Mayor James T. Butts: Inglewood's Well Positioned to Thrive Once Pandemic Passes

Mayor Butts, since taking office as Inglewood’s mayor in 2011, your city has ascended from  near bankruptcy to become an engine for regional economic development in sports and entertainment. In 2018, you said,  “The only thing that has changed in Inglewood is everything.” Now, considering the current disruption by COVID-19 of everything, how is Inglewood adapting economically?

Mayor James T. Butts: First and foremost, no municipality can say that there won’t come a time when your greatest successes and aspirations won’t fall prey to some force majeure—an earthquake, a terrorist attack—in this case, a pandemic. You have to be prepared, economically, to run your operation for probably 5 to 6 months, so that you can withstand an unexpected onslaught to your economy.  The City Council (Eloy Morales, Alex Padilla, George Dotson, and Ralph Franklin) have partnered with me to create the vision of a sustainable and vibrant Inglewood.

All this time that I have tried to prepare us and bring us forward in the sports entertainment world and the retail world, we have been saving money. We have also been doing what they do in the private finance world; we’ve done a debt swap.

Now, one of the big things killing cities is pension fund unfunded liability assessments. Municipal retirement conglomerations determine that assessment based on what it would cost today to pay benefits if everyone that’s working for you today retires and lives until the actuarial table says they will die, and if everyone out there already getting retirement lives until that table says they will.  Cities don’t go out of business, but they still assess your unfunded liability based upon the afore-described scenario.  The fact that a retirement system has a projected unfunded liability does not mean the plan cannot meet its payment obligations today and in the medium to long term future.

The pernicious thing is that it’s an imaginary number—it’s a projection in today’s dollars —but they’re charging you interest on it as though the fund had that amount available for investment. For CalPERS the investment goal is 7 percent return.  So they calculate the UAL assessment principal plus interest payment this way —but 7 percent is pretty steep interest. If you owned a house or you were a company that had a big debt and could get cheaper money, you would refinance that debt.

One of things we did was issue a $100 million bond to go toward our projected $250 million liability. We swapped out 7 percent debt for 3 percent debt, which we couldn't have done if we hadn’t increased our bond rating. When I took office in 2011, we were BBB- and now we have bonds go out at AA, AA+, and AA-. That saves us about $8 million each year for the first six or seven years.

Now, instead of spending that money, we put it in the bank. We have $54 million in the bank, and from our projections, we’ll be somewhere between $7 million to $12 million upside-down as a result of COVID in the current fiscal year dropping our reserves total by that amount. When you take into mind that we only had $10 million in the bank when I got here, we’re way ahead. Even percentage-wise of our operating plan—if we’re left with $40+ million—we’re still way ahead of other comparable cities.

That being said, we can maintain our employee base and the continuity of government and position ourselves for when this ends—and it will end; there’s no way this country’s going to end because of this virus. The thing is, you need time to outlast this pandemic, and we have put ourselves in a position to continue normal operations without layoffs.

Since the last time that we talked, I’ve become a member of the Metro board and, this year, elected board chair.  My colleagues honored me by selecting me as Chairman for 2019-2020 of this $14 billion construction and operations transportation entity.  We will over time receive close to half a billion dollars for mass transit needs in Inglewood. The Southbay is projected over time to receive close to half a billion as well.  We got $233 million from repurposed Measure R money to put towards a monorail system to connect the Sports Entertainment District to the Crenshaw/LAX line at Florence & Market Street. We were just awarded $95 million from a $500 million grant that was available statewide. Think about this: We were awarded close to 20 percent of all the money available, and we don’t own a single bus.  Lisa Trifiletti of Trifiletti Consulting heads a collection of the best and brightest transportation project teams in the country.  We have positioned ourselves to be the center of the economic resurgence for the South Bay, Westside, and greater Los Angeles area.

How is Inglewood responding to the continued job loss and unemployment caused by the COVID economy?

