13. Dance Hall $450.00 $100.00 $447.00

14. Dance, One Night-Public $ 58.00 NONE NONE

15. Dance, Teenage-Public $ 45.00 $ 14.00 $ 42.00

16. Dancing Academy $177.00 $ 76.00 $ 43.00

17. Dancing Club $177.00 $ 76.00 $175.00

18. Escort $ 59.00 $ 26.00 $ 43.00

19. Escort Bureau $518.00 $149.00 $ 90.00

20. Family Billiard Room $300.00 $149.00 $298.00

21. Figure Studio $595.00 $124.00 $591.00

22. Firearms, Concealable, Vendor $300.00 $149.00 $298.00

23. Game/Skill/Science $228.00 $ 64.00 $226.00

24. Handbill Distribution $ 69.00 $ 40.00 NONE

25. Hill Climbing $106.00 NONE NONE

C.O.R.E. Report Re: Assessing L.A.’s Business-Related Police Permits & Fees

March 2012 Page 7 of 12 pages

26. Hostess, Dance Hall $595.00 $149.00 $592.00

27. Identification Cards $373.00 $124.00 $ 42.00

28. Junk Collector $129.00 $ 40.00 NONE

29. Junk Dealer $450.00 $ 76.00 $ 44.00

30. Locksmith $154.00 $ 40.00 $ 43.00

31. Massage $395.00 $296.00 $224.00

32. Massage - Off Premises $402.00 $303.00 $230.00

33. Massage Technician $261.00 $ 58.00 NONE

34. Massage Technician - Off Premises $266.00 $ 58.00 NONE

35. Messenger Service $ 81.00 $ 40.00 $ 43.00

36. Motion Picture Show $191.00 $ 64.00 $188.00

37. Parades $125.00 NONE NONE

38. Pawnbroker $496.00 $124.00 $ 44.00

39. Peace Officer Firefighter Org -Promotor Promotor

$140.00 $ 58.00 $ 83.00

40. Peace Officer Firefighter Org -Solicitor

$ 54.00 $ 29.00 $ 39.00

41. Pool Room-Single $300.00 $149.00 $298.00

42. Pool Room $300.00 $149.00 $298.00

43. Private Patrol $300.00 $149.00 $ 43.00

44. Rides Mechanical $130.00 $ 64.00 $128.00

45. Rummage Sale (Annual) $ 59.00 $ 14.00 $ 44.00

46. Sale, Fire, Close-Out and Removal $298.00 $149.00 NONE

47. Secondhand $154.00 $ 64.00 $ 91.00

48. Secondhand (Books/Mags.) $154.00 $ 64.00 $ 91.00

49. Secondhand (General) $154.00 $ 64.00 $ 91.00

50. Secondhand (Jewelry) $154.00 $ 64.00 $ 91.00

51. Shooting Gallery $154.00 $ 64.00 $151.00

52. Skating Rink $300.00 $ 64.00 $298.00

53. Special Officer $ 59.00 $ 26.00 $ 42.00

54. Swap Meet Operator $250.00 $ 58.00 $ 83.00

55. Towing Operation $450.00 $ 76.00 $ 89.00

56. Tow Unit Operator $ 59.00 $ 32.00 $ 43.00

57. Firearm & Ammo $ 91.00 $ 91.00 $ 91.00

58. Ammunition Vendor $672.00 None

59. CyberCafe $153.00 $153.00

As of Oct. 31st http://www.lapdonline.org/police_commission/content_basic_view/9139

C.O.R.E. Report Re: Assessing L.A.’s Business-Related Police Permits & Fees

March 2012 Page 8 of 12 pages

Appendix “B”

Business Permit Fee Ordinance

See attached 4 pages of Ordinance (Pages 9-12 of CORE Report)

181919ORDINANCE NO. _

An ordinance amending Sections 44.04, 52.16, 103.12 and 103.206 of the LosAngeles Municipal Code to add an application fee for Charitable Solicitation InformationCards, increase the fees for issuance of News Media Identification Cards and FalseAlarms, and revise the Police Permit Fee Schedule.

THE PEOPLE OF THE CITY OF LOS ANGELESDO ORDAIN AS FOLLOWS:

Section 1. The first unnumbered paragraph of Section 44.04, of Article 4, ChapterIV of the Los Angeles Municipal Code is amended to read as follows:

No person shall solicit or authorize any other person to solicit any charitablecontribution unless a written Notice of Intention to solicit charitable contributions is filedwith the Department at least 15 days prior to the beginning of the solicitation on a formfurnished by the Department. A Notice of Intention shall be filed for each separatespecial event. At the option of the person filing the Notice, a Notice related to anongoing general appeal for charitable contributions may be filed on an annual basis.The Department shall distinguish between special events and activities related to anongoing general appeal so as to best inform the public of the costs and receipts of thevarious types of charitable solicitation activities undertaken by the person filing theNotice. If an annual Notice is filed, it shall include a description of the activities plannedfor the year related to the general appeal of the person filing the Notice, and the personfiling the Notice shall file a separate Notice of Intention for any charitable solicitationactivity that is not included in the annual Notice. The Notice of Intention shall includethe following information and must be accompanied by an information card fee of$42.00.

Sec. 2. Subsection (H) of Section 52.16, of Article 2 of Chapter V of the LosAngeles Municipal Code is amended to read as follows:

H. The fee for issuance of a card shall be $24.00, provided however that nofee shall be charged for the reissuance of such card.

Sec. 3. The Business Permit Fee Schedule of Section 103.12, Division 4, Article3, Chapter X of the Los Angeles Municipal Code is amended to read as follows:

I Or~inal!\nnual. I,.;nangeRenewal of

Type of Business ee Fee LocationFee

Alarm System, Proprietor or Subscriber, otherthan a mechanical audible alarm system asdefined by Section 103.206 of the Code,Protecting a residential building 34.00 30.00 34.00

BUSINESS PERMIT FEE SCHEDULE

1

Ammunition Salesperson 80.00 80.00 NoneAmmunition Vendor 702.00 151.00 702.00Antique Shop 272.00 151.00 272.00Arcade Game 213.00 151.00 213.00Arcade Picture 221.00 151.00 221.00Auto Park 323.00 151.00 323.00Bath/Tannino Salon 491.00 151.00 491.00Bowline Alley 252.00 151.00 252.00Cafe Entertainment and Shows, Except LiveTheatrical Productions in a Theater with aSealinQ Capacity of 99 Persons of Less 486.00 151.00 486.00Card Club School 478.00 151.00 478.00Carnival 166.00 151.00 166.00Collectors' Exchange or Antique Show 270.00 151.00 270.00PromoterCyber Cafe 160.00 151.00 160.00Dance Hall 424.00 151.00 424.00Dance, One Niqht Public 315.00 None 315.00Dance, Teenaqe Public 421.00 None 421.00Dancinq Academy 248.00 151.00 248.00Danclnq Club 246.00 151.00 246.00Escort 347.00 151.00 NoneEscort Bureau 398.00 151.00 398.00Family Billiard Room 246.00 151.00 246.00Figure Studio 243.00 151.00 243.00Firearms Sales Person 80.00 80.00 NoneFirearms Vendor 702.00 151.00 702.00Firefighter Organization Promoter 211.00 151.00 211.00Firefighter Organization Solicitor 211.00 151.00 211.00Game, Skills/Science 221.00 151.00 221.00Hostess, Dance Hall 382.00 151.00 382.00Junk Collector 168.00 151.00 NoneJunk Dealer 470.00 151.00 470.00Key Duplicator 182.00 151.00 182.00Massaoe Business 813.00 151.00 813.00Massaqe Business -Off Premises 369.00 151.00 NoneMassaqe Technician 512.00 169.00 NoneMassaqe Technician-Off Premises 512.00 169.00 NoneMotion Picture Show 270.00 151.00 270.00Parades 300.00Pawnbroker 361.00 151.00 361.00Peace Officer Organization Promoter 211.00 151.00 211.00Peace Officer Orqanlzation Solicitor 211.00 151.00 211.00Pool Room-Slncle 319.00 151.00 319.00Pool Room 339.00 151.00 339.00

2

Rides (Mechanical) 213.00 151.00 213.00Rummaoe Sale (Annual) 46.00 46.00 46.00Sale, Close-Out 211.00 None 211.00Sale, Fire 211.00 None 211.00Secondhand (Auto Parts) 367.00 151.00 367.00Secondhand (Books/Maqazines) 367.00 151.00 367.00Secondhand (General) 367.00 151.00 367.00Secondhand(Jewel~) 367.00 151.00 367.00Shooting Gallerv 209.00 151.00 209.00Skatina Rink 264.00 151.00 264.00Swap Meet Operator 347.00 151.00 347.00Towina Operation 466.00 151.00 466.00Tow Unit Operator 411.00 151.00 None

Sec. 4. Paragraph (1) of Subsection (e) of Section 103.206, Division 8, Article 3,Chapter X of the Los Angeles Municipal Code is amended to read as follows:

(1) False Alarm Fees. Alarm System Users shall pay a False AlarmFee of $151.00 for each False Alarm.

3

Sec. 5 The City Clerk shall certify to the passage of this ordinance and have itpublished in accordance with Council policy, either in a daily newspaper circulatedin the City of Los Angeles or by posting for ten days in three public places in the City ofLos Angeles: one copy on the bulletin board located at the Main Street entrance to theLos Angeles City Hall; one copy on the bulletin board located at the Main Streetentrance to the Los Angeles City Hall East; and one copy on the bulletin board locatedat the Temple Street entrance to the Los Angeles County Hall of Records.

I hereby certify that this ordinance wCZ~Rassedby the Council of the City ofLos Angeles, at its meeting of Q~T2 1 .

JUNE LAGMA Y, City Clerk

Approved OC_T_2_'8_:t_O_W __

Deputy

Mayor

Approved as to Form and Legality

CARMEN A. TRUTANICH, City Attorney

By ~.::f ~(1fJ<C..)BRIAN L. SOTTILEDeputy City Attorney

Date ~' 1; ;:;2..,011

File No. CF 11-0600' 5P9 (II- 1(,.J.5)

M:IPGENIPGENIBRIAN SOTTILEIOrdinanceslPolice Permit Fees - 8.25.11.doc

4

Report Re: FAILURE TO MANAGE CITY PROPERTIES

LEASED TO NON-PROFITS: - TIME FOR ACCOUNTABILITY

___________________________________________ TO: The Honorable Antonio Villaraigosa, Mayor The Honorable Wendy Greuel, City Controller The Honorable Carmen Trutanich, City Attorney Honorable Members of the City Council DATE: March 2012 I. Summary

There has never been a more important time than now for the City to evaluate its many assets and make sure the public’s assets are being properly managed and put to their best uses.

In the case of more than 100 properties owned by the City that are rented to various non-profits at well-below market rates – typically $1 per year – the Commission on Revenue Efficiency (C.O.R.E.) finds the City is failing to track, manage or realize the potential of these valuable properties. In this report, C.O.R.E. recounts a brief history of this issue, the Commission’s assessment of the current state of affairs and our Recommendations for reform.

The City’s lack of organization and willingness to oversee these publicly owned assets has been discussed for well more than a decade – but City Hall has, unfortunately, taken little action to remedy the situation. At stake is the potential for millions of dollars annually in rental income, savings in repairs, maintenance and capital improvements, diminished liabilities and legal expenses, reduced management and oversight costs for the City and the potential monies that might be realized from the sale of selected surplus properties.

Los Angeles is fortunate to be home to many outstanding non-profits – and their work

should be encouraged and assisted by the City wherever possible. The intent of the below-market leases has been to support their work and the community benefits they provide. The problem, however, is that the City’s policies have been inconsistent – and often irresponsible and capricious. Some properties are falling into disrepair; some are apparently uninsured. There is no consistent review for which non-profits get free rent, or of the public benefit the non-profits are to provide. Some of the organizations may, in fact, be engaging in activities that aren’t non-profit.

As detailed in the list of properties and non-profits (attached as Appendix “B”), the

properties and non-profits run the gamut from modest buildings and small-staff operations to much larger facilities and organizations – including Downtown’s Museum of Contemporary Art (MOCA), L.A. Theater Center, the Gay & Lesbian Center, the Japanese American National Museum and others. Many of the non-profits do exemplary work and might not otherwise continue to do so without a subsidized lease. For some this may not necessarily be the case.

C.O.R.E. makes no judgment about the individual non-profits receiving the benefit of

below-market leases – nor is the Commission advocating that all below-market leases should be discontinued. We do, however, urge the City to get a handle on these properties and exercise due diligence and oversight. It is time for accountability.

C.O.R.E. Report Re: Failure to Manage City Properties Leased to Non-Profits: Time for Accountability March 2012 Page 2 of 21 pages

II. Recommendations C.O.R.E. Recommends: 1. That the Mayor issue an Executive Order to require accountability of GSD and of

the City’s lessees. Said Executive Order should, at a minimum, require:

Insurance -- Compliance of all lessees with required and adequate property, hazard and liability insurance policies, procured from insurers meeting commercially standard requirements. Lessees shall furnish proof of appropriate insurance – with the City as a co-insured and a co-payee on all insurance policies. Should any such policies lapse, the insurance companies would be responsible for notifying the City, and the City would have authority to either bill the lessee for any insurance procured by the City, or to initiate eviction of the lessee. Repair and Maintenance -- Appropriate repair and maintenance provisions shall be added to all leases and GSD shall conduct a site visit to each property to determine if repair and maintenance required of the lessees is being performed. If not, appropriate letters and follow-up actions shall be taken – including, possibly, eviction. Tax and Financial Compliance -- All lessees shall furnish annually copies of their tax returns, annual budgets/reports and proof of compliance with IRS 501(c)(3) organization. Any lessees no longer qualifying as non-profits should be immediately evicted. Conforming Leases -- Immediately adopt leases for all lessees that are substantially conforming. Insofar as all but 7 of the leases are month-to-month, there should be little reason that new leases may not be required of the lessees.

Affidavits – Lessees shall annually be required to furnish affidavits of compliance with all Lease requirements.

2. That the City Council approve the 2001 and 2010 recommendations, respectively, by

the Municipal Facilities Committee (Entitled, “Policy Summary”, see Appendix “A”) and the 2010 Memo from the CLA and CAO (Entitled: “Non-Profit Lease Subsidy and Real Property Sale Policy” (available online at http://clkrep.lacity.org/onlinedocs/2008/08-2762_rpt_cao_4-16-10.pdf) ) -- and to make these recommendations mandatory lease requirements.

3. That the City Conduct an Independent Portfolio Analysis – Understanding the value

of the assets we have is vital to determining what should be done with them. Accordingly, C.O.R.E. recommends a thorough and independent evaluation of the 100-plus properties leased to non-profits. Said evaluation should include:

Market values for sales and leases Permitted uses Limitations on uses (per Planning and Zoning, deed restrictions, etc.) Limitations on sales or leases (per deed restrictions or other agreements) Development opportunities Condition of the properties and any clearly evident deferred maintenance, health, safety or

compliance issues

The costs associated with full evaluations and appraisals could be significant – and would likely vary depending on the property itself. C.O.R.E. recommends that the City develop and issue an RFP/RFQ for the evaluation(s). The City might also consider enlisting the UCLA Ziman Center for Real Estate and/or USC’s Lusk Center for Real Estate to undertake an evaluation of, and report about, the properties as part of a graduate school program.

C.O.R.E. Report Re: Failure to Manage City Properties Leased to Non-Profits: Time for Accountability March 2012 Page 3 of 21 pages

4. Evaluate and Implement Consistent Criteria – A stable and predictable set of criteria is necessary in determining what constitutes “public benefit”, whether a given non-profit qualifies for a below-market lease of City property and an assessment of community needs and priorities. As detailed in Sec. III, below, various standards and criteria have been suggested in the past, but there is still no consistent policy. Some non-profits are more clearly providing public benefit than others; some are able to pay market rates, some aren’t; some are maintaining their lease properties, others aren’t. There is no consistency – and no standards. The City also needs to consider how much of the determination of which non-profits are to benefit from below-market leases should be within the sometimes near-exclusive purview of the Councilmember in whose district a particular property is located. Moreover, while most leases have gone month-to-month, there are still apparently some tied to the term of office of particular Councilmembers; this, we believe, is troublesome. A 2010 report of the CAO and the CLA (see Sec. III, below) recommended, among other things, a new application system; we concur. More consistent policies must be implemented.

5. Adopt Los Angeles County Asset Management Strategies – An excellent checklist and paradigm can be found in a study by the Los Angeles County Citizen's Economy and Efficiency Commission (September 1995), entitled: Asset Management Strategies for the Los Angeles County Real Estate Portfolio. It should also be noted that the tracking and management of the City’s properties would likely be greatly assisted with simple “off-the-shelf” software that is used by many real estate management companies and owners.

6. Create a Real Estate Management Advisory Panel – C.O.R.E. recommends that the

City of Los Angeles form a real estate management advisory panel similar to The County of Los Angeles Real Estate Management Commission. This five-member group is advisory to the Board of Supervisors and all affected Departments and entities on all matters pertaining to the purchase, sales, leases, exchanges and rentals of real property.

7. Assess City Staffing – The management and rental of City properties involves staff of

GSD, the CLA, City Attorney and others. Staffing levels, expertise and interplay need to be assessed and evaluated for efficacy and efficiency.

8. Seek to Generate Supplemental Revenues – C.O.R.E. recommends that the Office of

the Mayor, with the City Council and City Controller explore additional and alternative methods of generating revenue through leased city property. Where appropriate, this may include, among other things, supplemental revenues from signage, special event rentals, filming and citing of cellular phone-related installations.1

9. Explore Opportunities for Subvention – Certain uses of rental property may be

subvened, i.e. provided with financial assistance or support from another source. For example, the County of Los Angeles is entitled to a Federal subvention (subsidy) for rent associated with certain uses – such as the Department of Children's and Family Services. Interestingly, the rent subsidy is not available if such programs are operated in facilities already owned by the County (only for facilities where the County pays rent). C.O.R.E. recommends that the City of Los Angeles examine both its own property uses, and the uses

1 Crown Castle International, an owner and operator of wireless installations shared by cellular phone carriers,

approached the Commission with a cursory analysis of the potential for the setting of such installations on the City owned buildings with non-profit tenants included in the report of Chief Legislative Analyst to the City Council April 16, 2010. Crown conveyed to the Commission that as many as 60 of the properties might be appropriate for consideration as potential sites for installations. Not every property is appropriate, of course, for a whole variety of land use, legal, quality of life and other possible reasons, but some of the sites could be appropriate -- and installations can generate up to $2,800 per month. C.O.R.E. is not advocating on behalf of wireless installations or on behalf of any company – but we offer this as an example, and believe it behooves the City to explore what are various opportunities for enhanced revenues.

C.O.R.E. Report Re: Failure to Manage City Properties Leased to Non-Profits: Time for Accountability March 2012 Page 4 of 21 pages

of its tenants, which may qualify for subvention. In doing so, the City could mandate that "subvened-rent-uses" are always located in leased facilities and that tenants of the City that qualify for subvention of their rent do, in fact, apply for such subvention assistance – so as to more fully compensate the City for use of the properties occupied by such tenants.

10. Consider Retaining Outside Counsel – For (unlawful detainer) evictions and other actions

related to illegal uses, nuisances and or other violations of lease terms. There are attorneys and firms that specialize in UD work – and doing it very quickly and cost-effectively.

III. Background

The matter of the more than 100 properties owned by the City, which are being rented or leased at below market value, has been a matter of discussions, motions, recommendations, referrals and guidelines for several years now – but very little real action has resulted.

On December 11, 2001, the City’s Municipal Facilities Committee2 met to approve a “Policy Summary for Non-Profit Leases in the City of Los Angeles” (the “The Non-Profit Policy”). The Non-Profit Policy listed eleven requirements non-profits would need to meet in order to qualify for occupying City property for less than fair-market rent. The points included submission of an annual report to the City, providing and maintaining liability insurance, payment for utilities, maintenance of property exterior/interior, compliance with various City ordinances and status as a valid 501-C3 non-profit. All leases were to be terminable with 30 days notice by the City and the term of agreement(s) was to coincide with the term of the Councilmember of the district in which the subject property is located. There were no provisions for rent to be paid – and the terms and conditions were rather vague. (See report online at http://clkrep.lacity.org/onlinedocs/2008/08-2762_rpt_cao_4-16-10.pdf)

On August 19, 2004, GSD submitted a request to adopt an amended non-profit policy to the City Council. The amended non-profit policy was to supersede the original policy adopted in December 2001. (See CF No. 04-1781: Communication from The Municipal Facilities Committee relative to "Policy Summary for Non-Policy Leases in the City of Los Angeles," also known as "The Non-Profit Policy.").

On April 19, 2005, the Council’s Budget & Finance Committee requested GSD to furnish a formal non-profit leasing policy and requested a moratorium on granting any further leases to non-profit organizations until a formal policy is adopted.

On November 14, 2005, GSD replied to the Budget & Finance Committee with a letter recommending that a an amended non-profit policy should include language that would allow the City to charge minimal rent ($1.00 per square foot) with a 3% rent increase after the first term to the non-profit organizations. Also included was an option for a re-elected Councilmember to allow a non-profit organization to renew for an additional four year term and requiring the non-profit to assume financial responsibility utilities. At the time, GSD predicted the fiscal impact would be an additional $100,000 to $200,000 per month in revenues for the City. GSD recommended that the City Council adopt the (amended) Non-Profit Policy. The matter was referred to the Information Technology and General Services and Budget and Finance Committees of the Council. Thereafter, nothing seems to have happened and the Council File was deemed terminated June 30, 2008.

On October 21, 2008, the Council adopted a Motion introduced October 10, 2008 by Councilmembers Parks and Cardenas (See CF No. 08-2762: “Leased City-Owned Properties / Non-profit organizations”). The Motion stated: “Unfortunately, there have been delays in implementing a more effective policy regarding leases with non-profit agencies. As a result, GSD has been unable to fully monitor the provisions of lease agreements, such as: provision of 2 The Municipal Facilities Committee is currently composed of the City Administrative Officer (Chair), along with

the Chief Legislative Analyst and a representative of the Office of the Mayor.

C.O.R.E. Report Re: Failure to Manage City Properties Leased to Non-Profits: Time for Accountability March 2012 Page 5 of 21 pages

services to the community; utility and maintenance costs for the property; confirmation of non-profit (501 c 3) status; and insurance coverage.” The Motion further stated that “if the City were to lease these properties at the rate of one dollar per square foot per month, that alone could generate revenues to the City of $1 million per month or $12 million annually. Additionally if these properties were sold, even at below market value, the City potentially could net $50 million.” The Motion requested that the City Administrative Officer (CAO) and the Chief Legislative Analyst (CLA), with assistance of the General Services Department (GSD) be instructed to report to the Information Technology and General Services Committee and to the Budget and Finance Committee with a study of all City-owned property leased to non-profit organizations. The CAO, CLA and GSD were further instructed to provide an annual report to the Council and to report with recommendations for instituting a City non-profit lease policy.

On April 16, 2010, the CLA and CAO furnished to the Council a memorandum report, entitled: “Non-Profit Lease Subsidy and Real Property Sale Policy” (available online at http://clkrep.lacity.org/onlinedocs/2008/08-2762_rpt_cao_4-16-10.pdf). The memorandum detailed some of the history of the matter, proposed policies and a listing of the subject properties with basic information about the tenants. In many cases, there was no available information on lease terms, insurance, non-profit status, etc. In brief, the listing pointed to the fact that the City has done a very poor job of tracking the properties, the tenants and the leases. The needs for consistency in issuance of subsidies, and in holding non-profits accountable, were recurring themes throughout the memorandum. Further, the memorandum estimated that limiting lease subsidies to 50% of market rent could generate additional revenues of up to $1.5 million annually for the City.

On June 1, 2010, CF No. 08-2762 was referred to the Arts, Parks, Health and Aging, Information Technology and Government Affairs and Budget and Finance Committees, with a request for a report-back in 60 days. There was a further Council Motion to request that the City Attorney assist GSD in preparing the lease agreements and that GSD and the City's Land Records Division, Bureau of Engineering o track the number and amount of subsidies for below market rate leases and real property sales by Council District and submit them to the CAO regular status updates in every financial status report.

On June 30, 2010, Council approved the Motion (CF No. 10-0773) instructing the CAO and Department of Cultural Affairs (DCA) to form a working group comprised of any relevant departments to draft a Request for Proposals (RFP) to transition 14 City-controlled cultural art facilities to public-private partnerships, while considering the proposed non-profit leasing policy. The Arts, Parks, Health and Aging (APHA) Committee has conducted several public hearings in which Committee members and the public were able to discuss various aspects of the DCA proposed RFP for public-private partnerships of the City's cultural art facilities. It has been made clear through staff reports and the public hearings that certain facilities have unique components that should be considered separately from the Citywide non-profit leasing policy.

On December 17, 2010, yet another Motion was introduced. (CF No. 10-0773-S3: “Non-Profit Leasing Policy / City-Owned Buildings / 14 Art Facilities”). The Motion stated that while the APHA Committee continues to consider the DCA RFP, and a non-profit policy for the arts and cultural facilities included in the RFP, the matter of the Citywide non-profit leasing policy should be considered by the Budget and Finance and Information Technology/Government Affairs (ITGA) Committees -- with the exclusion of: (1) the 14 art facilities to be included in the DCARFP; (2) the Los Angeles Fire Department Historical Society; (3) the Los Angeles Police Department Historical Museum; and (4) the African Americans Firefighter's Museum. On September 12, 2011, Council referred item to Information Technology and General Services Committee, pursuant to the Council’s restructuring of its committees (CF No. 11-1529-S1).

Other notable Council Files 3.

3 Other Notable Council Files: Audit of Real Property Trust Fund revenues (CF No. 10-0219) and Audit of the

Department of General Services' Asset Management Division (CF No. 03-1860).

C.O.R.E. Report Re: Failure to Manage City Properties Leased to Non-Profits: Time for Accountability March 2012 Page 6 of 21 pages

IV. Revenue Impact

A prior review by the CAO and CLA estimated that limiting lease subsidies to 50 percent of market rent could generate additional revenue of up to $1.5 million annually. We believe this is a very conservative estimate – but we also recognize the public benefits realized by making City properties available to certain not-for-profits that might not otherwise be able to operate as they do. That said, even of the City was to continue its practice of these essentially free rentals – but do so in a way that better ensures tenant responsibility, maintenance, insurance and opportunities for subvention – CORE estimates the potential for combined revenues and savings of at least $1 - $5 million annually.

Specific projections on revenue impact are difficult with the current lack of information available - but what is at stake is the potential for millions of dollars annually in rental income, savings in repairs, maintenance and capital improvements, diminished liabilities and legal expenses, reduced management and oversight costs for the City and the potential monies that might be realized from the sale of selected surplus properties – with then concomitant property tax revenues. Moreover, there is an opportunity – and an imperative -- to better assure that non-profits that receive special consideration from the City are most benefitting the communities they serve. There’s no better time to act than now.

Respectfully submitted, Ad Hoc Commission on Revenue Efficiency

Ron Galperin, Chair Hon. Cindy Miscikowski, Vice Chair Mark Ames, Commissioner David Farrar, Commissioner Michael Gagan, Commissioner Cheryl Parisi, Commissioner Brandon Shamim, Commissioner

CC: Budget & Finance Committee Information Technology and General Services Committee Arts, Parks, Health & Aging Committee Miguel A. Santana, City Administrative Officer Gerry F. Miller, Chief Legislative Analyst Antoinette Christovale, Director, Office of Finance Neil Guglielmo, Deputy Mayor, Budget & Financial Policy

Tony Royster, General Manager, Department of General Services Reginald Byron Jones Sawyer Sr., Director of Asset Management, Department of General Services

Contacts:

Ron Galperin, Chair Jon Dearing, Analyst Ad Hoc Commission on Revenue Efficiency Office of Chief Legislative Analyst ron@rongalperin.com jonathan.dearing@lacity.org

Website:

http://C.O.R.E..lacity.org/

C.O.R.E. Report Re: Failure to Manage City Properties Leased to Non-Profits: Time for Accountability March 2012 Page 7 of 21 pages

Appendix “A”

2001 Recommendations of the Municipal Facilities Committee (Page 1 of 2)

C.O.R.E. Report Re: Failure to Manage City Properties Leased to Non-Profits: Time for Accountability March 2012 Page 8 of 21 pages

Appendix “A”

2001 Recommendations of the Municipal Facilities Committee (Page 2 of 2)

C.O.R.E. Report Re: Failure to Manage City Properties Leased to Non-Profits: Time for Accountability March 2012 Page 9 of 21 pages

Appendix “B”

List of City-Owned Properties Leased to Non-Profits (April 2010)

See attached 11 pages of the list (Pages 10-21 of CORE Report)

Report Re: LOST IN THE PARKING LOT:

STOPPING ROGUE PARKING OPERATORS FROM STEALING OUR TAX DOLLARS

____________________________________________ TO: The Honorable Antonio Villaraigosa, Mayor The Honorable Wendy Greuel, City Controller The Honorable Carmen Trutanich, City Attorney Honorable Members of the City Council DATE: March 2012 I. Summary The City of Los Angeles’ Parking Occupancy Tax is a substantial source of general fund revenue for the City -- generating approximately $85 million annually. The POT is the 10% add-on we all pay when parking our vehicles in a commercial lot or structure in the City. But, the City – and nearly every one of us who pay the tax – are being cheated out of tens of millions of dollars each year by rogue parking operators who collect our money and then fail to turn it over to City. This has to stop.

The cash nature of the parking industry and the transient method of operation employed by many parking lot and valet parking operators allows for constant fraud and abuse of City policy – resulting in unpaid POT and business taxes. Non-compliance with the City's POT ordinance also creates an uneven playing field for tax scofflaws and leaves the generally law-abiding operators (which generally report a roughly 5% profit margin) at a competitive disadvantage with those wrongfully absconding with another 10%.

L.A.’s POT problem has been the subject of various audits, lawsuits, Council Files,

investigations, committee hearings, requests for departmental report-backs and press conferences where City officials talk about getting tough. None of these measures have helped much.

The good news, however, is that the problems are eminently fixable. The Commission on Revenue Efficiency has intensely studied POT collections throughout

2011. Among the highlights of our recommendations:

Requiring parking operators to accept credit and debit cards -- The more parkers are able to use plastic, the less cash collected, and the less opportunities for under-reporting and abuse.

Simplifying and streamlining our ordinances and centralizing responsibility for POT collections -- Currently, three City entities have three separate sets of administrative

C.O.R.E. Report Re: Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars March 2012 Page 2 of 15 pages

hearing related to parking operators: The Office of Finance (which issues business licenses), the Police Commission (which issues operating permits) and the Office of the City Attorney (which is empowered to seek civil and criminal enforcement of the City’s ordinances). We need to amend our ordinances, empower one entity to take charge, and the City must stop treating POT just like other form of taxes – it isn’t. Operators don’t pay the tax it’s you and I who pay it. The operators are simply fiduciaries whose sole responsibility is to take the tax we paid and send it to the City – and they’re not doing it.

Clarity – Shockingly, after nearly a year of studying this matter, it remains a challenge to know with certainty how many lots are in the City, how many parking structures, how many operators are under investigation, how many of those operators are delinquent, and so on.

Integration with a new valet ordinance.

Better use of new technologies.

Enforcement and accountability – It’s too easy for rogue operators to game the system and the City. The City needs to be swift in enforcement -- and not wait three to five years to pursue bad operators long out of business or long-ago stealing our money.

II. Recommendations

A. HANDLING OF MONEY – Less cash; more plastic The cash nature of the parking business (especially surface lots) allows parking operators to pocket the money everyday drivers pay in parking tax. It’s theft, pure and simple.

REVENUE CONTROL EQUIPMENT (RCE):

Both the Police Commission and the Office of Finance in their recently completed reports on the parking tax are recommending some form of revenue control equipment. Their views differ:

The Police Commission studied both moderately priced handheld devices that accept various payment forms and more expensive fixed machines, gates and pay-in-lane systems. Both the Los Angeles Parking Association and the Police Commission generally recommend requiring all parking operators to have revenue control equipment – but allowing the operators to choose which type.

The Office of Finance stated in its report of Oct. 19, 2011 that: “we do not agree that all

current and newly permitted Auto Parks install either permanent, portable or handheld RCE (revenue control equipment). More specifically, Finance does not concur with Auto Parks being provided the option of installing portable or handheld RCE in lieu of permanent RCE.” The Office of Finance seems to favor permanent RCE for all operators, but “recommends at a minimum that all non-compliant Auto Park operators be required to install permanent RCE.” The Office of Finance reasons this requirement, would, among other things, serve as a deterrent to non-compliant operators.

NOTE: See Endnote No. 1 for more discussion re RCEi.

C.O.R.E. has reflected extensively on the matter of RCE. As we see it, the easiest revenues for operators to not report, or to under-report, are cash revenues. The more parkers pay

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by credit and debit cards, the more an electronic and paper trail will exist. And so, C.O.R.E. believes that the form of RCE is not nearly as important as mandating that all operators must accept credit and debit cards. What equipment they use could be left to the operators. Right now, many people pay cash because Auto Parks (particularly surface lots) do not accept debit and credit cards. If they were required to do so, the number of people opting to pay with plastic will, of its own accord, skyrocket. Admittedly, less cash and more plastic will not necessarily achieve 100% compliance, but it will, we believe, solve a large part of the current problem.

Accordingly, C.O.R.E. recommends:

1. Acceptance of credit cards -- That all permitted parking operators and operations in the City be mandated to accept credit and debit cards; there shall be no price differential for parkers who pay by debit, credit, check or cash.

2. Revenue Control Equipment -- The Police Commission shall be authorized to impose a requirement for any given operator out of compliance to use permanent RCE -- such as automated cash machines, electronic gates, and/or pay-in-lanes systems. Insofar as the cost of such equipment can range from $45,000 to $173,000, or more, such a requirement may be imposed on operators deemed seriously out of compliance by the Police Commission. Operators deemed out of compliance (but, perhaps not seriously out of compliance) might be required to use portable RCE that not only accepts various payment types, but also produces receipts.

3. Electronic access to operator data -- All operators shall provide the Office of Finance electronic access to data of credit and debit card transactions – and shall authorize as a condition to permitting, that the Office of Finance have access to such records through the credit and debit card processing companies.

B. PROCEDURAL / LEGAL

Currently, the City Attorney, Office of Finance and Police Commission each have their

own administrative hearing processes related to various aspects of non-compliance by parking operators. C.O.R.E. could be judicious and say this is inadvisable. In fact, though, it’s crazy.

The City Attorney has cited existing provisions in the Los Angeles Administrative Code

that may enable greater enforcement by the City. Section 103.06.1 addresses the renewal of permits. Section 22.04.1 addresses the failure to pay POT. Section 103.31(a)(10) address denying a permit based on the failure to pay the POT. Unfortunately, the City seems to have been treating parking operators who steal the same due process rights as, for example, businesses allegedly not in compliance with the City’s business tax. There is a big difference between one and the other, however. Accordingly, C.O.R.E. recommends:

4. Designate one party to be finally responsible for parking operator

compliance – and all the aspects thereof. When C.O.R.E. first began its inquiries into the matter, the Commission invited representatives of the City Attorney, Office of Finance and Police Commission. It was immediately evident that, at the time, the three entities were not cooperating very well and that each was essentially pointing to the other. One party must be ultimately responsible.

5. Set in place a permanent task force of representatives from the Office of the City Attorney, Police Commission/LAPD and the Office of Finance. Said task force should meet at least quarterly to review and coordinate enforcement of current –

C.O.R.E. Report Re: Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars March 2012 Page 4 of 15 pages

and any future – codes, regulations or rules applicable to parking operators, and of valet operators. This coordination, C.O.R.E. believes, will make for better and quicker enforcement of the laws on the books.

6. End the process of up to three entities having administrative hearings. The three City entities currently involved should be afforded certain cross enforcement powers. The paradigm used by the City of Culver City is one we believe worthy of potentially replicatingii. Culver City’s code provides broad authority to the City’s Committee on Permits & Licenses to act swiftly and independently to shut down rogue parking operations.

7. Auditing – Currently, the Police Commission does spot visits, and the City has a private contractor The Parking Network (TPN), which does surveillance/audits. This has not been enough. With so much money not being surrendered to the City, C.O.R.E. believes monies spent on auditing, surveillance, and inspection will be well-spent. Moreover, the Los Angeles Parking Association even recommended to C.O.R.E. that a special fee be imposed upon the parking operators to fully cover the costs of various types of site and financial audits. The City should take them up on their offer.

NOTE: The Commission discussed the possibility that in a more ideal world POT might be based on something other than a 10% add-on to parking fees paid by people parking – perhaps even a tax based on parking spaces. Given the 2/3 vote needed for any changes in tax policy, the Commission concluded that fixing the current system was more realistic.

8. Role of the City Attorney

a. Civil Cases: C.O.R.E. recommends a fast-track to pursuing civil cases against rogue parking operators.

NOTE: The City Attorney’s Office reported to C.O.R.E. that it had pending files representing approximately 40 companies with a staggering 700 parking lots (involving approximately not in compliance with applicable ordinances. pending files related to parking lots. In the spring of 2011, the City Attorney’s Office also reported to the Commission approximately 30 active cases involving multiple lots. This included civil cases and criminal cases (handled by two respectively different divisions of the office). Of the 30 then-pending cases, 7 were being settled and 2 were in bankruptcy court. A multi-million judgment was obtained against Prestige Parking – though such judgments are difficult to collect on.

Notably troubling to the Commission was that, according to the City Attorney’s Office, cases for not-compliance with POT generally don’t come to the office until they are at least 3 years old – and many are 5-6 year-old cases.

Three sets of administrative hearings by three City entities is not acceptable. Moreover, it makes little sense to afford to parking operators failing to give over the POT to the City the same treatment as given, for example, to businesses allegedly failing to pay business tax. In the case of the latter, the City must appropriately afford certain levels of due process to taxpayers. In the case of the former, however, the parking operator is not the taxpayer per se – the person parking is. The failure of an operator to give over to the City

C.O.R.E. Report Re: Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars March 2012 Page 5 of 15 pages

is not just a failure to pay its own taxes – it is a failure to hand over tax already paid by the consumer.

b. Criminal cases: C.O.R.E. recommends vigorous and timely prosecutions. The Commission is cognizant of the fact that it is more difficult to prosecute a criminal case than a civil one – and that criminal cases do not result in collections or monetary awards to the City. Notwithstanding, a parking operator’s failure to convey to the City monies already collected from people parking is theft.

c. Receivers: Wherever appropriate, the Office of the City Attorney should seek to obtain appointment of a receiver for parking companies severely non-complying. Sometimes, just the threat may be helpful in collecting.

C. INTEGRATION WITH VALET ORDINANCE C.O.R.E. recommends that the Council consider ways for certain of the requirements

imposed (and to be imposed) upon parking operators be equally imposed upon valet operations. Arguably valet parking operators are subject to the POT, but there is no currently

consistent regulatory scheme of parking valets. On July 2011 The City Attorney submitted a Draft Valet Parking Ordinance pursuant to Council File No. 09-0206. As of December 2011, there appears to have been no action on the draft since July 2011. The draft ordinance would require Valets to be permitted. The draft also references compliance with POT, but the application of POT to the valet business remains a gray area. C.O.R.E. believes this should be corrected.

There is a wide range of valet operations in the City – and the Commission noted that not

all can necessarily be treated the same. There are those operations that are exclusive to a particular lot. Some valets contract with lots in a given area, some serve a specific business and some use primarily street parking. Some valets are commercial operations servicing multiple clients while others are just hired directly by a business owner (such as a restaurant). Some accept validations; others don’t. Some valets are hired on an as-needed basis for parties and events in commercial and residential areas. Finally, some are compensated not by the drivers but by the owners or hosts of an event venue.

In nearly all cases, the valet business is very cash-intensive. As a result, it would be very

fair to reason that compliance with POT (if applicable) and with business and other taxes is less than ideal. Accordingly, C.O.R.E. recommends:

9. Application of POT to valet parking operations, where appropriate – C.O.R.E. supports adoption of a comprehensive and clear valet parking ordinance. Any such ordinance should clearly identify which types of valet parking operations will, or will not, be subject to POT. Commercial parking lots that offer valet parking (exclusively or optionally), for example, are the types of operations where POT would most appropriately be applicable. In contrast, free valet parking paid for by hosts of a party at their home might, arguably, be among types of operations where POT would least appropriately be applicable. There are, of course, many, arguably, less clear types of valet services.

Note: The Commission would not support simultaneously applying POT both for the individual using a valet and for the valet company then taking the same vehicle to a parking structure and paying POT for the use of a space.