This is extraordinarily disappointing for us. When I took office, our unemployment rate was at 17.5 percent, amongst the highest in the state of California. Until COVID-19 came, it had dropped as low as 4.7 percent, the lowest rate for a minority-majority community in the state of California. Fortunately, working with the Governor’s Office and the Board of Supervisors we were able to get the stadium excepted from the stay-at-home order and saved 3,000 construction jobs. 1,200 of them are Inglewood residents, because we have a 35 percent local hire built into all of our development agreements.

Within a year, we will start construction on the Inglewood Basketball Entertainment Complex (IBEC), which will house the Clippers operations and include mixed-use retail and public spaces. That’ll be another 1,200 people that go to work every day with the 35 percent local-hire goal.

As far as jobs, we’re probably more fortunately positioned than most other cities because of the development we have attracted. The biggest problem is the turnover in small businesses. They operate week-to-week, and, at best, month-to-month.  Due to COVID-19 Small Business has been harmed severely. While I know there’s been stimulus money pumped into the economy, it’s sufficiently directed at the small business owners who employ 12 or 14 people. 

Inglewood is set to be the region’s capital for sports and entertainment. How are you dealing with, and adapting to, what you see on the horizon today about public and international gatherings?

Don’t forget that we’re also positioning ourselves as a center for culture and youth development. The Girl Scouts of Greater Los Angeles left Marina Del Ray, and they spent $4 million to buy and rehabilitate a building that’s not a quarter-mile from City Hall. The LA Philharmonic bought a building from the City on our Civic Center footprint for $5.65 million, which was a building we purchased for $4 million the year before to relocate their youth orchestra program to right here in the heart of Inglewood.

That being said, no one expects that this is the end of life as we know it. We have the reserve funding to go through the phases of reopening the economy while this is sorted out. This isn’t the end of the world, but it will be stressful economically for any municipality that doesn't have money in the bank to ride this out. 

You have positioned Inglewood to take advantage of the world-class investments being made in sports and entertainment facilities.  Has the Covid-19 pandemic impacted the city’s expected return on these investments?

The reality is that people spend, proportionally, more of their income on entertainment than on anything in this world including food; people want to be entertained. Sports figures are not sports figures, they’re entertainers; people identify with them. We potentially may have an NFL season with only televised games.  If we don’t receive the revenues had anticipated, the good thing is we didn’t count our chickens before they hatched.

We don’t have a workforce size built on what’s to come, it’s built on what we have now. If we just get back to some sense of normalcy in terms of sales taxes, we’ll be fine. Fortunately for us, our property values have gone up 150 percent, and commensurate property tax revenue increases have occurred as well.

In a recent TPR interview of SoLa Impact’s Martin Muoto, who’s invested capital in residential real estate  and a new Beehive opportunity zone business campus in South LA, he noted that Inglewood & Crenshaw were uptown by comparison- and not competitive with South LA. Who then does Inglewood compete with for realizing the full economic miracle of Inglewood?

First of all, let’s go to this whole concept of ‘miracle.’ A miracle is something totally unanticipated and could never happen. If you look back at my prior interview, I talk about what the ingredients were for cities. Cities that depend upon their indigenous sales and property taxes get along fine through every boom cycle of the stock market. In every session, they’ve expanded their employment base and granted benefits and salaries that are unsustainable, and then they go through crisis.

As I said before, we have solid fundamentals in terms of stability for municipal finances. Things that bring people in cars from other locations, who spend money, and augment your sales tax base are the key to a robust economy.

Inglewood can be the nucleus—the engine—for the region when we come out on the other side of the pandemic. We’re proud to have positioned ourselves to be this catalyst for what the new economy will be, but things will be different. People won’t meet as much in person or drive as much, but they will go to see what they want to see.

Public transit ridership has taken a hit around the country and around the world. As outgoing chair of the Metro board, how is the latter now responding to the public health concerns contributing to the drastic decline of ridership and on-site retail?