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We also note that the before imposing new requirements, the City would be advised to conduct an inquiry into the likely revenues that might be realized from application of POT to a broader scope of valets vs. the costs of enforcement, collections, etc.

10. Acceptance of credit cards – As with parking lots, requiring certain valet

operations to accept credit and debit cards could be a benefit to parkers – and help increase compliance with all sorts of taxes. That said, such a mandate might be more appropriately applied to valets stationed in parking lots and commercial valet operations that service multiple clients vs., for example, a small restaurant that hires one or two people in the evening to park cars.

D. ADDITIONAL APPLICATIONS OF POT

11. C.O.R.E. recommends that the Council clarify and define a mandate of the City’s application of POT to the following:

a. Validations – Validated parking may be provided in various ways. Commercial property owners may provide free or reduced-fee parking for visitors (typically shoppers). Such validation may be for parking in a lot owned and/or operated by the business owner or owned/or operated by one or more other entities. Commercial tenants may also pre-purchase validations (sometimes in sticker form) that are applied to ticket stubs of a visitor to the tenant. In all these events, the application of POT has been, and is, inconsistent. The City’s ordinances need to clarify the application of POT, where deemed appropriate.

b. Monthly parking – While POT is, arguably, supposed to be applied to monthly parking by a parker, the application of POT, again, seems often to be less than optimally consistent. The City’s ordinances should clarify this.

c. Lease agreements with free parking – Tenants often negotiate parking as part of their commercial leases. An office tenant, for example, might negotiate for a certain number of spaces in a building as part of the office lease. The application of POT needs to be clarified in order for the City to get its rightful share of POT.

Note: In the above example, the lease may, or may not, designate the value of the spaces provided by the landlord to the tenant. Say the lease includes 10 spaces regularly rented for $100 per month. If rented directly to the tenant(s), the gross might be $1,000 per month for the parking operator/owner – with either an additional $100 (10% tax) due to the City (or $90.90 in POT if said sum is already included in the $1,000 per month). However, if the spaces are simply included in the lease, the City will often not realize any POT.

E. ALTERNATIVE TECHNOLOGIES

Technology has proved to be a dynamic game-changer in every business including parking. New ways of doing business offers new opportunities for the City to track revenue and stay on top of rogue parking operations. Such oversight would have been prohibitively expensive in the past but thanks to flourishing technologies it is now more possible and cost-beneficial.

C.O.R.E. Report Re: Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars March 2012 Page 7 of 15 pages

12. C.O.R.E. recommends that the Council may want to obtain further

information about the use of new and emerging technologies for parking and parking tax-related information, including, but not necessary limited to:

License Plate Recognition Devices (LPRs):

NOTE: The City of Sacramento, through Department of Homeland Security grantsiii installed a high tech system of cameras in coordination with LPRs in a private shopping center to track every vehicle entering their facility. The technology is able to sync with the Sacramento Police Department database, and, according to local reports, also resulted in retrieving 21 stolen vehicles that led to the arrest of 22 individuals. Said technology could be used to better track the amount of traffic entering facilities resulting in a more accurate forecast of revenue. In addition these technologies may work as sanctions against those operators found to be non-compliant.

Data access and sharing – This would include methods to have direct access to parking operator financial data and sharing data with the County re properties designated for parking and re business in the County’s databases that are engaged in parking-related operations.

Cameras – A requirement that cameras (perhaps with live feed to law enforcement or to a parking auditor of the City) might be imposed as a sanction to those operators who have had audits completed and were short in their POT, or for lots that have operated as non-permitted.

Satellite technology – A regular source of disagreement between rogue operators

and the City is just how occupied a parking lot has been. Various methods may be employed to monitor parking occupancy at a given lot. One that may merit more research is obtaining satellite photos. Today, photos generated by satellites are more precise than ever, and may provide some historical data for occupancy of certain surface lots during certain times and dates.

C.O.R.E. also gave extensive consideration to the following – and we concluded to not recommend any significant changes regarding the following hereinbelow:

F. BONDING / LETTERS OF CREDIT

There has been much discussion in the City about imposing new and/or additional bonding requirements on parking operators. C.O.R.E. has concluded to not make new and/or additional P.O.T-related bonding requirements one of our recommendations. While the City should not take this option off the table, C.O.R.E. believes the other recommendations outlined herein have the potential to be more effective in ending the theft of the City’s rogue operators.

Parking operators in Los Angeles are required to provide a bond to be issued a police

permit, with bonds ranging from $50,000 to $500,000 for larger lots. These bonds do not

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guarantee payment of POT, only damages to vehicles. C.O.R.E. supports continuing this requirement (and, as may be appropriate, increasing the bonding for damages to vehicles.

Some in Los Angeles have suggested requiring operators to post bonds or provide letters

of credit guaranteeing the City payment of the POT. Some cities have sought this approach, and there is, indeed, an argument to be made that requiring bonding or letters of credit would help drive rogue operators out of business. Notwithstanding, C.O.R.E. is somewhat less that persuaded by calls for bonding.

It is less than clear that bond requirement can be used for tax purposes

(despite lot operators acting as a third party in collecting the tax). Legitimately operating parking companies represent that they have

roughly a 5% profit margin. Bonds might add 3% to their costs of doing business, resulting in higher costs for the consumer.

Bonds and letters of credit can take a very long time to collect on – and may involve costly litigation. Moreover, these mechanisms often pay out only after a creditor has exhausted other remedies.

Smaller operators could very well be driven out of business if they are unable to obtain bonds or letters of credit.

Accordingly, as stated above, C.O.R.E. has concluded to not make new and/or additional

P.O.T.-related bonding requirements one of our recommendations. G. HOLDING PROPERTY OWNERS RESPONSIBLE The shell game: One of reasons parking operators often get away with not giving over to

the City the parking tax collected from parkers is that the operators get away with it. And one of the ways they have continued to get away with it is by playing a shell game. As soon as one operating entity (typically an LLC) is deemed to be out of compliance, or facing closure, the parking operator simply regroups as a new legal entity.

The two sides of owner liability: The Commission gave serious consideration to

possible ways to hold not just parking operators responsible for compliance with the POT and other requirements – but to also hold property owners responsible for the conduct of the operators upon their real property. Holding property owners responsible for the misconduct of their tenants is not without precedent. However, it is also not without its complexities. For example, we have laws holding apartment building owners liable if they don’t seek to clamp down of drug-dealing tenants. At the same time, it would seem nearly inconceivable to hold an office building owner liable if an office tenant fails to pay its income taxes.

The City of Miami, FL has a notable Parking Facilities Surcharge Ordinance that broadly

defines parking operators and specifically holds real property owners responsible and liable for any parking operations upon their properties. The ordinance specifically states: “The intent of this definition is to place the burden for collection of the surcharge on the owner of the facility and not just the entity which operates the facility if different from the owner”. Notably, the Los Angeles Parking Association expressed to C.O.R.E. that it might be receptive to such an ordinance in Los Angeles.

Possible paradigms for property owner liability: The Commission considered several ways to possibly hold property owners liable for parking operations conducted upon their properties. Possible paradigms include(d), but are not necessarily limited to, the following:

C.O.R.E. Report Re: Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars March 2012 Page 9 of 15 pages

The City could ask to have the right to approve any lease(s) between a property

owner and parking operator and require provisions that bind the property owner to the actions of the operator.

The City might consider an ordinance holding the property owner responsible for illegal conduct occurring on the owner’s property -- much like landlord liability for drug dealing at a property.

The City might consider requiring the recordation of self-enforcing (non-judicial) liens as a pre-condition to permitting a parking operation (given that such permitting is discretionary).

Conditional Use Permits -- The City might consider changing or supplementing the current paradigm of requiring a Police Permit for a parking operation to something that would include a Conditional Use Permit. Given that CUPs are tied to the real property, the owner of a property that loses its CUP because of misconduct by an operator will have much more incentive to make sure the operator complies. In that the CUP has value for the property owner, that owner will take a much greater interest in anything and everything that would threaten the CUP – and, thus, the value of the property.

Note: While the Commission finds merit in a CUP paradigm, we were also cognizant and concerned of the likely burdens that would be imposed on property owners and businesses in the City.

C.O.R.E.’s conclusions on owner liability: Excepting those situations where a property owner may be knowingly and/or actively participating in illegal conduct in concert with a parking operator – and given the complexities and potentially overreaching burdens that might result for many property owners – the Commission is not recommending at this time that the City adopt the paradigms outlined above for holding property owners liable. Notwithstanding, the City such paradigms might be reserved for consideration by the City at a future time.

III. Background

A. THE CURRENT LEGAL FRAMEWORK: PROCESS OF PERMITTING &

ENFORCEMENT The City of Los Angeles has enacted a Parking Occupancy Tax that is imposed for the

privilege of occupying space in any parking facility in the City of Los Angeles. Each operator of a parking facility within the City, whether registered or not, must collect the tax from the occupant of the parking space and remit the full amount of the tax to the City on a monthly basis. The Parking Occupancy Tax is set as a percentage of the parking fee and the current applicable tax rate is 10%. The tax must be separately stated on any signage, receipts or other information provided to customers from the amount of the fee charged. If the full amount of the parking fee and tax are not collected, a proportionate share of the tax is deemed under the City’s Parking Occupancy Tax Ordinance to be collected with each parking fee collected and such amount must be remitted to the City.

The Los Angeles Municipal Code: Ch. X (Business Regulations), Div. 8 (Trades &

Occupations), Sec. 103.202, defines an “Automobile Parking Lot” as “… any lot,

C.O.R.E. Report Re: Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars March 2012 Page 10 of 15 pages

contiguous lots, or other parcels of land under single management or control where more than eight motor vehicles are kept stored or parked within or without a building, for a consideration, at any one time.” This section of the Municipal Code also sets forth the permitting requirements therefor.

Los Angeles Municipal Code: Ch. II, Article 1.15, Secs. 21.15.1 - 21.15.14, Sets forth the

City’s Parking Occupancy Tax Ordinance.

Los Angeles Municipal Code: Ch. II, Article 2, Sec. 22.02 sets forth powers to revoke permits and Sec. 22.04.01 further sets forth grounds for suspension or revocation of a permit for a parking operation based on failure to comply with POT requirements.

Los Angeles Municipal Code Sec. 22.04.1, which became effective

March 7, 2009, authorizes revocations or suspension of police permits for non-payment of taxes. Once the Office of Finance completes an administrative process, it prepares a report and affidavit for the Police Permit Review Paneliv to consider Revocation or Suspension of a permitted lot. The only lots this pertains to, however, are those that have a current permit. Moreover, another (sometimes connected or related) applicant may apply for a new permit. Moreover, new and renewal permits have been granted to companies even being sued by the City for non-payment. A prime example is Police Commission Permit Application List with Recommended Board Actionv (1/25/11) -- granting new permits to Prestige Parking.

According to information provided by the Police Commission to C.O.R.E., earlier this year, there were at the time 10 cases provided to the Commission Investigation Division by the Office of Finance. Pursuant thereto, 4 permits were revoked, 2 cases settled by payment, 2 suspended pending payment arrangements made with the Office of Finance, 2 agendized for revocation. Several revocations have been put on hold at the request of the Office of the City Attorney due to civil suits against an operator and/or settlement proceedings.

The Business Permit Fee Schedule of the Police Commissionvi provides

for original, annual, change of location fees.

B. HOW MANY COMMERCIAL LOTS AND STRUCTURES DO WE HAVE? There continues to exist much uncertainty about just how many lots and structures

(permitted and unpermitted) we have in the City. As CORE began to ascertain the number of auto parks within the city we found conflicting

representations at different times by the Office of Finance and the Police Commission regarding the number of parks, and the number of permitted parks.

In January 2010, the Office of Finance reported 2,150 businesses registered as conducting an “Auto Park” businesses (reported as part of a “Request for Proposal for “City Parking Occupancy Tax Discovery & Compliance Program”).

In March 2011, the Police Commission indicated to C.O.R.E. that “our data base of

permits indicates just under 1,700 permitted parking lots. As to the number of non-permitted lots that for us is difficult to provide since we do not know a lot is being operated until we discover it by on-site inspection or information provided to us by the Office of Finance.”

C.O.R.E. Report Re: Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars March 2012 Page 11 of 15 pages

In the first half of 2011, the Office of Finance advised the Police Commission that

there were 2,071 auto parks within the City. The Police Commission Investigation Division (CID) investigated and completed a field survey July 2011. The Police Commission related to C.O.R.E. that “the number supplied by (the) Office of Finance is not accurate.” CID found 1,153 validly permitted auto parks. 68 were found to be towing operations and 255 were eliminated as auto parks altogether. Some of those eliminated were found to be Valet Services not requiring an Auto Park permit. As of September 2011, CID reported 595 of the locations did not have permits, but were being checked out as time is available. However, CID reported that as they are checking these locations without permits they are finding that most of them are either valet services or there are simply no lots at the location.

CORE conducted its own (admittedly unscientific) based on L.A. County Assessor

designated land uses in seven zip codes (90012, 90013, 90014, 90015, 90017, 90021, and 90029). The records identified 115 parking structures and 785 parking lots just in these seven zip codes. We note that designated land use codes may not always accurately reflect current use(s). Moreover, certain structures and lots may be exempt from POT taxes as non-profits or for other reasons. Notwithstanding, our sense is that the City’s numbers of total lots may be less than ideally comprehensive.

C. C.O.R.E.’S INQUIRIES C.O.R.E. Conducted numerous meetings and ongoing inquiries into the issues related to

the POT. Beginning Nov. 18, 2010, representatives from the Police Commission Investigation Division (CID), Office of Finance, and City Attorney presented an overview to C.O.R.E. of the City’s regulation of parking lot operators, with the primary focus on collection of the Parking Occupancy Tax. C.O.R.E. brought together these three sets of parties responsible for parking operations simultaneously in order to begin to understand and unravel the multiple layers of oversight. In January 2011, the Commission held a follow-up discussion on the Parking Occupancy Tax with representatives from the Los Angeles Parking Association which represents large lot operators in the City. The Association also submitted a letter to C.O.R.E.vii Thereafter, C.O.R.E. began a series of further inquiries and follow ups, culminating in this report.

D. COUNCIL FILE(S) Issues related to parking operators, the Parking Occupancy Tax, and compliance

therewith, have long been the subject of discussion and Council Files in the City. Among the highlights:

Council file No. 09-0177 – Introduced Jan. 27, 2009 re Parking Occupancy Tax. Pursuant thereto, on July 10, 2009, the Council adopted recommendations of the Budget & Finance Committee instructing the Office of Finance and requesting the Police Commission “to report to the Council with recommendations for requiring parking operators to install parking revenue and control equipment at any parking facility found to be not paying or underpaying the Parking Occupancy Tax in order to make auditing and monitoring of compliance less difficult and to enable suspension of repeat offenders from operating as a parking lot until such equipment is installed.” Thereafter, it is unclear as to whether there was any follow up.

C.O.R.E. Report Re: Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars March 2012 Page 12 of 15 pages

Council File No. 09-0206 – Introduced Jan. 28, 2009 re Valet Parking Permit Program / Regulation. As noted in Sec. II C. of this report, a Draft Valet Parking Ordinance prepared by the Office of the City Attorney is still pending – with no action thereupon since July 2011.

Council File No., 09-1479 – Report of June 16, 2009 from the Office of the CAO and

Report of July 2, 2009 from the Budget & Finance Committee relative to a supplemental agreement with The Parking Network, Inc., for the continuation of the Parking Occupancy Tax Discovery Program. Recommendations for Council action were to (1) authorize the Director of Finance, or designee, to execute the supplemental agreement with The Parking Network, Inc., on a month to month basis through December 31, 2009, upon receipt of a current insurance certificate, and (2) to instruct the Office of Finance to report back to the Budget and Finance Committee relative to the Department's efforts to ensure compliance with the City's parking occupancy tax requirements. The report should include the number of parking lots both in and out of compliance with the parking lot permit requirements.

Council File No. 11-0595 – Introduced April 27, 2011 re Parking Occupancy Tax

Collections. Referred to the Audits and Governmental Efficiency Committee and the Transportation Committee of the Council.

Council File No. 11-1470 – Introduced Aug. 19, 2011 re Parking Occupancy Tax

Amendment.

E. RESOURCES

A list of various parking associations, parking companies, periodicals and other resources is hereinbelow in the endnotes to this report.viii

IV. Revenue Impacts

As reported to CORE, an estimated 25-30% of Parking Occupancy Tax Revenue may be currently underreported due to rogue parking lot operators. With annual POT revenue of $85 million, this translates to an additional $21 - $25 million annually to the City. CORE is cognizant of the fact that achieving 100% compliance may not occur. However, if the City shifts the costs of audits and investigations to the operators – along with more effectively applying the POT (as may be deemed appropriate) to valet operations, leases, validations, etc. – CORE estimates the potential for combined revenues and savings of $20 - $30 million annually.

C.O.R.E. Report Re: Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars March 2012 Page 13 of 15 pages

Respectfully submitted, Ad Hoc Commission on Revenue Efficiency

Ron Galperin, Chair Hon. Cindy Miscikowski, Vice Chair Mark Ames, Commissioner David Farrar, Commissioner Michael Gagan, Commissioner Cheryl Parisi, Commissioner Brandon Shamim, Commissioner

CC: Budget & Finance Committee Audits & Governmental Efficiency Committee Miguel A. Santana, City Administrative Officer Gerry F. Miller, Chief Legislative Analyst Antoinette Christovale, Director, Office of Finance Neil Guglielmo, Deputy Mayor, Budget & Financial Policy

Richard M. Tefank, Executive Director, LAPD Board of Commissioners Contacts:

Ron Galperin, Chair Ad Hoc Commission on Revenue Efficiency ron@rongalperin.com Jon Dearing, Analyst Office of Chief Legislative Analyst Jonathan.dearing@lacity.org

Website:

http://core.lacity.org/

C.O.R.E. Report Re: Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars March 2012 Page 14 of 15 pages

ENDNOTES i Revenue Control Equipment (RCE) -- Mandated installation of automated ticket systems have been discussed in prior occasions.

The Office of Finance's FY 2008/2009 budget package included the following submitted as a revenue opportunity:

"Require a parking operator to install parking revenue and control equipment at any parking facility found to be not paying or underpaying the Parking Occupancy Tax. Due to the cash nature of the parking business, lack of automated equipment (such as ticket dispensers, gates, etc.) makes auditing and monitoring of compliance very difficult. This remedy could be reserved for only repeat offenders with authority to operate being suspended until the equipment is installed for the most serious offenders."

As noted in Council file No. 09-0177, the Council, in fact, adopted recommendations of the Budget & Finance Committee (pursuant to a Motion by then-Councilmember Wendy Greuel) re instructing the Office of Finance and requesting the Police Commission “to report to the Council with recommendations for requiring parking operators to install parking revenue and control equipment at any parking facility found to be not paying or underpaying the Parking Occupancy Tax in order to make auditing and monitoring of compliance less difficult and to enable suspension of repeat offenders from operating as a parking lot until such equipment is installed.”

ii Culver City Muni Code Sec. 11.01.355:

http://www.amlegal.com/nxt/gateway.dll/California/culver/title11businessregulations/chapter1101generallicensing?f=templates$fn=document-frameset.htm$q=[rank,100%3A[domain%3A[and%3A[stem%3A[and%3Apermits%20and%20licensing]]]][sum%3A[stem%3Apermits%20and%20licensing%20]]]$x=server$3.0#LPHit1

iii

License plate recognition devices (LPRs) – grants avail from Dept. of Homeland Security. See: http://www.news10.net/news/story.aspx?storyid=66795&catid=2, and http://www.latimes.com/news/local/la-me-santa-monica-parking-

20110123,0,5779844.story?page=1

iv The Police Permit Review Panel is a subsidiary of the Board of Police Commissioners, and is

responsible for issuing and overseeing a wide variety of Police Permits for numerous types of businesses – including parking lots and garages. The processing of these permits and the investigation of complaints related to permitted businesses is conducted by Commission Investigation Division, which is headed by a Lieutenant Commanding Officer and staffed by sworn and civilian investigators and clerical staff.

v

http://www.google.com/url?sa=t&source=web&cd=2&ved=0CBoQFjAB&url=http%3A%2F%2Fwww.lapdpolicecom.lacity.org%2F010511%2FItem%25203_Non%2520Alarm%2520Calendar.pdf&rct=j&q=la%20police%20commission%20parking%20lot%20permits&ei=ayJ4Tb-yIpL6swPgoIW5BA&usg=AFQjCNGuIQj3nfTw02XqbME6F3Z0kRXDYA vi http://www.lapdonline.org/police_commission/content_basic_view/9139

vii

Per the Los Angeles Parking Association:

“The Los Angeles Parking Association, comprised of the leading private parking operators, was formed to represent the common interests of the parking industry. We estimate that our members operate about 70% of the parking lots in Los Angeles and pay 70% of the Parking Occupancy Taxes (POT) to the City of Los Angeles. The City collected POT of about $85 million in FY 2008-09. Due to the fact that some operators were not paying their fair share of POT thus creating an uneven playing field for our members, the Association met with former Controller Laura Chick which resulted in the City retaining an outside auditing firm administered through the Office of Finance. On the permitting side of the equation, the Association worked very closely with the Police Commission staff and the Office of Finance to

C.O.R.E. Report Re: Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars March 2012 Page 15 of 15 pages

develop a process that facilitates the Master Permitting of Automobile Parking Lots and same day permitting of additional parking lots which was approved by the City Council in 2009. The process has yet to be fully implemented by the City. When it is, we believe the City will be in a much stronger position to determine the status of permits and payment of the POT with operators.” C.O.R.E. would like to express its appreciation for the suggestions and forthrightness of

the L.A. Parking Association and its representatives in presentation(s) to the Commission.

viii

RESOURCES:

http://www.cppaparking.org/

http://www.parking.org/

http://www.southwestparking.org/

http://www.parkingtoday.com/epip.php

Automated and Mechanical Parking Association -- www.ampapark.org/

International Parking Institute -- www.parking.org

National Parking Association -- www.npapark.org

National Valet Parking Association -- www.nvpaonline.com

Parking Network -- www.parking-net.com

Parking Today Magazine -- www.parkingtoday.com

Parking World -- http://www.parkingworld.com

Report Re: MANAGING OUR MONEY:

- INTERGOVERNMENTAL REVENUE SOURCES ____________________________________________ TO: The Honorable Antonio Villaraigosa, Mayor The Honorable Wendy Greuel, City Controller The Honorable Carmen Trutanich, City Attorney Honorable Members of the City Council DATE: March 2012 I. Summary

The City of Los Angeles receives more than 40% of its annual general fund revenues in the form of “allocations” or “remittances” from federal, state, county and other (inter)governmental sources – such as property, sales, gas, documentary transfer taxes, and vehicle license fees, special funds and grants. As vital as these sources of revenue are, however, the City does not have a definitive and comprehensive internal protocol or process to ensure that the computations of such revenue transfers are in accord with applicable statutes and agreements -- or even to verify the accuracy of the calculations through which the revenues actually received by the City were determined. With roughly $2 billion of the City’s annual $4.7 billion in general fund revenues at stake (FY 09-10), it is vital that the City not just examine what it does receive – but, as importantly, what it should receive.

Add section on business personal property and other new recommends…

II. Recommendations

C.O.R.E. recommends that:

1. The Mayor direct the Office of Finance, in cooperation with the City Controller, and the City Administrative Officer, establish and memorialize internal protocols to insure that the City’s receipt of revenue from federal, state, county and other (inter)governmental sources is in accord with applicable statutes and agreements. The purpose of such protocols shall be to verify the accuracy of the calculations through which revenues due and/or payable to the City have been determined.

2. The Council allocate such additional funds as might be needed for a single

party to be responsible for following up on the protocols to be established for

C.O.R.E. Report Re: Managing Our Money: Intergovernmental Revenue Sources March 2012 Page 2 of 7 pages

verifying and tracking intergovernmental revenues. Such party could be an existing employee of the Office of Finance, the Office of the Controller or of the Office of the CAO. This could also, for an initial period, be assigned to the individual who shall fill the post of Inspector General/Executive Director for Revenue/Efficiency – authorized by the Council this year.

3. The Office of Finance and/or the City Controller conduct spot audits of selected intergovernmental revenues. C.O.R.E. acknowledges that significant resources may be needed to perform comprehensive and ongoing audits of all intergovernmental revenue sources. However, a program of selective spot audits could be very helpful in determining the scope of possible discrepancies between what the City should get from certain intergovernmental sources vs. what that which it is actually receiving.

C.O.R.E notes the general distinction between functions of the Office of the Controller (typically focused on what the City pays out), and the Office of Finance (typically focused on what the City takes in). That said, the audits recommended might be undertaken by either of the offices – as they best determine.

4. The Office of Finance and/or the City Controller be authorized to enter into

contingency audit contracts with firms that have appropriate qualifications and expertise to find possible discrepancies between what the City should get from certain intergovernmental sources vs. what that which it is actually receiving. Pursuant to such contingency contracts, said vendors would be compensated only in the event that additional revenues are found to be due to the City, and are, in fact, collected.

5. The City Attorney and City Controller verify agreements the City that govern

the collection of taxes to ensure they are current, valid, and within the City’s best interests.

6. The Office of Finance be instructed to add to the City’s Business Tax forms

information on the Business Personal Property Tax. The form might require the taxpayer to indicate whether the Business Personal Property Tax has been paid. This information and the forms should be made available online. As detailed below, C.O.R.E. believes the “unsecured roll” might be a very significant untapped source of additional funds for the City.

III. Background

Attached as Appendix “A” hereto, is a listing of the major sources of (inter)governmental revenues collected by others and transferred and/or remitted to the City for the benefit of the general fund. To illustrate just some of the issues and potential for additional revenues, C.O.R.E. highlights the following revenue sources:

1. DOCUMENTARY TRANSFER TAX

Documentary Transfer Tax (“DTT”) is one intergovernmental revenue source that the Commission believes is particularly ripe for additional and ongoing scrutiny. At the height of the real estate market five years ago, DTT revenues were in the neighborhood of $200 million annually, constituting the sixth largest source of the City’s general fund revenues. In FY 09-10,

C.O.R.E. Report Re: Managing Our Money: Intergovernmental Revenue Sources March 2012 Page 3 of 7 pages

these revenues plummeted to roughly $90 million – but as real estate transactions pick up, so do DTT revenues. California Revenue and Taxation (“R&T”) Code Sec. 11911, et. seq. authorizes cities and counties to impose documentary transfer taxes upon deeds, instruments and writings by which an ownership interest in land is transferred. Per R&T Code Sec. 11912, the tax “shall be paid by any person who makes signs or issues any document or instrument subject to the tax, or for whose use or benefit the same is made, signed or issued.” LA County imposes a documentary transfer tax of $1.10 per $1,000.00 of consideration or value of the property conveyed (typically sale price, less liens and encumbrances transferring with the real property). The City of LA imposes a documentary transfer tax of $4.50 per $1,000.00. This aggregates to $5.60 per $1,000.00. Pursuant to a Memorandum between the County and the City, the County is responsible for collecting the DTT and remitting the portion thereof that is due to the City.

The City of L.A. has no formal guidelines or procedures to determine whether the City has been shortchanged in DTT revenues (and additional property tax revenues that result from reported changes of real property ownership) – both for transfers by deed and for unrecorded transfers.

A. Transfers by Deed:

The Los Angeles County Registrar-Recorder / County Clerk collects DTT before recording deeds transferring ownership of real property. While this would seem to be a relatively straightforward process, the sale price for a property – and thus the DTT due – is largely self-reporting by the party submitting the deed for recordation. Also, the amount of DTT paid depends on where the property is located. The rates in L.A. are higher than in other cities in the County, or in unincorporated areas of the County. Mistakes do happen, and when they do, the City is shortchanged.

Although the revenue impact cannot be determined without an audit, it should be

noted that a recent one time audit of DTT for calendar years 2004-2008 resulted in a demand by the City Controller to the County Recorder for payment of an additional $ 18.7 million ($ 3.4 million/year) which the audit determined was the difference between the amount the City should have received and the amount which the City actually received. Because the County Recorder has denied the City’s claim, legal action is now pending. B. Unrecorded Transfers:

Growing numbers of properties (notably commercial properties) are being

transferred by changes of ownership in a business entity – not by deed. State and local laws provide that substantial change in ownership within a real estate-owning entity (such as an LLC, partnership, or corporation), is supposed to trigger reassessment and DTT. The LA Recorder, however, has historically lacked the basic information and mechanisms needed to enforce the laws – and the only method to collect the DTT for these transfers is after-the-fact of the property transfers. Although the County Assessor, County Recorder and County Tax Collector are well aware of the issue and are taking steps to identify and assess property which is included in unrecorded transfer, the potential additional City revenue from DTT justify the City’s active participation in this process. 2. Property Taxes:

The City’s Property Tax Revenues exceed $ 1.4 billion and constitute about one third of the City’s general fund Revenue. As with the DTT, the City is totally reliant on the County for determination, collection and distribution of the property taxes due the City of Los Angeles and

C.O.R.E. Report Re: Managing Our Money: Intergovernmental Revenue Sources March 2012 Page 4 of 7 pages

other cities and governmental units within the County. Also, as with DTT, if there is no recorded deed and the property is not reassessed, that means less tax revenue for the County and for the City. The County’s property tax management is complex and involves substantial inter-departmental coordination between the County Assessor (which identifies the property, assesses its value and determines the property tax), the County’s Treasurer Tax Collector (which collects the tax from the taxpayer), and the County’s Auditor-Controller (which allocates the collected taxes to the City and other govermental units which are entitled to receive a portion of the tax revenues).

Unsecured Roll. Approximately $ 46 million of the City’s general fund revenue is derived from tax on personal property which is used in a trade or business. The business personal property is difficult to identify and assess, and since the business personal property tax is unsecured, it is difficult to collect without resort to the courts or to some other quasi-judicial remedy. That said, C.O.R.E believes this revenue source is ripe for exploration with greater collaboration between the County Assessor and the Office of Finance to make sure that all businesses are aware of this tax and that the tax is being collected fully. Collaboration between the City and the County. C.O.R.E. has observed that there is high correlation between those business entities which would be subject to the City’s gross receipts tax and those business entities which would be subject to the County’s tax on business personal property, That is, a taxpayer which owes a business personal property tax will more than likely owe a business license tax, and vice versa. When County Assessor John Nougez addressed C.O.R.E, he indicated that his office would enthusiastically support any initiatves to foster greater collaboration between the City’s Office of Finance and the County Assessor. Accordingly, C.O.R.E. recommends that the City’s Office of Finance pursue this opportunity to exchange data and otherwise collaborate with the County regarding businesses within the City which should be paying both of these business taxes. C.O.R.E. strongly recommends that the City have one point person who shall be responsible for coordinating all efforts related to DTT and to Property Tax Assessments and Collection to insure the City gets it fair share of DTT – and property tax revenue which result from unrecorded changes in ownership. 3. SUPERIOR COURT FINES AND OTHER COURT-ORDERED DEBT Approximately 12% of Los Angeles Superior Court (“LASC”) revenue from court-ordered

debt collections is allocated to City of Los Angeles, while the rest is dispersed to numerous State and County governmental entities. At a meeting of C.O.R.E. this spring, a representative of the Office of the CAO reported that the City is “essentially flying blind on court fines” and that there is simply “no way to tell” whether the City receives the revenue it is entitled to receive from LASC”). Uncollected revenue from court-ordered debt is substantial. In July 2009, LASC’s portfolio of delinquent and uncollected court-ordered debt exceeded $ 1.4 Billion. By July 2010, this number had grown to $ 1.9 Billion and while accruing at over $ 45 million per month, may exceed $ 2.8 Billion by the end of December 2011. Accordingly, the City’s share of the uncollected revenue would be $ 336 Million ($ 2.8 Billion x 12%). By taking a more proactive role, and by encouraging the Courts to engage in more effective collections, the City might see enhanced revenues, and better assure that it is getting its fair share. At a minimum, the City should demand that the Courts give the City a monthly report with data indicating citations processed by Vehicle Code section, revenue received and data on alternative sentences (e.g. traffic school) imposed by the Courts.

C.O.R.E. Report Re: Managing Our Money: Intergovernmental Revenue Sources March 2012 Page 5 of 7 pages

4. SALES AND USE TAX ALLOCATIONS

Sales tax-related revenues benefitting the general fund constitute in excess of $300 million annually for the City of Los Angeles. Possible mistakes in allocation by the Board of Equalization can be very costly to the City. There are varied mechanisms for the City to review, audit, and question allocations – among them CA Revenue & Taxation Code Sec.6066.3, which is intended to foster an efficient and effective working relationship in the review, posting, and correction of local tax records. It is our understanding that the Office of Finance is seeking contract approval for an auditor/consultant who could determine the accuracy of these allocations. IV. Revenue Impact

With roughly $2 billion of the City’s annual $4.7 billion in general

fund revenues derived from intergovernmental sources, City government needs to pay much closer attention to getting its rightful share of these allocations and remittances from federal, state, county and other (inter)governmental sources. CORE has not examined each of these sources, but the Commission has explored the areas of court fees and fines, documentary transfer tax, real property tax and sales and use tax allocations. If the City’s challenge of just DTT revenues related to recorded deeds (2004-2008) is any indication, the potential for additional revenues is significant. We believe these have the potential to yield more revenue for the City. Notably, the City realizes $46 million annually as its share of business personal property collected by the County. Considering that businesses’ compliance with the business personal property tax is widely considered very low, boosting collections on this tax alone could yield tens of millions of dollars annually. Accordingly, CORE estimates the potential for combined revenues and savings of $40 - $100 million annually.

Respectfully submitted, Ad Hoc Commission on Revenue Efficiency

Ron Galperin, Chair Hon. Cindy Miscikowski, Vice Chair Mark Ames, Commissioner David Farrar, Commissioner Michael Gagan, Commissioner Cheryl Parisi, Commissioner Brandon Shamim, Commissioner

C.O.R.E. Report Re: Managing Our Money: Intergovernmental Revenue Sources March 2012 Page 6 of 7 pages

CC: Budget & Finance Committee Intergovernmental Relations Committee Miguel A. Santana, City Administrative Officer Gerry F. Miller, Chief Legislative Analyst Antoinette Christovale, Director, Office of Finance Neil Guglielmo, Deputy Mayor, Budget & Financial Policy Contacts:

Ron Galperin, Chair Jon Dearing, Analyst Ad Hoc Commission on Revenue Efficiency Office of Chief Legislative Analyst ron@rongalperin.com Jonathan.dearing@lacity.org

Website:

http://C.O.R.E..lacity.org/

* The Commission would like to specially acknowledge and thank Commissioner David Farrar for contributing his outstanding research to this report.

C.O.R.E. Report Re: Managing Our Money: Intergovernmental Revenue Sources March 2012 Page 7 of 7 pages

Appendix “A”

Major sources of (inter)governmental revenues

(Collected by others and transferred and/or remitted to the City)

C.O.R.E. Report Re: Managing Our Money: Intergovernmental Revenue Sources March 2012 Page 8 of 7 pages

Report Re: IMPROVING COLLECTION OF UNPAID PARKING TICKETS:

RENTAL CARS & NEW TECHNOLOGIES

____________________________________________ TO: The Honorable Antonio Villaraigosa, Mayor The Honorable Wendy Greuel, City Controller The Honorable Carmen Trutanich, City Attorney Honorable Members of the City Council DATE: March 2012 I. Summary

The City of L.A. generates approximately $140 million annually in parking citation revenues through the Department of Transportation (“DOT”). However, this can and should be improved. This Report focuses on two notable (and complementary) opportunities to do so -- in collecting parking citations issued on rental cars, and in application of new technologies to make payment of citations easier and quicker.

Rentals DOT, and its collection vendor, ACS, anticipate that 2.7% of citations issued by DOT in

FY 2011 will be attributable to rental cars – roughly 70,000 out of 2.58 million tickets issued. Nearly 40% of these tickets will remain “open” and largely unpaid, however – lagging significantly behind vehicle collections generally.i

Collecting from renters is much tougher than other collections. Moreover, (as detailed in

C.O.R.E.’s October 2010 Blueprint for Reform of City Collections (Rec. 60, page 58), and hereinbelow), the CA Vehicle Code provides rental car companies can be released of liability for citations accrued while their vehicles are rented – provided that the companies provide the ticket issuer (LADOT) with the renters’ contact information. As a result, for citations issued over a two-year period by DOT, the category identified as “rentals and miscellaneous” constituted 11.65%, or $22.96 million, of the Department’s “Difficult to Collect” accounts.

Were the rental companies instead obligated to pay renter citations and/or charge their

renters therefor, the City could realize up to several million dollars annually in reasonably assured revenues.

C.O.R.E. Report Re: Improving Collection of Unpaid Parking Tickets March 2012 Page 2 of 6 pages

New technologies With a growing number of parking meters now accepting credit card payments for time

used, there may be additional benefits if meters can be configured to process citation payments as well. This option could also be explored in conjunction with an "instant discount" in which the payment is reduced by a nominal amount for immediate payment, or payment within 24 hours. Smartphone technology is also transforming how people pay. Smartphones are being used, for example, to text payments that then appear on the account holder’s phone bill. Many merchants are also employing a Quick Response (QR) Code in various forms of printed materials. The QR Code is similar to a bar code and can be scanned and loaded by any smartphone. City parking citations might be printed in the future to include a QR Code that would enable anyone with a smartphone to scan the code with their phone and make an instant payment to the City. An instant discount may also be effective as an incentive for use of the QR Code – which could make collections nearly instantaneous – and possibly avoid some credit card and private vendor collections fees.

II. Recommendations

C.O.R.E. recommends:

1. That the City Council request the Department of Transportation to submit a report to the Council on its current rental car collection systems and policies. Said report should include a breakdown of rental vehicle types issued citations and any information available regarding the rental locations and companies from which said vehicles were rented.

2. That the City Council request the Department of Transportation, in

consultation with its parking citation vendor and with the Office of the City Attorney, submit a report regarding bests practices and ordinances most effective in improving collection on rental car tickets in other cities and counties, both in and California and in other states. Said report should include recommendations for changes in DOT procedures and policies, and possible local ordinance and/or legislative changes. Said report should also include consideration and analysis of the possibility of entering into agreements with rental car companies to collect from their renters the citations issued to said renters – perhaps even with some sort of compensation therefor to the rental companies.

3. That the City Council and Mayor request the Board of Airport Commissioners

to report on a possible policy that would obligate rental car companies with airport operations to pay renter citations and/or charge their renters therefor as a condition to renewal of lease agreements, or of re-opened discussions on franchise issues. Further, the Office of the City Attorney should be requested to opine thereon. And, in crafting the appropriate and legally sustainable policy, C.O.R.E. recommends the Board confer with representatives of the rental car companies.

4. That the City Council request the Dept. of Transportation to report about

options for new and alternative technologies and payment methods. Said

C.O.R.E. Report Re: Improving Collection of Unpaid Parking Tickets March 2012 Page 3 of 6 pages

report shall include information about the feasibility and advisability of expanding payment options through use of parking meters and QR Codes.

III. Background

A substantial number of car rentals in the City of Los Angeles occur at facilities under the purview of the Los Angeles International Airport through franchise agreements approved by the Board of Airport Commissioners.

While state law relieves rental car companies of an obligation to pay the citationsii,

nothing in the law would appear to prevent the companies from paying a ticket and then billing their customer. In fact, these car companies have information on their lease agreements which gives them (and not the City) the contact information of the rental car driver as well as a contract to enforce payments that are due to them with applicable credit card data and ability to receive full payment reimbursement. The rental car contact could (and, arguably, should) indicate that unpaid parking tickets will be covered by the car company and charged back to the driver whose contract covers the period in which the car was utilized. Thereby, the obligation for (uncollected) parking citations would fall on the entity responsible for these vehicles -- the rental car company which owns and leases them.

Insofar as doing business at LAX or other L.A.-area airports is a privilege, the City could

realize significant and steady revenue by requiring companies to be ultimately responsible for parking citations issued on their vehicles as a condition for the renewal of contracts to do business at or with the airports.iii

The Commission is not in a position to opine on the legal implications of the recommendations herein, but we believe that all options need to be explored. The Commission is also cognizant of the need to work with rental car companies to address concerns they rightfully have – and may have – with liability for rental car tickets. Notably:

Rental car companies have complained to the Commission and its Commissioners about the processes of DOT, and that there are instances where the companies timely forward renter information to DOT and are still assessed the ticket, plus fines. In such cases, companies have reported paying under protest to avoid DMV holds – and then having to request refunds from DOT and/or the DMV.

Rental car companies report that a significant percentage of rental car tickets are

issued on cars rented by problem renters. These include cars wrongfully not returned to the rental company cars rented with stolen IDs or credit cards, and renters whose charges exceed their credit card company limits.