First, the Metro Board is populated with great elected leaders, a great CEO (Phillip Washington) and the best staff.  The estimate is that over the next two fiscal years—the end of this one and the completion of the next one—we will lose $1.8 billion in revenue. The reality is that Metro is a cash flow operation, so there’s enough money in the bank and in an ongoing revenue stream that we will continue to run buses that could be virtually empty at 25 percent capacity, but we will survive this. It’s one of those ‘too big to fail’ operations. There is sufficient cash flow between Measure M and Measure R, and there’s going to be money to run the operation even if you’re not getting positive fair box recovery. Truth be told, we haven’t had a positive fair box recovery since the system started.

Share how the public is likely to adapt to public transit and the first/last-mile commuting solutions that are meant to bring people to the entertainment attractions now being built in Inglewood?

The biggest change that you’re going to see when it comes to commuting is that there are going to be more Zoom meetings like this one. Gas prices are low and will continue to fall, people will spend less on clothes.  I think that will be the biggest change is that people won’t meet in person as much as they did before. When it comes to entertainment, people will still want to get out.

COVID-19 will not be the end-all plague that ends life as we know it. People won’t hug as much, people won’t shake hands, and people won’t be around strangers as much, but I believe that people will go back to seeking their entertainment.

There’s a fourth round of appropriations being considered by the federal government, and there’s much pressure to direct some of that money to backstop cities, counties, and the state. Do you have any goals in that regard, and are you hoping for any relief for Inglewood?

It’s my understanding that somewhere around $400-plus million is going to go to Los Angeles County to be distributed by the Board of Supervisors. They’re going to divide it amongst the 88 cities, but I guarantee you it’s not going to be $400 million divided by 88. The County is going to need to retain some of that because they too have lost billions of dollars in revenue.  The Board of Supervisors—Kathryn Barger, Mark Ridley-Thomas, Janice Hahn, Hilda Solis, and Shelia Kuehl— are outstanding leaders and the County Administrator, Sachi Hami, is a great budget strategist.  The County of Los Angeles will be fine.  In Inglewood, we’re depending on our reserves to carry us through the short term.  Federal money is getting down to the smaller businesses.  The SBA has been nimble and responsive in getting money distributed.  Small businesses need the funds to survive the downturn.

There are a number of reports that the public is fearful and anxious about the economy the health. Share with our readers how you respond, as a Mayor, when public pressure mounts and the political wagons start to circle at city hall.

I’ve been under pressure for so long, I don’t even know what that means anymore. All that you can do is create an environment so that when we come out on the other side of the pandemic, streets are paved, the water system is functioning, and we have public safety. We’re in our 9th consecutive year of the lowest crime rate in the history of the city. We only had two murders last year (2019), less than Santa Monica, Pasadena, and Torrance. That is unheard of for the city of Inglewood.

The City Council is creating an environment where the economy can thrive by having infrastructure maintained, limiting the rate of rent/lease increases to 3% and funding effective public safety, but there’s a limit of what we can do directly when it comes to business incubation. And to answer your questions directly, small businesses don’t expect the city to be their salvation when the economy goes awry.  The federal government has stepped up to provide direct economic stimulus. 

Lastly, there are also local and global conversations about what the post-pandemic urban life will be like, and how cities must adapt? Is there likely to be much change in Inglewood?

Right now, cities are not having conversations about what the future will look like because most municipalities are still in shock. They don’t even want to think about what the future will hold, they’re trying to figure how they’re going to make it day to day. We in Inglewood are looking toward the future, modifying projects, and we’re sticking with our overall plan. We feel very confident in the formula we put together, and while it may be diminished to some degree, it’s still going to be there. Some cities are going to figure out what it feels like to downsize, (as Inglewood had to in 2011 and 2012) but some cities have been conservative and have money in the bank. They can delay downsizing of government operation until they get to a dangerous lack of reserves, but that is if, and only if, this COVID-19 tragedy extends more than a year. I just don’t believe that it will.