While a rental car company my apply certain charges for citations (plus processing

or penalty fees) to a renter’s credit card, the company inevitably has to contend with chargebacks – i.e. funds withheld from the rental company by a credit card company when a renter (rightly or wrongly) disputes his/her credit card charge(s). Moreover, renters who do take responsibility for a ticket will sometimes take the position that the rental company should be responsible for any late fees and penalties because the renter did not get timely notice from the company to avoid the additional charges.

C.O.R.E. Report Re: Improving Collection of Unpaid Parking Tickets March 2012 Page 4 of 6 pages

Representatives from rental car companies have put forth the idea of incentives over penalties in order for the City to increase collections. Rental car companies are required to pay within 30 days but do not face penalties until 90 days. The procedure for rental car companies is to pay tickets upon receipt and bill the amount to its customers. Many car companies wait and incur penalties after the 90 days. If the city were to agree to waive penalties upon payment of the ticket within 60 days it would, according to certain rental car company representatives, increase collections. Incentivizing payment will make paying the fine much easier and cost-effective than passing on data which is both costly to the City and the company.

There exist questions of who might be obligated. There are the national companies,

but particular local operations may be operated by affiliated or independent franchisees.

Requiring rental car companies/operators/franchisees to be responsible for tickets if

a vehicle is rented at LAX. IV. Revenue Impact

By conditioning new rental car facilities contracts at L.A.’s airports on rental car companies undertaking certain obligations to pay renter citations and/or charge their renters therefor, the City could realize a significantly greater share of the nearly $11.5 million in difficult to collect (and often uncollectible) citations attributable to rental cars.iv Another way to estimate the benefit of the rental car companies being responsible for the tickets of their customers is to consider that 2% of $140 million is, grossly calculated, approximately $2.8 million per year. This amount, going forward as an obligation to pay by large, licensed rental car companies, could become a more reasonably assured amount in future City budget revenue projections. Such a policy change could also be implemented in such a way as to streamline existing DOT procedures to the benefit of the City and of the rental car companies.

As for application of new technologies, making it easier and quicker for people to pay their

parking tickets will be both a financial benefit to the City and of benefit to the residents, businesses and visitors in Los Angeles.

The City generates approximately $140 million in annual revenue from parking citations. Approximately 2.7 percent of citations are attributable to rental cars and approximately 40 percent of such rental car citations go unpaid. CORE estimates additional revenue of approximately $1 - $2 million from better collecting unpaid citations from rental car companies. Additionally, with enhanced technology to facilitate immediate payment for all citations, coupled with implementation of the Commission’s Blueprint recommendations as they relate to parking citations, CORE estimates the potential for combined revenues and savings of $3 - $10 million annually.

C.O.R.E. Report Re: Improving Collection of Unpaid Parking Tickets March 2012 Page 5 of 6 pages

Respectfully submitted, Ad Hoc Commission on Revenue Efficiency

Ron Galperin, Chair Hon. Cindy Miscikowski, Vice Chair Mark Ames, Commissioner David Farrar, Commissioner Michael Gagan, Commissioner Cheryl Parisi, Commissioner Brandon Shamim, Commissioner

CC: Budget & Finance Committee Audits & Governmental Efficiency Committee Transportation Committee Miguel A. Santana, City Administrative Officer Gerry F. Miller, Chief Legislative Analyst Antoinette Christovale, Director, Office of Finance Neil Guglielmo, Deputy Mayor, Budget & Financial Policy Jaime de la Vega, General Manager, LADOT

Contacts:

Ron Galperin, Chair Jon Dearing, Analyst Ad Hoc Commission on Revenue Efficiency Office of Chief Legislative Analyst ron@rongalperin.com jonathan.dearing@lacity.org

Website:

http://C.O.R.E..lacity.org/

+ The Commission would like to specially acknowledge and thank Vice Chair, the Hon. Cindy Miscikowski for contributing her outstanding research to, and preparation of, this report.

C.O.R.E. Report Re: Improving Collection of Unpaid Parking Tickets March 2012 Page 6 of 6 pages

ENDNOTES: i

ii Standard vehicle rental agreements state that the renter is responsible for all tickets issued to the vehicle

while it is rented. Most car rental agreements also have provisions that allow the rental company to charge the renter’s credit card for unpaid parking violations, but this rarely happens. California’s Vehicle Code essentially takes rental companies “off the hook” for parking tickets if they simply furnish the ticketing agency (DOT) with information about the party renting the vehicle at the time a ticket was issued. Moreover, the DMV will not withhold registration renewals of the vehicle for such tickets.

Per CA Vehicle Code Div. 3, Chapter 1, Article 6, Sec. 4760(c): “The court or designated processing

agency shall issue an abstract or notice of disposition of parking violation to the renter or lessor of a vehicle issued a notice of delinquent parking violation relating to standing or parking if the renter or lessor provides the court or processing agency with the name, address, and driver’s license number of the rentee or lessee at the time of occurrence of the parking violation.”

Some rental companies report information about renters to DOT electronically as part of DOT’s voluntary

fleet program, others don’t. A DOT representative reported to C.O.R.E. that the voluntary program is not as successful as anticipated. Once DOT does get information about a renter, notices are sent to the renter, but collecting from renters out of L.A. is difficult, especially without the enforcement mechanism inherent in withholding of vehicle registration renewals.

iii DOT replied to C.O.R.E.’s recommendation(s) in a letter, dated July 28, 2011, regarding Department

responses requested by the Office of Finance as part of its Accounts Receivable Initiatives Department Response Tracker (CF 10-0226). DOT stated that: “ACS implemented a new program to expedite notices to the correct owner since rental car ownership information is dynamic, in that, most rental car companies do not own their vehicles for more than two years. Further ACS is confirming ownership with the DMV as soon as the citation is processed, and also is strictly enforcing the requirement for rental agencies to provide the driver’s license information of the renter within a time frames as required in the CVC. Finally, ACS is also working with the larger rental agencies on a master database repository of their entire nationwide inventory.”

iv C.O.R.E. has not conducted a legal analysis regarding any statutory or other limitations, or the extent or

manner that an obligation could be undertaken by contract by rental car companies.

Follow Up to C.O.R.E.’s Blueprint for Reform of City Collections

March 2012 Page 1 of 16 Pages

Report Re: Follow Up to C.O.R.E.’s Blueprint for

Reform of City Collection - Accompanying Recommendations Tracker

__________________________________________ TO: The Honorable Antonio Villaraigosa, Mayor The Honorable Wendy Greuel, City Controller The Honorable Carmen Trutanich, City Attorney Honorable Members of the City Council DATE: March 2012

In the spring of 2010, the Los Angeles City Council created the Ad Hoc Commission on Revenue Efficiency (CORE) at the initiation of Council President Eric Garcetti to evaluate and recommend improvements in collections, billing and new revenues. Comprised of seven volunteer Commissioners, CORE has had more than 25 meetings and hearings to study and develop its Blueprint for Reform of City Collections.

The Blueprint In October 2010, CORE released the Blueprint, which contains 65

recommendations applicable to various City departments and offices. The Blueprint offers a comprehensive roadmap for reform of billing and collections activities – and for the City to realize as much as $100 million or more annually in additional net revenues from departments’ non-tax receivables. CORE presented the Blueprint to the Council on May 3, 2011 (CF No. 10-0225). Thereafter, the Council adopted the Blueprint, including its central recommendation: Creation of the post of an Inspector General for Revenue & Efficiency/Collections (the IG).

The Commission has received periodic updates from the Office of Finance

and other City departments regarding implementation since the report was released. CORE has closely monitored implementation through the development of a tracking matrix for all of the recommendations. (See page 3, below).

The City’s Receivables The most recent comprehensive report of the City’s non-tax receivables is

dated October 19, 2011 and entitled: “Accounts Receivable Quarterly Report for 4th

Follow Up to C.O.R.E.’s Blueprint for Reform of City Collections

March 2012 Page 2 of 16 Pages

Quarter Fiscal Year 2010/2011.1 This report is a great improvement in the amount and format of information provided over reports previously submitted when CORE began its work. That said, the numbers continue to reflect the fact that key City Departments are still failing to write off old and bad debt – and to get it off the City’s books. Per the 4th Quarter report, the City had nearly $585.8 million in non-tax receivables reported by the (non-proprietary) Departments, less a staggering $454.1 million in allowance(s) for doubtful accounts reported by the Departments – reducing reported net receivables to $131.7 million.

Inspector General

While some of the recommendations have been implemented, or partially implemented, many have not. Notably, the City has yet to appoint an IG. It was CORE’s very strong recommendation that the City create this post for a 1-2 year period to independently report on, and aid in, the implementation of, the City’s Collection Guidelines, the Controller’s recommendations and the recommendations of CORE’s Blueprint. As we stated in the Blueprint: Reports, audits, Mayoral directives, Council directives and Collection Guidelines have proven to be insufficient by themselves in bringing about reform of collections. The Commission saw – and still sees – the need for the sole and concentrated focus on revenue and collections and the coordination that the IG can bring.

The intention of the IG position is not to supplant or usurp or duplicate the

authorities of any other City office. The elected and other officials of the City would also continue to exercise their ongoing responsibilities and authorities. The IG, however, will have a vital role in reporting, convening, coordinating – and, most importantly, in achieving results in dollars. To that end, CORE recommends that the IG be assigned to focus on several distinct pools of collections where the City can achieve significant and timely results. If the IG focuses on these areas – even without achieving a thorough overhaul of collections – we believe the IG will have been a great success. Specifically:

EMS billings – To make sure the City realizes the most out of the Fire

Department’s recently implemented billings and collections contracts. With approximately 100,000 ambulance calls and $ 85 million in annual collections, a 15-20% increase in collections, coupled with other efficiencies, would yield the City $13-$17 million in new revenues annually. This, we believe, is a conservative estimate.

Parking Citations – To implement the recommendations in the Blueprint and

in CORE’s January 2012 Report on Collection of Unpaid Parking Tickets: Rental Cars & New Technologies. The City currently realizes approximately $140 million in annual revenues from parking citations. We believe that number could be increased by at least 10-20%. That, along with making the process more efficient, could yield the City $14-$30 million in new revenues annually.

1 (See: http://cityclerk.lacity.org/lacityclerkconnect/index.cfm?fa=ccfi.viewrecord&cfnumber=10-0225-S2).

Follow Up to C.O.R.E.’s Blueprint for Reform of City Collections

March 2012 Page 3 of 16 Pages

Parking Tax – To achieve coordination between the currently disparate roles

of the Office of Finance, Police Commission and City Attorney as they relate to regulation of parking lot operators and to collection of the Parking Occupancy Tax. As detailed in CORE’s January 2012 Report on Lost in the Parking Lot: Stopping Rogue Parking Operators from Stealing Our Tax Dollars, the City currently realizes approximately $85 million in annual POT revenues. With one person to coordinate reform of the process, along with revised ordinances, we believe the City can realize $20 million or more in additional annual revenues within the next year. The IG position was advertised by the City in August 2011, and again in the

fall. To-date, the Commission is not aware that any such appointment has been made. As C.O.R.E. now wraps up its work, the Commission stresses the necessity to now identify and put to work this person to carry forth our recommendations and assure their implementation and success.

Tracking Progress on CORE’s Recommendations

Office of Finance Tracker -- The Office of Finance’s most recent report with

a matrix/tracker for (CORE and other collection) recommendations is dated June 30, 2011, and submitted to the Clerk of the City of August 8, 2011. Entitled: “Accounts Receivable Citywide Improvement Initiatives”, the Office of Finance report includes an Exhibit I of a “Finance Directives Checklist” with status of 75 initiatives and an Exhibit II with a “Departmental Response Tracker” indicating Departmental Reponses submitted to the Office of Finance re 100 Recommendations.2

CORE Tracker -- Attachment “A”, hereto, is the Commission’s own tracker/matrix wherein we assess the progress and status related to each of CORE’s 65 Recommendations. CORE recommends that the City’s policymakers continue to track the

progress of the identified departments and offices toward implementation. The Commission encourages the City to fulfill each and every recommendation and we look forward to what will be done. We also want to reiterate that the City’s private collection agencies should be returning uncollected accounts for recommended secondary and tertiary collections. This procedure should be followed by the City and by the County in its collections on behalf of the City – as detailed in C.O.R.E.’s accompanying Report on Intergovernmental Revenue Sources.

2 (See: http://clkrep.lacity.org/onlinedocs/2010/10-0225_rpt_oof_8-8-11.pdf).

Follow Up to C.O.R.E.’s Blueprint for Reform of City Collections

March 2012 Page 4 of 16 Pages

Revenue Impact

Implementation is continuing on CORE’s recommendations to strengthen the City’s collections process, institute best practices, centralize reporting and tracking, and increase accountability among departments and elected offices. As we previously detailed in the Blueprint, with implementation of the Commission’s prior Blueprint recommendations, along with prior Controller recommendations regarding collections, CORE estimates the potential for combined revenues and savings of $10 - $25 million in the coming fiscal year, and within three years, as much as $100 million or more annually.

In Conclusion

The Commissioners would like to express our gratitude for the assistance of myriad individuals in and out of City government, and for the honor and privilege of being of service to the people of the City of Los Angeles. While the Commission’s formal work is hereby concluded, each of the Commissioners intends to remain available and on-call to further assist in any way.

Respectfully submitted, Ad Hoc Commission on Revenue Efficiency Ron Galperin, Chair Hon. Cindy Miscikowski, Vice Chair Mark Ames, Commissioner David Farrar, Commissioner Michael Gagan, Commissioner Cheryl Parisi, Commissioner Brandon Shamim, Commissioner

CC: Audits and Governmental Efficiency Committee Budget and Finance Committee Miguel A. Santana, City Administrative Officer Gerry F. Miller, Chief Legislative Analyst Antoinette Christovale, Director, Office of Finance Neil Guglielmo, Deputy Mayor, Budget & Financial Policy

Contacts:

Ron Galperin, Chair Jon Dearing, Analyst Ad Hoc Commission on Revenue Efficiency Office of Chief Legislative Analyst ron@rongalperin.com jonathan.dearing@lacity.org

Website:

http://core.lacity.org/

Follow Up to C.O.R.E.’s Blueprint for Reform of City Collections

March 2012 Page 5 of 16 Pages

Appendix “A”

CORE Recommendations Tracker Matrix

(See accompanying pages)

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erta

in f

un

din

g so

urc

e fo

r Fi

nan

ce’s

co

llect

ion

wo

rk –

Cit

y C

ou

nci

lIn

Pro

cess

or

Dis

cuss

ion

The

CA

O is

pre

par

ing

a re

po

rt

rela

tin

g to

item

iv. I

tem

iii h

as b

een

imp

lem

ente

d. I

tem

s i a

nd

iv h

ave

no

t

bee

n im

ple

men

ted

.

Ap

pen

dix

"D

" --

Pag

e 1

of

11

pag

es

1/1

9/2

01

2C

OR

E R

eco

mm

en

dat

ion

s Tr

acke

r M

atri

x: S

tatu

s o

f C

OR

E R

eco

mm

en

dat

ion

s

8

CO

RE

reco

mm

end

s th

at F

inan

ce im

med

iate

ly r

epo

rt t

o t

he

Co

un

cil’s

Bu

dge

t &

Fin

ance

Co

mm

itte

e re

gard

ing

the

stat

us

of

crea

tio

n o

f th

is T

ask

Forc

e. C

OR

E

furt

her

rec

om

men

ds

that

th

e C

om

mit

tee

req

ues

t ea

ch o

f th

e m

emb

ers

of

the

Rev

enu

e R

evie

w C

olle

ctio

n T

ask

Forc

e to

ap

pea

r b

efo

re t

he

Co

mm

itte

e.

Fin

ance

In P

roce

ss o

r

Dis

cuss

ion

The

Task

Fo

rce

has

co

nve

ned

an

init

ial m

eeti

ng

and

th

e O

ffic

e o

f

Fin

ance

is p

rep

arin

g a

rep

ort

.

9C

OR

E re

com

men

ds

that

Fin

ance

tak

e al

l nec

essa

ry s

tep

s to

rec

on

stit

ute

an

d

invi

gora

te it

s cu

rren

t R

even

ue

Man

agem

ent

Co

mm

itte

e (t

he

“RM

C”)

.Fi

nan

ceFu

lly o

r M

ost

ly

Imp

lem

ente

d

10

CO

RE

reco

mm

end

s th

at t

he

Insp

ecto

r ge

ner

al (

IG)

pro

po

sed

by

CO

RE

(See

Sec

.

VI.

D.)

pre

par

e q

uar

terl

y re

po

rts

of

dep

artm

ents

’ co

mp

lian

ce a

nd

per

form

ance

to

sub

mit

to

th

e M

ayo

r, C

on

tro

ller,

Cit

y A

tto

rney

an

d t

he

Co

un

cil:

i. C

om

plia

nce

of

dep

artm

ents

wit

h e

ach

of

the

crit

eria

in D

irec

tive

No

. 5.

ii. C

om

plia

nce

of

dep

artm

ents

wit

h a

ll ap

plic

able

Co

llect

ion

Gu

idel

ines

.

iii. P

erfo

rman

ce o

f d

epar

tmen

ts w

ith

cap

turi

ng

all b

illab

le s

ervi

ces

and

fee

s –

incl

ud

ing

full

cost

rec

ove

ry.

iv. P

rogr

ess

of

dep

artm

ents

in c

ult

ivat

ing

new

rev

enu

e so

urc

es.

v. R

epo

rts

to in

clu

de

bo

th d

etai

ls a

nd

a s

imp

le c

har

t/ch

eckl

ist

wit

h s

um

mar

y

sco

res

or

grad

es f

or

each

dep

artm

ent.

Pro

po

sed

Insp

ecto

r

Gen

eral

In P

roce

ss o

r

Dis

cuss

ion

The

Co

un

cil a

nd

May

or

app

rove

d t

he

crea

tio

n o

f an

Insp

ecto

r G

ener

al f

or

Co

llect

ion

s p

osi

tio

n w

ith

in t

he

CA

O's

off

ice.

Th

e p

osi

tio

n h

as n

ot

bee

n

fille

d. I

nte

rvie

ws

are

un

der

way

.

11

CO

RE

reco

mm

end

s th

at t

he

Insp

ecto

r G

ener

al (

IG)

pro

po

sed

by

CO

RE

(See

Sec

.

VI.

D.)

pre

par

e q

uar

terl

y re

po

rts

to s

ub

mit

to

th

e M

ayo

r, C

on

tro

ller,

Cit

y A

tto

rney

and

th

e C

ou

nci

l:

i. St

atu

s o

f im

ple

men

tati

on

of

each

of

the

curr

entl

y n

ot-

imp

lem

ente

d a

nd

/or

par

tial

ly im

ple

men

ted

rec

om

men

dat

ion

s in

th

e C

on

tro

ller’

s 2

00

7 a

nd

20

10

Au

dit

s.

ii. S

tatu

s o

f im

ple

men

tati

on

of

each

of

CO

RE’

s re

com

men

dat

ion

s th

at a

re

Pro

po

sed

Insp

ecto

r

Gen

eral

In P

roce

ss o

r

Dis

cuss

ion

See

com

men

t fo

r R

eco

mm

end

atio

n

10

.

12

CO

RE

reco

mm

end

s th

at t

he

May

or,

CA

O a

nd

Co

un

cil’s

Bu

dge

t &

Fin

ance

Co

mm

itte

e re

qu

ire

dep

artm

ent

Gen

eral

Man

ager

s, a

s p

art

of

ann

ual

bu

dge

t

req

ues

ts, t

o s

ub

mit

a le

tter

att

esti

ng

thei

r d

epar

tmen

ts c

om

plia

nce

wit

h

Dir

ecti

ve N

o. 5

an

d w

ith

all

pro

visi

on

s o

f th

e C

olle

ctio

n G

uid

elin

es. A

ny

and

all

pro

visi

on

s w

her

ein

a d

epar

tmen

t is

no

t in

co

mp

lian

ce s

hal

l be

det

aile

d b

y th

e

Gen

eral

Man

ager

an

d r

evie

wed

as

par

t o

f th

e b

ud

get

pro

cess

.

May

or,

CA

O a

nd

Co

un

cil B

ud

get

&

Fin

ance

Co

mm

itte

e

In P

roce

ss o

r

Dis

cuss

ion

The

May

or'

s 2

01

2-1

3 B

ud

get

Lett

er

to D

epar

tmen

ts r

eass

erts

th

at

dep

artm

ent

man

ager

s w

ill b

e h

eld

acco

un

tab

le f

or

com

plia

nce

wit

h

Exec

uti

ve D

irec

tive

No

. 5 a

nd

th

e

Co

llect

ion

Gu

idel

ines

.

13

CO

RE

reco

mm

end

s th

at, i

n o

rder

to

imp

lem

ent

a cl

ear

man

agem

ent

eval

uat

ion

po

licy

wh

ich

incl

ud

es r

even

ue

and

co

llect

ion

per

form

ance

cri

teri

a, t

he

May

or,

as

Ch

ief

Exec

uti

ve s

ho

uld

co

nsi

der

dev

elo

pm

ent

of

spec

ific

ind

ivid

ual

per

form

ance

guid

elin

es w

ith

eac

h G

ener

al M

anag

er. T

hes

e gu

idel

ines

sh

ou

ld in

clu

de

goal

s

and

exp

ecta

tio

ns

set

resp

ecti

vely

by

the

Gen

eral

Man

ager

an

d t

he

May

or

and

sho

uld

be

eval

uat

ed a

nn

ual

ly b

y th

e M

ayo

r an

d h

is e

xecu

tive

tea

m w

ith

ad

viso

ry

inp

ut

fro

m t

he

Cit

y C

ou

nci

l as

app

rop

riat

e to

co

nsi

der

th

e G

ener

al M

anag

er’s

cap

abili

ty a

nd

per

form

ance

in m

eeti

ng

the

ove

rall

resp

on

sib

iliti

es o

f ru

nn

ing

the

ind

ivid

ual

dep

artm

ent.

May

or

Fully

or

Mo

stly

Imp

lem

ente

d

The

May

or

con

du

cts

ann

ual

GM

per

form

ance

rev

iew

s in

clu

din

g fi

scal

man

agem

ent.

Rev

enu

e an

d

colle

ctio

n p

erfo

rman

ce a

re in

clu

ded

and

exp

and

ing.

Ap

pen

dix

"D

" --

Pag

e 2

of

11

pag

es

1/1

9/2

01

2C

OR

E R

eco

mm

en

dat

ion

s Tr

acke

r M

atri

x: S

tatu

s o

f C

OR

E R

eco

mm

en

dat

ion

s

14

CO

RE

reco

mm

end

s th

at t

he

CA

O r

epo

rt t

o t

he

May

or

and

th

e C

ou

nci

l on

th

e

feas

ibili

ty o

f ad

op

tin

g as

pec

ts o

f th

e C

ou

nty

of

L.A

.’s

bu

dge

tin

g p

arad

igm

–

wh

erei

n d

epar

tmen

t b

ud

gets

are

bas

ed, i

n p

art,

on

co

llect

ion

s ta

rget

s.

Dep

artm

ents

th

at d

o w

ell c

an b

enef

it. D

epar

tmen

ts t

hat

fai

l to

mee

t

exp

ecta

tio

ns

are

calle

d t

o a

cco

un

t b

y th

e C

ou

nty

’s C

EO a

nd

by

the

Bo

ard

of

Sup

ervi

sors

.

Ch

ief

Ad

min

istr

ativ

e

Off

icer

Has

No

t B

e

Imp

lem

ente

d

CA

O r

esp

on

se: P

er t

he

Cit

y C

har

ter,

the

Bu

dge

t is

dev

elo

ped

in

coo

rdin

atio

n w

ith

th

e M

ayo

r’s

Off

ice.

Rev

enu

e ta

rget

s ar

e

dev

elo

ped

in c

on

sult

atio

n w

ith

Dep

artm

ents

an

d t

he

Cit

y

Ad

min

istr

ativ

e O

ffic

er a

nd

ap

pro

ved

by

the

May

or

and

Co

un

cil.

An

y

dev

iati

on

s fr

om

rev

enu

e ta

rget

s ar

e

add

ress

ed t

hro

ugh

th

e Fi

nan

cial

Stat

us

Rep

ort

s to

th

e M

ayo

r an

d

15

CO

RE

reco

mm

end

s th

at C

ou

nci

l cre

ate

a p

ilot

pro

gram

wit

h s

ever

al d

epar

tmen

ts

(or

a cl

ust

er o

f d

epar

tmen

ts)

that

wo

uld

ded

icat

e o

r ea

rmar

k a

po

rtio

n o

f

colle

ctio

ns

to f

un

d t

he

cost

s o

f co

llect

ion

s an

d t

o b

enef

it s

aid

dep

artm

ents

’

op

erat

ion

s. T

he

par

adig

m m

igh

t b

e th

at a

po

rtio

n o

f ce

rtai

n r

even

ues

be

app

ort

ion

ed o

r d

irec

ted

to

hel

p f

un

d a

nd

su

pp

ort

:

i. C

olle

ctio

n p

osi

tio

ns

at F

inan

ce.

ii. T

he

po

st o

f In

spec

tor

Gen

eral

fo

r R

even

ue

& C

olle

ctio

ns.

iii. R

even

ue-

gen

erat

ing

po

siti

on

s in

th

e sp

ecif

ic d

epar

tmen

t.

iv. S

taff

ing

nee

ds

and

pro

gram

s o

f th

e sp

ecif

ic d

epar

tmen

t.

Cit

y C

ou

nci

lH

as N

ot

Be

Imp

lem

ente

d

CA

O r

esp

on

se: R

even

ues

fro

m

colle

ctio

n it

ems

are

con

sid

ered

on

e

tim

e re

ceip

ts. T

he

Cit

y’s

Fin

anci

al

Po

licie

s p

recl

ud

e th

e u

se o

f o

ne-

tim

e

reve

nu

es f

or

on

goin

g ex

pen

ses.

Th

e

CA

O w

ill b

e re

view

ing

this

pro

po

sal

for

com

plia

nce

wit

h t

he

Cit

y’s

curr

ent

fin

anci

al p

olic

ies.

It s

ho

uld

als

o b

e n

ote

d t

hat

rest

rict

ing

the

use

of

Gen

eral

Fu

nd

reve

nu

e re

du

ces

the

reve

nu

e

avai

lab

le f

or

oth

er p

rio

riti

es.

16

CO

RE

reco

mm

end

s th

at t

he

May

or,

CA

O a

nd

Co

un

cil m

ake

dep

artm

ent-

by-

dep

artm

ent

reve

nu

e ta

rget

s (a

nd

per

form

ance

) a

fixe

d p

art

the

bu

dge

t p

roce

ss,

of

the

regu

lar

Fin

anci

al S

tatu

s R

epo

rts

(FSR

s) b

y th

e C

AO

, an

d t

hat

th

ese

targ

ets

be

incl

ud

ed in

all

qu

arte

rly

rep

ort

s b

y d

epar

tmen

ts.

May

or,

CA

O a

nd

Co

un

cil B

ud

get

&

Fin

ance

Co

mm

itte

e

In P

roce

ss o

r

Dis

cuss

ion

CA

O R

esp

on

se: T

he

Ad

op

ted

Bu

dge

t

sets

rev

enu

e ta

rget

s fo

r al

l Cit

y

Dep

artm

ents

. Th

e C

AO

Fin

anci

al

Stat

us

Rep

ort

s to

th

e M

ayo

r an

d

Co

un

cil w

ill t

rack

th

e re

ven

ue

pro

gres

s o

f C

ity

Dep

artm

ents

. Th

e

FSR

will

hig

hlig

ht

per

form

ance

on

mee

tin

g ta

rget

s.

17

CO

RE

reco

mm

end

s th

at e

ach

dep

artm

ent

imp

lem

ent

a re

cogn

itio

n p

rogr

am f

or

emp

loye

es.

All

Dep

artm

ents

Fully

or

Mo

stly

Imp

lem

ente

d

18

CO

RE

reco

mm

end

s th

e es

tab

lish

men

t an

d a

pp

oin

tmen

t o

f an

Insp

ecto

r G

ener

al

for

Rev

enu

e an

d C

olle

ctio

ns

to in

dep

end

entl

y re

po

rt o

n, a

nd

aid

in t

he

imp

lem

enta

tio

n o

f, t

he

Cit

y’s

Co

llect

ion

Gu

idel

ines

, th

e C

on

tro

ller’

s

reco

mm

end

atio

ns,

th

e re

com

men

dat

ion

s o

f th

is B

luep

rin

t an

d o

ther

co

llect

ion

refo

rms.

May

or

& C

ity

Co

un

cil

In P

roce

ss o

r

Dis

cuss

ion

See

com

men

t to

Rec

om

men

dat

ion

10

.

Ap

pen

dix

"D

" --

Pag

e 3

of

11

pag

es

1/1

9/2

01

2C

OR

E R

eco

mm

en

dat

ion

s Tr

acke

r M

atri

x: S

tatu

s o

f C

OR

E R

eco

mm

en

dat

ion

s

19

CO

RE

reco

mm

end

s re

pla

cin

g th

e cu

rren

t sy

stem

of

dep

artm

ent

“ref

erra

ls”

of

acco

un

ts f

rom

on

e st

age

of

colle

ctio

ns

to a

no

ther

wit

h a

de

fact

o s

yste

m o

f

com

pu

lso

ry a

cco

un

t tr

ansf

ers,

un

der

th

e su

per

visi

on

of

Fin

ance

. Rat

her

th

an

mak

e re

ferr

als

a d

iscr

etio

nar

y o

r re

com

men

ded

act

by

a d

epar

tmen

t, t

he

tran

sfer

sh

ou

ld b

e co

mp

uls

ory

(an

d, p

refe

rab

ly, a

uto

mat

ic)

– u

nle

ss t

her

e is

a

spec

ific

rea

son

or

circ

um

stan

ce t

o n

ot

do

so

.

All

Dep

artm

ents

In P

roce

ss o

r

Dis

cuss

ion

The

Off

ice

of

Fin

ance

ind

icat

es t

hat

a

mo

re f

orm

aliz

ed, c

entr

aliz

ed

colle

ctio

n m

anag

emen

t sy

stem

is

nee

ded

bef

ore

th

ere

can

be

com

pu

lso

ry t

ran

sfer

s, a

nd

has

ask

ed

the

IT O

vers

igh

t C

om

mit

tee

to p

ut

this

item

on

its

rad

ar.

20

CO

RE

reco

mm

end

s th

at t

he

Cu

rren

t N

on

-Tax

Acc

ou

nts

Rec

eiva

ble

Pro

cess

Flo

w

and

Tim

etab

le o

f th

e C

olle

ctio

n G

uid

elin

es b

e re

pla

ced

wit

h C

OR

E’s

up

dat

ed

Rec

om

men

ded

No

n-T

ax F

low

char

t.

All

Dep

artm

ents

In P

roce

ss o

r

Dis

cuss

ion

Has

bee

n u

pd

ated

to

ref

lect

cu

rren

t

pra

ctic

e an

d w

ill c

on

tin

ue

to u

pd

ate

as p

roce

sses

evo

lve.

21

CO

RE

reco

mm

end

s th

at F

inan

ce a

men

d t

he

Co

llect

ion

Gu

idel

ines

set

tin

g fo

rth

the

pro

cess

flo

w f

or

pri

mar

y co

llect

ion

s o

f ac

cou

nts

of

less

th

an $

5,0

00

– a

s

follo

ws:

i. A

s n

ote

d in

Rec

om

men

dat

ion

No

. 19

, (Se

c. V

II.A

.19

), a

cco

un

ts u

nd

er t

he

curr

ent

Co

llect

ion

Gu

idel

ines

th

at a

re s

up

po

sed

to

be

refe

rred

by

dep

artm

ents

at f

ort

y fi

ve (

45

) d

ays

of

del

inq

uen

cy, s

hal

l hen

cefo

rth

be

de

fact

o t

ran

sfer

red

to

a p

rim

ary

colle

ctio

n a

gen

cy (

un

less

a d

epar

tmen

t p

rovi

des

a s

pec

ific

rea

son

or

circ

um

stan

ce n

ot

to d

o –

to

th

e sa

tisf

acti

on

of

Fin

ance

).

ii. If

no

pay

men

t is

rec

eive

d w

ith

in a

nin

e (9

) m

on

th p

erio

d f

rom

tra

nsf

er o

f an

acco

un

t to

th

e p

rim

ary

colle

ctio

n a

gen

cy, t

he

acco

un

t sh

all,

in c

on

sult

atio

n w

ith

Fin

ance

, be

auto

mat

ical

ly t

ran

sfer

red

to

sec

on

dar

y co

llect

ion

s (S

ee

Rec

om

men

dat

ion

No

.22

(Se

c. V

II.B

.22

).

iii. I

f p

arti

al p

aym

ent

is r

ecei

ved

wit

hin

th

e n

ine

(9)

mo

nth

per

iod

, th

e p

erio

d f

or

the

pri

mar

y ag

ency

to

ho

ld t

he

acco

un

t m

ay b

e ex

ten

ded

up

to

an

oth

er t

hre

e

mo

nth

s.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

The

Off

ice

of

Fin

ance

is p

rep

arin

g a

new

RFP

fo

r co

llect

ion

s. T

he

new

con

trac

t w

ill a

dju

st t

he

tran

sfer

per

iod

fro

m 1

2 m

on

ths

to 9

mo

nth

s.

Off

ice

of

Fin

ance

Gu

idel

ines

pro

vid

e

for

dep

artm

ent

refe

rral

wit

hin

45

day

s o

f d

elin

qu

ency

an

d O

OF

has

dis

cret

ion

to

pu

ll ac

cou

nts

or

po

ols

of

acco

un

ts a

t w

ill.

22

CO

RE

reco

mm

end

s th

at F

inan

ce a

men

d t

he

Co

llect

ion

Gu

idel

ines

to

pro

vid

e fo

r

an a

uto

mat

ic o

r co

mp

uls

ory

tra

nsf

er o

f u

np

aid

acc

ou

nts

fro

m p

rim

ary

to

seco

nd

ary

colle

ctio

n v

end

ors

as

soo

n a

s ti

me

allo

tted

to

pri

mar

y co

llect

ion

has

exp

ired

. Su

ch t

ran

sfer

sh

ou

ld b

e au

tom

atic

an

d, a

t th

e sa

me

tim

e, in

con

sult

atio

n w

ith

Fin

ance

. Su

ch t

ran

sfer

, we

gen

eral

ly b

elie

ve, s

ho

uld

be

for

a si

x

(6)

mo

nth

per

iod

--

exce

pt

wh

ere

Fin

ance

det

erm

ines

oth

erw

ise.

Fin

ance

In P

roce

ss o

r

Dis

cuss

ion

23

CO

RE

reco

mm

end

s th

at F

inan

ce h

ave

con

trac

ts w

ith

at

leas

t tw

o p

riva

te

colle

ctio

n a

gen

cies

wit

h r

esp

ect

to e

ach

maj

or

typ

e o

f re

ceiv

able

. Ea

ch v

end

or

wo

uld

init

ially

rec

eive

eq

ual

ref

erra

ls a

nd

Fin

ance

wo

uld

eva

luat

e an

d p

ub

lish

each

ven

do

r’s

per

form

ance

qu

arte

rly.

Un

der

a r

ewar

ds-

bas

ed s

yste

m f

or

dis

trib

uti

ng

acco

un

ts, t

he

eval

uat

ion

s w

ou

ld b

e d

eter

min

ativ

e o

f th

e vo

lum

e o

f

acco

un

ts a

ssig

ned

in s

ub

seq

uen

t q

uar

ters

. C

om

pet

itio

n is

go

od

, an

d F

inan

ce

sho

uld

rew

ard

su

per

ior

per

form

ance

wit

h a

dd

itio

nal

ref

erra

ls.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

See

com

men

t to

Rec

om

men

dat

ion

19

.

Ap

pen

dix

"D

" --

Pag

e 4

of

11

pag

es

1/1

9/2

01

2C

OR

E R

eco

mm

en

dat

ion

s Tr

acke

r M

atri

x: S

tatu

s o

f C

OR

E R

eco

mm

en

dat

ion

s

24

CO

RE

reco

mm

end

s th

at t

he

Cit

y’s

futu

re c

olle

ctio

n a

gen

cy-r

elat

ed R

equ

ests

fo

r

Pro

po

sals

(R

FPs)

an

d a

gree

men

ts r

efo

cus

fro

m lo

w-f

ee, l

ow

-bid

co

ntr

acts

to

per

form

ance

-bas

ed s

elec

tio

n a

nd

co

mp

ensa

tio

n. F

or

aged

acc

ou

nts

, ven

do

rs

sho

uld

be

pro

vid

ed w

ith

sig

nif

ican

tly

enh

ance

d c

om

mis

sio

n(s

) in

rel

atio

n t

o t

he

dif

ficu

lty

and

like

liho

od

of

colle

ctio

n.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

25

CO

RE

reco

mm

end

s sp

ecif

ic p

rovi

sio

ns

for

colle

ctio

n a

gen

cy c

on

trac

ts b

e

con

sid

ered

, as

follo

ws:

i. C

om

pet

itio

n c

lau

ses

(See

Rec

om

men

dat

ion

s 2

3 a

nd

58

).

ii. P

erfo

rman

ce g

uar

ante

es.

iii. P

erfo

rman

ce b

on

ds.

iv. A

nn

ual

fin

anci

al s

tate

men

ts t

o m

on

ito

r ve

nd

or’

s st

ren

gth

an

d r

eso

urc

es.

v. Q

uar

terl

y m

eeti

ngs

bet

wee

n t

he

ven

do

r, F

inan

ce a

nd

dep

artm

ent

per

son

nel

to r

evie

w a

nd

dis

cuss

ho

w t

o im

pro

ve e

very

on

e’s

per

form

ance

.

vi. O

pti

on

s fo

r d

ebto

rs t

o p

ay o

nlin

e.

vii.

Ben

chm

arks

.

viii.

Pre

fere

nce

s fo

r lo

cal e

mp

loym

ent.

ix. I

nce

nti

ves

to a

ggre

ssiv

ely

wo

rk t

he

“bac

k en

d”

of

acco

un

t p

oo

ls.

x. In

cen

tive

s to

co

llect

so

on

er r

ath

er t

han

late

r.

xi. S

op

his

tica

ted

an

d e

ffec

tive

ski

p t

raci

ng.

xii.

Pai

rin

g o

f p

oo

ls o

f re

ceiv

able

s. S

om

e p

oo

ls a

re m

ore

att

ract

ive

to c

olle

cto

rs

than

oth

ers.

A w

ay t

o g

et v

end

ors

to

un

der

take

a m

edio

cre

po

ol a

t a

goo

d r

ate

is

to p

air

that

po

ol w

ith

on

e th

at is

mo

re a

ttra

ctiv

e.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

26

CO

RE

reco

mm

end

s th

at F

inan

ce is

sue

a R

equ

est

for

Pro

po

sals

(R

FP)

/ R

equ

est

for

Qu

alif

icat

ion

s (R

FQ)

for

eval

uat

ion

of

rece

ivab

les

for

sale

an

d f

or

bro

kers

spec

ializ

ing

in s

uch

sal

es. C

ou

nci

l sh

ou

ld b

e p

rese

nte

d w

ith

th

e sc

op

e o

f w

ork

fo

r

the

RFP

/ R

FQ p

rio

r to

its

rele

ase.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

27

CO

RE

reco

mm

end

s am

end

ing

the

Cit

y A

dm

inis

trat

ive

Co

de

to m

ake

the

pri

mar

y

char

ge o

f th

e B

oar

d o

f R

evie

w (

BO

R)

the

eval

uat

ion

of

(po

ols

of)

acc

ou

nts

rece

ivab

le f

or

sale

or

auct

ion

. Cu

rren

tly,

th

e B

OR

is c

har

ged

wit

h e

valu

atin

g

imp

rob

able

rec

eiva

ble

s fo

r w

rite

-off

. Wh

ile t

her

e ar

e so

me

rece

ivab

les

of

clea

rly

no

val

ue

that

nee

d t

o e

valu

ated

fo

r w

rite

-off

ap

pro

val b

y th

e B

OR

, nea

rly

all t

he

rest

of

the

Cit

y’s

imp

rob

able

rec

eiva

ble

s sh

ou

ld, m

ore

ap

pro

pri

atel

y, b

e

eval

uat

ed b

y th

e B

OR

, in

co

nsu

ltat

ion

wit

h d

ebt

sale

bro

kers

, fo

r ap

pro

val f

or

sale

or

auct

ion

. Fo

r th

e b

ulk

of

aged

rec

eiva

ble

s, t

he

Cit

y w

ou

ld t

hen

auto

mat

ical

ly w

rite

-off

th

e d

iffe

ren

ce b

etw

een

th

e am

ou

nt

of

the

deb

t an

d t

he

amo

un

t re

aliz

ed in

a f

inal

sal

e o

r au

ctio

n.

May

or

& C

ity

Co

un

cil

In P

roce

ss o

r

Dis

cuss

ion

The

Off

ice

of

Fin

ance

has

dev

elo

ped

an R

FP f

or

the

valu

atio

n a

nd

sal

e o

f

deb

t. B

ased

on

init

ial a

dvi

ce f

rom

the

Cit

y A

tto

rney

, it

is li

kely

to

be

red

raft

ed. C

on

sid

erat

ion

is b

ein

g

give

n t

o r

aisi

ng

the

thre

sho

ld f

or

Bo

ard

of

Rev

iew

wri

te-o

ff f

rom

$5

,00

0 t

o $

50

,00

0.

28

CO

RE

reco

mm

end

s th

at t

he

May

or

and

Co

un

cil d

irec

t th

at a

cco

un

ts u

nco

llect

ed

afte

r se

con

dar

y co

llect

ion

s sh

ou

ld b

e au

tom

atic

ally

fo

rwar

ded

to

th

e B

oar

d o

f

Rev

iew

fo

r ev

alu

atio

n a

nd

rec

om

men

dat

ion

fo

r au

ctio

n o

r sa

le.

May

or

& C

ity

Co

un

cil

In P

roce

ss o

r

Dis

cuss

ion

See

com

men

t to

Rec

om

men

dat

ion

27

.

Ap

pen

dix

"D

" --

Pag

e 5

of

11

pag

es

1/1

9/2

01

2C

OR

E R

eco

mm

en

dat

ion

s Tr

acke

r M

atri

x: S

tatu

s o

f C

OR

E R

eco

mm

en

dat

ion

s

29

CO

RE

reco

mm

end

s th

at F

inan

ce r

epo

rt o

n it

s cl

aim

s se

ttle

men

t st

atis

tics

an

d

po

licie

s to

th

e C

ou

nci

l’s B

ud

get

& F

inan

ce C

om

mit

tee.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

30

CO

RE

reco

mm

end

s th

at F

inan

ce r

epo

rt t

o t

he

May

or,

Co

un

cil,

CA

O a

nd

CO

RE

on

the

det

ails

an

d t

imet

able

of

the

fort

hco

min

g O

ffer

in C

om

pro

mis

e P

rogr

am.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

31

CO

RE

reco

mm

end

s th

at t

he

Co

un

cil e

xped

ite

and

fu

nd

th

e im

ple

men

tati

on

of

a

com

pre

hen

sive

no

n-t

ax a

mn

esty

pro

gram

pro

po

sed

by

Fin

ance

in it

s FY

10

-11

bu

dge

t.

Cit

y C

ou

nci

lFu

lly o

r M

ost

ly

Imp

lem

ente

d

32

CO

RE

reco

mm

end

s th

at t

he

Co

un

cil i

nst

ruct

th

e C

ity

Att

orn

ey t

o p

rep

are

dra

ft

ord

inan

ce(s

) n

eces

sary

to

ap

ply

co

nsi

sten

t fe

es, p

enal

ties

, an

d in

tere

st c

har

ges

for

all C

ity

rece

ivab

les

– ex

cep

t as

may

be

no

ted

as

bei

ng

imp

erm

issi

ble

. Sai

d

dra

ft s

ho

uld

th

en b

e se

nt

to e

ach

dep

artm

ent

Gen

eral

Man

ager

, wh

o w

ou

ld

hav

e n

o m

ore

th

an 3

0 t

o d

ays

to o

bje

ct. R

evis

ed d

raft

ord

inan

ce(s

) w

ou

ld b

e

sub

mit

ted

to

th

e A

GE

Co

mm

itte

e an

d t

o C

ou

nci

l fo

r re

view

an

d a

pp

rova

l.

Cit

y C

ou

nci

lIn

Pro

cess

or

Dis

cuss

ion

OO

F is

pre

par

ing

a p

roce

ss in

con

jun

ctio

n w

ith

th

e C

ity

Att

orn

ey

as w

ell a

s a

rep

ort

to

Co

un

cil t

hat

will

incl

ud

e in

stru

ctio

ns

to

dep

artm

ents

to

wo

rk w

ith

OO

F to

revi

ew s

om

e 1

50

cit

ywid

e

rece

ivab

les

for

app

licat

ion

of

33

CO

RE

reco

mm

end

s th

at F

inan

ce p

rep

are

a re

po

rt o

n t

he

feas

ibili

ty o

f in

crea

sin

g

the

inte

rest

rat

e an

d p

enal

ties

cu

rren

tly

app

lied

to

del

inq

uen

t re

ceiv

able

s to

no

less

th

an t

he

aver

age

bei

ng

char

ged

by

oth

er m

un

icip

alit

ies.

Fin

ance

In P

roce

ss o

r

Dis

cuss

ion

34

CO

RE

reco

mm

end

s th

at F

inan

ce m

ove

to

agg

ress

ivel

y im

ple

men

t th

e C

ity’

s

new

ly a

do

pte

d a

dm

inis

trat

ive

lien

Ord

inan

ce f

or

del

inq

uen

t ta

xes.

Fin

ance

sho

uld

als

o r

epo

rt o

n it

s im

ple

men

tati

on

an

d t

he

resu

lts

ther

eof

to t

he

Co

un

cil’s

Bu

dge

t &

Fin

ance

Co

mm

itte

e si

x (6

) m

on

ths

afte

r th

e ef

fect

ive

dat

e o

f th

e

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

35

CO

RE

reco

mm

end

s th

at t

he

Cit

y A

tto

rney

, in

co

nsu

ltat

ion

wit

h t

he

CLA

, pre

par

e

a m

emo

ran

du

m r

egar

din

g th

e fe

asib

ility

of

req

uir

ing

par

kin

g

lot/

faci

lity/

stru

ctu

re t

ax a

gree

men

ts t

o b

e re

cord

ed u

po

n t

he

titl

e to

th

e re

al

pro

per

ties

wh

ereu

po

n s

uch

op

erat

ion

s cu

rren

tly

exis

t. S

uch

agr

eem

ents

co

uld

serv

e as

an

en

cum

bra

nce

up

on

th

e re

al p

rop

erti

es t

o e

ssen

tial

ly g

uar

anty

pay

men

t o

f th

e p

arki

ng

tax

and

as

a lie

n t

hat

co

uld

be

fore

clo

sed

up

on

in t

he

even

t o

f n

on

-pay

men

t (s

imila

r to

pro

per

ty t

axes

).

Cit

y A

tto

rney

In P

roce

ss o

r

Dis

cuss

ion

36

CO

RE

reco

mm

end

s th

at F

inan

ce a

nd

th

e C

ity

Att

orn

ey c

olla

bo

rate

to

dra

ft a

fram

ewo

rk f

or

a C

ityw

ide

po

licy

dic

tati

ng

the

grea

ter

use

of

lien

s an

d o

ther

encu

mb

ran

ces

wit

h r

eco

mm

end

atio

ns

for

app

licat

ion

s.

Fin

ance

& C

ity

Att

orn

ey

In P

roce

ss o

r

Dis

cuss

ion

The

Off

ice

of

Fin

ance

an

d t

he

Cit

y

Att

orn

ey a

re c

on

ferr

ing

on

th

is

mat

ter.

37

CO

RE

reco

mm

end

s th

at F

inan

ce a

nd

th

e C

ity

Att

orn

ey c

lear

ly m

emo

rial

ize

the

par

amet

ers,

do

llar

thre

sho

lds

and

tim

ing

of

case

s tr

ansf

erre

d t

o t

he

Cit

y

Att

orn

ey f

rom

Fin

ance

or

fro

m d

epar

tmen

ts.

Fin

ance

& C

ity

Att

orn

ey

In P

roce

ss o

r

Dis

cuss

ion

The

Off

ice

of

Fin

ance

an

d t

he

Cit

y

Att

orn

ey m

eet

bi-

wee

kly

on

th

is

mat

ter.

38

CO

RE

reco

mm

end

s th

at t

he

Cit

y A

tto

rney

ou

tlin

e a

pro

po

sed

fra

mew

ork

fo

r

con

tin

gen

cy c

olle

ctio

n c

ases

.C

ity

Att

orn

eyH

as N

ot

Be

Imp

lem

ente

d

39

CO

RE

reco

mm

end

s th

at F

inan

ce r

epo

rt t

o t

he

Co

un

cil a

nd

th

e C

ity

Att

orn

ey

rega

rdin

g d

epar

tmen

tal c

om

plia

nce

wit

h S

ec. 4

.4 o

f th

e C

olle

ctio

n G

uid

elin

es.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

Rev

iew

is c

om

ple

te a

nd

ap

pro

pri

ate

chan

ges

bei

ng

mad

e.

Ap

pen

dix

"D

" --

Pag

e 6

of

11

pag

es

1/1

9/2

01

2C

OR

E R

eco

mm

en

dat

ion

s Tr

acke

r M

atri

x: S

tatu

s o

f C

OR

E R

eco

mm

en

dat

ion

s

40

CO

RE

reco

mm

end

s th

at F

inan

ce a

nd

th

e C

ity

Att

orn

ey c

op

y th

e o

ther

on

mo

nth

ly c

olle

ctio

n r

epo

rts.

Fin

ance

sh

ou

ld c

op

y th

e C

ity

Att

orn

ey o

n a

ny

rep

ort

s

rela

ted

to

dep

artm

enta

l co

mp

lian

ce w

ith

th

e C

olle

ctio

n G

uid

elin

es a

nd

wit

h

rep

ort

s o

n t

he

stat

us

of

colle

ctio

ns

by

each

dep

artm

ent.

Sim

ilarl

y, C

OR

E

reco

mm

end

s th

at t

he

Cit

y A

tto

rney

fu

rnis

h u

pd

ates

reg

ard

ing

all c

olle

ctio

ns

and

acco

un

t d

elin

qu

ency

cas

es b

ein

g h

and

led

by

the

Cit

y A

tto

rney

.

Fin

ance

& C

ity

Att

orn

ey

In P

roce

ss o

r

Dis

cuss

ion

The

Off

ice

of

Fin

ance

an

d t

he

Cit

y

Att

orn

ey m

eet

bi-

wee

kly

on

th

is

mat

ter.

41

CO

RE

reco

mm

end

s th

at F

inan

ce r

evis

e th

e ac

cou

nts

rec

eiva

ble

tem

pla

te u

sed

by

dep

artm

ents

an

d F

inan

ce f

or

rep

ort

s o

f q

uar

terl

y re

ceiv

able

s.

i. In

clu

de

colu

mn

s d

elin

eati

ng

bre

akd

ow

ns

of

any

app

lied

inte

rest

, pen

alti

es a

nd

late

fee

s.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

42

CO

RE

reco

mm

end

s th

at t

he

May

or

and

Co

un

cil d

irec

t C

ity

dep

artm

ents

an

d

Fin

ance

to

pre

sen

t ac

cou

nts

fo

r ti

mel

y w

rite

-off

in a

cco

rd w

ith

th

e ti

mel

ines

set

fort

h in

Co

llect

ion

Gu

idel

ines

. It

is f

urt

her

rec

om

men

ded

in t

he

even

t th

at

dep

artm

ents

fai

l to

tim

ely

sub

mit

qu

alif

yin

g re

ceiv

able

s, c

erta

in s

um

s sh

all b

e

wit

hh

eld

fro

m t

hei

r b

ud

get

allo

cati

on

s u

nti

l su

ch t

ime

as t

her

e is

co

mp

lian

ce.

This

rec

om

men

dat

ion

will

on

ly n

eed

to

be

imp

lem

ente

d s

o lo

ng

as t

he

curr

ent

syst

em o

f re

ferr

als

exis

ts.

May

or

& C

ity

Co

un

cil

In P

roce

ss o

r

Dis

cuss

ion

May

or,

Co

un

cil a

nd

Fin

ance

hav

e

inst

ruct

ed a

nd

rec

ent

acti

vity

sugg

ests

dep

artm

ents

are

pre

par

ing

po

ten

tial

ly s

ign

ific

ant

amo

un

ts f

or

wri

te-o

ff; t

her

e ar

e n

o c

urr

ent

pla

ns

for

wit

hh

old

ings

.

43

CO

RE

reco

mm

end

s th

at F

inan

ce p

rese

nt

to C

ou

nci

l an

d t

he

CA

O a

Mem

ora

nd

um

rega

rdin

g th

e re

sou

rces

nee

ded

by

Fin

ance

to

ad

equ

atel

y au

dit

th

e ac

cou

nts

rece

ivab

le b

ein

g re

po

rted

by

dep

artm

ents

.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

44

CO

RE

reco

mm

end

s th

at IT

A d

evel

op

an

d s

ub

mit

an

inve

nto

ry t

o C

ou

nci

l of

curr

entl

y ex

isti

ng

and

ava

ilab

le d

epar

tmen

t an

d C

ityw

ide

dat

a p

oo

ls /

dat

abas

es

that

co

uld

ass

ist

in in

den

tify

ing

par

ties

wh

o m

ay o

we

the

Cit

y m

on

ey.

Spec

ific

ally

: In

stru

ct I

TA a

nd

Fin

ance

to

pre

par

e an

inve

nto

ry o

f kn

ow

n

dat

abas

es, w

ith

bri

ef d

escr

ipti

on

s o

f th

e d

ata

fiel

ds

in e

ach

dat

abas

e, t

he

form

at

/ so

ftw

are

of

each

of

the

dat

abas

es a

nd

th

e ac

cess

ibili

ty o

f th

e d

atab

ase

to o

ther

Info

rmat

ion

Tech

no

logy

Age

ncy

In P

roce

ss o

r

Dis

cuss

ion

See

com

men

t to

Rec

om

men

dat

ion

2.

45

CO

RE

reco

mm

end

s th

at F

inan

ce s

ub

mit

to

Co

un

cil a

mem

ora

nd

um

iden

tify

ing

no

n-C

ity

dat

abas

es w

hic

h m

igh

t b

e b

enef

icia

l fo

r th

e C

ity

to h

ave

acce

ss t

o f

or

the

pu

rpo

ses

of

reve

nu

e en

han

cem

ent.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

Ap

pen

dix

"D

" --

Pag

e 7

of

11

pag

es

1/1

9/2

01

2C

OR

E R

eco

mm

en

dat

ion

s Tr

acke

r M

atri

x: S

tatu

s o

f C

OR

E R

eco

mm

en

dat

ion

s

46

CO

RE

reco

mm

end

s th

at F

inan

ce, i

n c

on

sult

atio

n w

ith

th

e C

ity

Att

orn

ey, d

evel

op

a p

roce

ss f

or

dep

artm

ents

to

acc

ess

a m

aste

r lis

t /

dat

abas

e o

f b

oth

bu

sin

ess

tax

and

no

n-b

usi

nes

s ta

x-re

late

d r

ecei

vab

les

- to

ver

ify

that

a p

arty

do

es n

ot

hav

e

del

inq

uen

t ac

cou

nts

wit

h a

ny

Cit

y d

epar

tmen

t p

rio

r to

Cit

y ex

ten

din

g o

r gr

anti

ng

to s

uch

par

ty:

• C

erta

in s

ervi

ces,

• P

erm

its,

• A

pp

rova

ls,

• C

on

trac

ts,

• Em

plo

ymen

t, o

r

• C

om

mis

sio

n /

bo

ard

ap

po

intm

ent

or

ren

ewal

.

Said

rep

ort

sh

ou

ld a

lso

det

ail t

he

curr

ent

imp

edim

ents

, so

luti

on

s, c

ost

s an

d

tim

elin

e fo

r im

ple

men

tati

on

of

such

a m

aste

r lis

t /

dat

abas

e, a

lon

g w

ith

a s

imp

le

syst

em f

or

dep

artm

ents

an

d C

ity

off

ices

to

mak

e th

e re

qu

ired

ver

ific

atio

n(s

).

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

47

CO

RE

reco

mm

end

s th

at t

he

May

or

and

Co

un

cil i

nst

ruct

th

e H

ou

sin

g D

epar

tmen

t

and

th

e D

epar

tmen

t o

f B

uild

ing

and

Saf

ety

to c

ross

ref

eren

ce o

ne

ano

ther

’s li

st

of

nam

ed d

elin

qu

ent

acco

un

ts a

nd

to

wit

hh

old

issu

ing

per

mit

s o

r p

rovi

din

g

oth

er d

epar

tmen

t se

rvic

es f

or

par

ties

ap

pea

rin

g o

n e

ith

er d

epar

tmen

t’s

list

of

del

inq

uen

t ac

cou

nts

.

May

or

& C

ity

Co

un

cil

In P

roce

ss o

r

Dis

cuss

ion

48

CO

RE

reco

mm

end

s th

at F

inan

ce p

ost

th

e n

ames

of

top

no

n-t

ax-d

elin

qu

ent

deb

tors

on

th

e C

ity’

s w

ebsi

te –

su

bje

ct t

o C

ity

atto

rney

ap

pro

val.

Fin

ance

Has

No

t B

e

Imp

lem

ente

d

Fin

ance

isn

't r

eco

mm

end

ing

po

stin

g

to t

he

inte

rnet

; it

is a

vaila

ble

to

Cit

y

staf

f vi

a th

e in

tran

et.

49

CO

RE

reco

mm

end

s th

at F

inan

ce, i

n c

on

sult

atio

n w

ith

th

e Tr

easu

rer

and

ITA

,

pre

par

e an

d s

ub

mit

a r

epo

rt o

n t

he

exte

nt

and

ava

ilab

ility

of

on

-lin

e an

d a

uto

-

pay

pay

men

t o

pti

on

s (c

red

it c

ard

, e-c

hec

k, e

tc.)

fo

r va

rio

us

typ

es o

f co

llect

ion

s

by

dep

artm

ents

an

d F

inan

ce a

nd

co

llect

ion

age

nci

es.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

50

CO

RE

reco

mm

end

s th

at F

inan

ce id

enti

fy s

ervi

ces

and

bill

ing

typ

es f

or

wh

ich

Cit

y

dep

artm

ents

sh

ou

ld, o

r co

uld

, dem

and

ad

van

ce p

aym

ent(

s) a

nd

/or

dep

osi

ts.

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

51

CO

RE

reco

mm

end

s th

at t

he

Trea

sure

r p

rep

are

and

su

bm

it a

rep

ort

on

th

e fe

es

curr

entl

y b

ein

g p

aid

by

the

Cit

y fo

r va

rio

us

typ

es o

f cr

edit

car

d a

nd

deb

it c

ard

tran

sact

ion

s –

and

wh

eth

er t

her

e m

ay b

e w

ays

to r

edu

ce c

ost

s to

th

e C

ity.

Pay

men

ts f

or

wh

ich

pay

ors

mu

st p

ay a

dd

itio

nal

fee

s to

use

a c

red

it c

ard

or

to

pay

on

line

sho

uld

gen

eral

ly b

e d

isco

ura

ged

.

Trea

sure

rIn

Pro

cess

or

Dis

cuss

ion

This

is b

ein

g u

nd

erta

ken

by

Fin

ance

no

w t

hat

th

e Tr

easu

rer

fun

ctio

n is

con

solid

ated

.

52

CO

RE

reco

mm

end

s th

at t

he

Trea

sure

r p

rep

are

and

su

bm

it a

rep

ort

on

rej

ecte

d

and

ret

urn

ed c

hec

ks a

nd

th

e d

isp

osi

tio

n t

her

eof.

A u

nif

orm

an

d f

ull-

cost

-

reco

very

bad

ch

eck

char

ge s

ho

uld

be

app

lied

.

Trea

sure

rIn

Pro

cess

or

Dis

cuss

ion

This

is b

ein

g u

nd

erta

ken

by

Fin

ance

no

w t

hat

th

e Tr

easu

rer

fun

ctio

n is

con

solid

ated

.

53

CO

RE

reco

mm

end

s th

at F

inan

ce r

epo

rt t

o C

ou

nci

l ab

ou

t p

oss

ible

MO

Us

and

oth

er a

rran

gem

ents

to

co

nso

lidat

e b

illin

gs o

r as

sign

bill

ing

resp

on

sib

ility

to

ano

ther

dep

artm

ent

or

agen

cy, i

n o

r o

ut

of

the

Cit

y –

DW

P, C

ou

nty

, BO

E, e

tc.

Fin

ance

Has

No

t B

e

Imp

lem

ente

d

Bill

ing

dep

artm

ents

hav

e n

o a

pp

etit

e

for

this

rec

om

men

dat

ion

.

Ap

pen

dix

"D

" --

Pag

e 8

of

11

pag

es

1/1

9/2

01

2C

OR

E R

eco

mm

en

dat

ion

s Tr

acke

r M

atri

x: S

tatu

s o

f C

OR

E R

eco

mm

en

dat

ion

s

54

CO

RE

reco

mm

end

s LA

FD e

xped

ite

mo

der

niz

atio

n a

nd

str

eam

linin

g b

oth

fo

r Fi

eld

Dat

a C

aptu

re a

nd

Em

erge

ncy

Med

ical

Ser

vice

s B

illin

g an

d C

olle

ctio

n –

pu

rsu

ant

to t

he

two

co

ntr

acts

fo

r LA

FD’s

ou

tso

urc

ing

app

rove

d b

y th

e C

ou

nci

l Au

gust

3,

Fire

Dep

artm

ent

Fully

or

Mo

stly

Imp

lem

ente

d

Thes

e co

ntr

acts

are

exe

cute

d a

nd

un

der

way

.

55

CO

RE

reco

mm

end

s th

at w

hile

mo

der

niz

ing

the

curr

ent

par

adig

m o

f in

div

idu

al

bill

ings

, th

e C

ity

sho

uld

als

o p

urs

ue

neg

oti

ated

bu

lk c

on

trac

ts w

ith

3rd

par

ty

pay

ors

-su

ch a

s M

edic

are,

Med

i-C

al a

nd

pri

vate

insu

rers

. Th

is c

ou

ld b

e an

inn

ova

tive

alt

ern

ativ

e to

th

e cu

rren

t p

atie

nt-

by-

pat

ien

t, b

ill-b

y-b

ill a

pp

roac

h.

Fire

Dep

artm

ent

Has

No

t B

e

Imp

lem

ente

d

The

dep

artm

ent

do

es n

ot

sup

po

rt

this

rec

om

men

dat

ion

.

56

CO

RE

reco

mm

end

s th

at t

he

Cit

y le

vera

ge e

xist

ing

rela

tio

nsh

ips

and

co

ntr

acts

wit

h h

ealt

h in

sure

rs a

nd

pro

vid

ers.

L.A

. has

bu

sin

ess

rela

tio

nsh

ips

wit

h s

om

e o

f

the

sam

e in

sure

rs a

nd

pro

vid

ers

that

rej

ect

or

slo

w-p

ay E

MS

bill

s fr

om

LA

FD. L

.A.

sho

uld

ass

ess

ho

w t

o u

se t

he

con

trac

ts it

gra

nts

to

th

ese

sam

e co

mp

anie

s to

th

e

Cit

y’s

adva

nta

ge.

Fire

Dep

artm

ent

Has

No

t B

e

Imp

lem

ente

d

This

is a

mat

ter

for

CA

O/C

ity

Co

un

cil

con

sid

erat

ion

.

57

CO

RE

reco

mm

end

s th

at D

OT

reca

ll fr

om

AC

S se

vere

ly a

ged

del

inq

uen

t ac

cou

nts

and

tra

nsf

er t

hem

, in

co

nsu

ltat

ion

wit

h F

inan

ce, f

or

assi

gnm

ent

to

add

itio

nal

/sec

on

dar

y co

llect

ion

s b

y an

oth

er v

end

or

(wit

h p

oss

ible

incl

usi

on

in a

no

n-t

ax a

mn

esty

pro

gram

) o

r fo

r sa

le/a

uct

ion

.

Dep

artm

ent

of

Tran

spo

rtat

ion

Has

No

t B

e

Imp

lem

ente

d

58

CO

RE

reco

mm

end

s am

end

men

t o

f Fi

nan

ce’s

pri

vate

co

llect

ion

co

ntr

acts

to

mak

e

add

itio

nal

/sec

on

dar

y co

llect

ion

att

ract

ive

to c

olle

ctio

n v

end

ors

. Bec

ause

colle

ctin

g ag

ed a

cco

un

ts is

co

nsi

der

ably

mo

re d

iffi

cult

th

an p

rim

ary

colle

ctio

n,

Fin

ance

sh

ou

ld a

men

d it

s ex

isti

ng

con

trac

ts w

ith

pri

vate

co

llect

ion

s ve

nd

ors

to

pro

vid

e th

at a

n e

nh

ance

d c

om

mis

sio

n (

of

up

to

40

%)

be

pai

d w

ith

res

pec

t to

colle

ctin

g ag

ed a

nd

dif

ficu

lt a

cco

un

ts. W

ork

ing

very

age

d a

cco

un

ts is

no

t

attr

acti

ve t

o C

ity

ven

do

rs u

nd

er t

he

curr

ent

com

pen

sati

on

agr

eem

ents

. (Se

e al

so

Rec

om

men

dat

ion

No

. 24

).

Fin

ance

Fully

or

Mo

stly

Imp

lem

ente

d

59

CO

RE

reco

mm

end

s th

at D

OT

con

sult

wit

h C

OR

E p

rio

r to

an

d d

uri

ng

the

pro

cess

of

issu

ing

an R

FP f

or

a (n

ew)

ven

do

r co

ntr

act.

Exp

irat

ion

of

the

exis

tin

g A

CS

con

trac

t p

rese

nts

th

e o

pp

ort

un

ity

to a

sses

s th

e st

ren

gth

s an

d w

eakn

esse

s o

f

curr

ent

pra

ctic

es a

nd

fee

str

uct

ure

(s)

-- a

nd

way

s to

imp

rove

.

Dep

artm

ent

of

Tran

spo

rtat

ion

Has

No

t B

e

Imp

lem

ente

d

The

RFP

has

no

t b

een

issu

ed. T

he

AC

S co

ntr

act

exp

ired

in M

arch

20

11

and

is m

on

th t

o m

on

th.

Ap

pen

dix

"D

" --

Pag

e 9

of

11

pag

es

1/1

9/2

01

2C

OR

E R

eco

mm

en

dat

ion

s Tr

acke

r M

atri

x: S

tatu

s o

f C

OR

E R

eco

mm

en

dat

ion

s

60

CO

RE

reco

mm

end

s th

at D

OT

sho

uld

dev

elo

p a

nd

pre

sen

t to

Co

un

cil a

new

stra

tegi

c p

rogr

am t

o b

oo

st c

olle

ctio

ns

on

par

kin

g ti

cket

s is

sued

to

ren

tal

veh

icle

s. F

or

cita

tio

ns

issu

ed b

etw

een

May

20

06

an

d J

un

e 2

00

8, t

he

cate

gory

of

“ren

tals

an

d m

isce

llan

eou

s” c

on

stit

ute

d 1

1.6

5%

, or

$2

2.9

6 m

illio

n, o

f D

OT’

s

Dif

ficu

lt t

o C

olle

ct a

cco

un

ts. A

s d

etai

led

bel

ow

, ren

tal c

om

pan

ies

can

sim

ply

pro

vid

e D

OT

wit

h r

ente

r in

form

atio

n a

nd

th

en t

hey

are

exc

use

d f

rom

resp

on

sib

ility

. If

a re

nta

l car

co

mp

any

do

es n

ot

tim

ely

furn

ish

th

e in

form

atio

n,

DO

T an

d it

s ve

nd

or

may

, an

d s

ho

uld

, see

k p

aym

ent

fro

m t

he

ren

tal c

ar

com

pan

y.

The

Cit

y sh

ou

ld a

lso

co

nsi

der

usi

ng

ren

ewal

of

fran

chis

e ag

reem

ents

wit

h r

enta

l

com

pan

ies

at L

AX

, or

the

neg

oti

atio

ns

to e

ven

tual

ly b

uild

a c

entr

al r

enta

l car

faci

lity

at L

AX

, as

leve

rage

to

en

gage

th

ese

com

pan

ies

in t

akin

g m

ore

resp

on

sib

ility

. We

mig

ht,

fo

r ex

amp

le, r

equ

est

that

ren

tal c

om

pan

ies

mai

nta

in a

list

of

ren

ters

wit

h u

np

aid

tic

kets

an

d r

efu

se t

o r

ent

to t

hem

un

til t

he

tick

ets

are

pai

d.

Dep

artm

ent

of

Tran

spo

rtat

ion

Has

No

t B

e

Imp

lem

ente

d

61

CO

RE

reco

mm

end

s D

OT’

s sw

ifte

r re

pai

r an

d r

epla

cem

ent

of

bro

ken

met

ers

to

imp

rove

rev

enu

es f

rom

bo

th m

eter

s an

d p

arki

ng

cita

tio

ns.

Acc

ord

ing

to a

rec

ent

stu

dy

con

du

cted

fo

r th

e C

ity,

10

-12

% o

f th

e C

ity’

s p

arki

ng

met

ers

wer

e b

roke

n o

r

faile

d a

t an

y gi

ven

tim

e. T

his

res

ult

s in

a v

ery

sub

stan

tial

loss

of

bo

th p

arki

ng

met

er in

com

e an

d in

th

e ab

ility

of

traf

fic

off

icer

s to

issu

e ci

tati

on

s.

Dep

artm

ent

of

Tran

spo

rtat

ion

Fully

or

Mo

stly

Imp

lem

ente

d

DO

T re

po

rts

that

70

% o

f m

eter

ed

spac

es h

ave

bee

n u

pgr

aded

an

d

hav

e 9

9%

up

-tim

es. B

y th

e en

d o

f FY

20

11

-12

, 93

% o

f m

eter

ed s

pac

es w

ill

be

up

grad

ed.

62

CO

RE

reco

mm

end

s th

at D

OT

amen

d a

nd

su

pp

lem

ent

its

curr

ent

form

at f

or

rep

ort

ing

of

acco

un

ts r

ecei

vab

le. R

epo

rts

of

DO

T’s

rece

ivab

les

are

qu

ite

mis

lead

ing.

As

no

ted

ab

ove

, bec

ause

th

e cu

rren

t A

R r

epo

rtin

g fo

rmat

do

es n

ot

sep

arat

e o

ut

late

fee

s an

d p

enal

ties

, th

e 1

5%

of

par

kin

g ci

tati

on

s th

at a

re d

ue

and

un

pai

d d

isp

rop

ort

ion

atel

y im

pac

t th

e re

po

rted

su

ms

du

e. M

ore

ove

r, t

he

rep

ort

ed s

um

s d

ue

do

no

t re

flec

t th

e si

zeab

le p

ort

ion

of

said

su

ms

that

, if

pai

d,

wo

uld

act

ual

ly b

e p

ayab

le t

o o

ther

en

titi

es (

pu

rsu

ant

to t

he

Cal

ifo

rnia

Veh

icle

Co

de)

, or

to t

he

colle

ctio

n v

end

or.

DO

T sh

ou

ld t

hu

s re

vise

its

AR

rep

ort

ing

tem

pla

te (

in a

cco

rd w

ith

Blu

epri

nt

Rec

om

men

dat

ion

No

. 41

), a

nd

als

o c

reat

e

sep

arat

e re

po

rt c

olu

mn

s to

cla

rify

th

e n

et a

mo

un

t th

at w

ou

ld a

ccru

e to

DO

T,

afte

r re

qu

ired

dis

trib

uti

on

s to

oth

er p

arti

es.

Dep

artm

ent

of

Tran

spo

rtat

ion

Fully

or

Mo

stly

Imp

lem

ente

d

63

a

CO

RE

reco

mm

end

s fu

nd

ing

for

suff

icie

nt

nu

mb

ers

of

cita

tio

n o

ffic

ers.

Par

kin

g

tick

et r

even

ues

are

bei

ng

hin

der

ed b

y re

du

ctio

ns

in t

he

nu

mb

er o

f tr

affi

c o

ffic

ers

emp

loye

d b

y th

e C

ity

to is

sue

cita

tio

ns,

co

up

led

wit

h f

req

uen

t as

sign

men

t o

f

off

icer

s to

tra

ffic

co

ntr

ol o

r sp

ecia

l eve

nts

du

ties

– t

hu

s re

du

cin

g th

e n

um

ber

of

cita

tio

ns

that

can

be

issu

ed. M

ain

tain

ing

reve

nu

e-p

rod

uci

ng

po

siti

on

s in

th

e C

ity

mu

st b

e a

pri

ori

ty.

May

or

& C

ity

Co

un

cil

In P

roce

ss o

r

Dis

cuss

ion

10

0 p

art-

tim

e p

osi

tio

ns

auth

ori

zed

in

the

20

11

-12

Bu

dge

t.

Ap

pen

dix

"D

" --

Pag

e 1

0 o

f 1

1 p

ages

1/1

9/2

01

2C

OR

E R

eco

mm

en

dat

ion

s Tr

acke

r M

atri

x: S

tatu

s o

f C

OR

E R

eco

mm

en

dat

ion

s

63

b

CO

RE

reco

mm

end

s th

at D

OT

pre

sen

t to

th

e C

ou

nci

l’s A

ud

its

and

Go

vern

men

tal

Effi

cien

cy C

om

mit

tee

(AG

E) a

rep

ort

on

ove

rhea

d a

nd

exp

ense

s fo

r p

arki

ng

man

agem

ent

sup

po

rt s

ervi

ces.

DO

T’s

curr

ent

ven

do

r co

ntr

act

pro

vid

es f

or

reim

bu

rsem

ent

of

vari

ou

s o

verh

ead

an

d e

xpen

ses,

incl

ud

ing

pri

nti

ng,

po

stag

e,

cert

ain

su

pp

lies,

do

cum

ent

sto

rage

, etc

. Th

ere

is a

lso

a p

rovi

sio

n f

or

a m

ark-

up

of

up

to

10

% o

n s

om

e o

f th

ese

reim

bu

rsem

ents

. A r

epo

rt r

evie

win

g su

ch

ove

rhea

d a

nd

exp

ense

s d

uri

ng

the

per

iod

of

the

con

trac

t is

ad

visa

ble

.

Dep

artm

ent

of

Tran

spo

rtat

ion

Has

No

t B

e

Imp

lem

ente

d

DO

T re

po

rts

that

th

e ex

isti

ng

con

trac

t lim

its

spec

ifie

d s

ervi

ces

to

no

mo

re t

han

10

% o

f th

e ac

tual

co

st

of

the

serv

ice

and

th

at a

t le

ast

thre

e

bid

s an

d p

rio

r ap

pro

val f

rom

DO

T is

req

uir

ed b

efgo

re r

eim

bu

rsem

ent

may

be

mad

e.

63

c

CO

RE

reco

mm

end

s th

e C

ou

nci

l co

nsi

der

see

kin

g a

chan

ge in

th

e cu

rren

t

def

init

ion

of

a sc

off

law

in C

alif

orn

ia V

ehic

le C

od

e --

fro

m a

veh

icle

th

at h

as f

ive

del

inq

uen

t an

d u

nsa

tisf

ied

cit

atio

ns

to a

veh

icle

th

at h

as t

hre

e d

elin

qu

ent

and

un

sati

sfie

d c

itat

ion

s. R

edu

cin

g th

e th

resh

old

fo

r sc

off

law

en

forc

emen

t w

ou

ld

serv

e to

incr

ease

th

e C

ity’

s o

vera

ll co

llect

ion

rat

e, a

nd

co

llect

ion

rev

enu

es.

Cit

y C

ou

nci

lIn

Pro

cess

or

Dis

cuss

ion

DO

T h

as 1

9 li

cen

se p

late

rea

din

g

veh

icle

s in

use

. Th

e D

epar

tmen

t sa

ys

it w

ill s

ecu

re li

cen

se p

late

rea

din

g

pd

as in

nex

t P

arki

ng

Cit

atio

n

Co

llect

ion

co

ntr

act.

63

d

CO

RE

reco

mm

end

s th

at D

OT

con

sid

er t

he

feas

ibili

ty o

f p

rovi

din

g n

oti

ce t

o

veh

icle

lien

ho

lder

s o

f im

po

un

dm

ents

or

imp

end

ing

imp

ou

nd

men

ts. A

lien

ho

lder

may

be

a ve

hic

le d

eale

r, b

ank,

cre

dit

un

ion

or

acce

pta

nce

co

rpo

rati

on

th

at h

old

s

a se

curi

ty in

tere

st –

an

d t

he

righ

t to

rep

oss

ess

the

veh

icle

in t

he

even

t th

at a

bo

rro

wer

of

less

ee f

ails

to

pay

as

pro

mis

ed. I

mp

ou

nd

men

t o

f a

veh

icle

fo

r

mu

ltip

le u

np

aid

par

kin

g ti

cket

s ca

n in

crea

se b

oth

th

e p

ote

nti

al f

or

def

ault

by

a

bo

rro

wer

or

less

ee –

an

d t

he

cost

s fo

r lie

nh

old

ers

wh

o r

ecla

im a

veh

icle

fro

m

imp

ou

nd

men

t in

ord

er t

o r

epo

sses

s it

. Th

us,

it m

ay m

erit

co

nsi

der

ing

ho

w

no

tice

s to

lien

ho

lder

s m

igh

t b

e u

sed

to

pu

t ex

tra

pre

ssu

re o

n r

epea

t p

arki

ng

Dep

artm

ent

of

Tran

spo

rtat

ion

In P

roce

ss o

r

Dis

cuss

ion

63

e

CO

RE

reco

mm

end

s th

at D

OT

rep

ort

to

th

e C

ou

nci

l’s A

ud

its

and

Go

vern

men

tal

Effi

cien

cy C

om

mit

tee

(AG

E) o

n o

pp

ort

un

itie

s to

red

uce

mar

gin

s o

f er

ror

in

issu

ance

of

cita

tio

ns.

Su

ch c

itat

ion

s b

ein

g is

sued

no

t ju

st b

y D

OT

bu

t al

so b

y

LAP

D, t

he

Gen

eral

Ser

vice

s D

ept.

(G

SD)

and

oth

er C

ity

enti

ties

.

Dep

artm

ent

of

Tran

spo

rtat

ion

In P

roce

ss o

r

Dis

cuss

ion

63

f

CO

RE

reco

mm

end

s th

at D

OT

and

its

ven

do

r(s)

dev

elo

p a

n in

tern

al p

olic

y o

n

issu

ance

to

an

d r

epo

rtin

g as

rec

eiva

ble

cit

atio

ns

issu

ed t

o h

om

eles

s a

nd

oth

ers

fro

m w

ho

m c

olle

ctio

n is

less

like

ly.

Dep

artm

ent

of

Tran

spo

rtat

ion

In P

roce

ss o

r

Dis

cuss

ion

63

g

CO

RE

reco

mm

end

s th

at D

OT

rep

ort

to

th

e C

ou

nci

l’s A

ud

its

and

Go

vern

men

tal

Effi

cien

cy C

om

mit

tee

(AG

E) o

n o

pp

ort

un

itie

s fo

r ap

plic

atio

n o

f n

ew a

nd

imp

rove

d p

arki

ng

and

cit

atio

n-r

elat

ed t

ech

no

logi

es. F

or

exam

ple

, exp

and

ing

the

use

of

licen

se p

late

sca

nn

ing

and

rec

ogn

itio

n c

amer

as a

nd

dev

ices

incr

ease

s b

oth

sco

ffla

w id

enti

fica

tio

n a

nd

cit

atio

ns

issu

ed.

Dep

artm

ent

of

Tran

spo

rtat

ion

In P

roce

ss o

r

Dis

cuss

ion

64

CO

RE

reco

mm

end

s th

at t

he

Co

un

cil’s

Au

dit

s &

Go

vern

men

tal E

ffic

ien

cy

Co

mm

itte

e in

stru

ct L

AH

D t

o p

rese

nt

an o

verv

iew

of

its

bill

ing

and

co

llect

ion

s

pra

ctic

es, s

tatu

s o

f ac

cou

nts

rec

eiva

ble

an

d u

tiliz

atio

n o

f lie

ns.

Au

dit

s &

Go

vern

men

t

Effi

cien

cy

Co

mm

itte

e

In P

roce

ss o

r

Dis

cuss

ion

Dra

ft r

epo

rt p

end

ing

rele

ase

this

mo

nth

.

65

CO

RE

reco

mm

end

s th

at L

AH

D p

rop

ose

to

th

e C

ity

Co

un

cil r

eco

mm

end

ed

Ord

inan

ce c

han

ges

to c

om

pre

ss t

he

tier

s an

d t

imel

ine

of

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