Controller Chick Audits Spotlight Inefficient L.A. City Practices

Laura, let's begin by focusing on one of your primary responsibilities: audits of city agencies and proprietary departments. In December, you released an audit report blasting the Airport Commission for its contracting policies and leasing practices, including the participation of Airport commissioners in the initial screening of potential contractors. The commissioners pushed back, at first denying problems existed. What, if anything, has resulted since the release of your audit?

I would say that you were mild in your characterization of what I would call an extremely defensive initial reaction on the part of the Mayor and the Airport's management and commission. I really thought there was an orchestrated, coordinated campaign against the auditors and me, because if they couldn't answer the audit their approach was to try and devalue and denigrate the findings. I think there was some confusion about the audit and what became a very serious, deep investigation being led by the District Attorney and the U.S. Attorney.

What came later was movement towards implementing some of the recommendations. I hear even from vendor companies and consultants that the atmosphere surrounding the contract award process has changed. I'm not Pollyanna-ish about this, and so when I released the airport audit, as they blasted away at me, I announced that we'd be going back in a year. And that's exactly what I will be doing, so that I can answer you and the public and the taxpayers and all of the stakeholders involved in the Airport what progress has been made and what progress hasn't been made.

I do remember that three weeks after the audit came out the Mayor issued an executive order directing his commissioners to no longer sit in on the initial screening of contractors. Part of the problem with that executive order, besides the fact that it took three weeks, is that it took six more months after that for the Mayor to issue a clarification that his executive order included the pre-bid process of awarding leases, for instance shipping leases at the Port. Those were seen as exceptions to normal contracts, and commissioners at the Port were very much involved in the same kind of practices that Airport commissioners used.

So, the good news is that there was an executive order that directed commissioners to stop one of the more egregious and, I would say, risk-causing actions that the audit found. The bad news is that it took over six months after the audit came out to get there.

Your office in 2002 also did an audit of the Department of Water & Power's Public Management and Green Power Program, a $60 million program mandated by AB 1890 and funded by ratepayers. In that audit, you found poor management in many of the clean power projects, but more recently in a follow-up audit you noted that they had shown better performance. What progress has been made by DWP?

Unfortunately, what the original audit found was that there had been a whole lot of ratepayer money spent on public relations consultants and VIP parties, even concerts at Dorothy Chandler Pavilion, but there had been no new sources of renewable energy created or near creation in the L.A. basin. The changes that have been so important are the management of that program, the commission's and outside attention to that program, and outsider attention to that program, and a whole shift in goals and objectives to focus on what the money is mandated for – to generate renewable energy sources in the Los Angeles region.

But, one of the things reported in the follow-up audit was that the changes didn't start for six or seven months, and these were slam-dunk things. This is a multi-billion-dollar public corporation in the city. It's the largest public utility in the United States, if not the world. It should be run in a state-of-the-art kind of way. What I have found at DWP is that it is chopped up into a lot of little different sections that don't talk to each other. That means that there is no accountability and huge amounts of money are wasted. As the prime example, for many years that department has been spending a minimum of $5.5 million on public relations and community relations consultants, without having a clear vision of what they're trying to accomplish.

It's constant pushing and shoving from my part. This is one of the reasons that I say it's so important we have the right, strong mayoral leadership in this city. Because only the mayor of the City of Los Angeles can pick up the phone, call the general manager or the president of the DWP commission and say, "Clean up your act, don't do this, this, and this anymore, and this is what I want to see. In six months, come and tell me it's done." Instead, I'm using public resources to put the spotlight on practices and policies that are antiquated, that are ineffective, that are inefficient or downright wrong.

Some things have changed. Not enough, as exemplified by the ongoing, not-yet-released audit that we are now doing of one of those giant multi-million-dollar public relations contracts that DWP has had over the last six or seven years. So, there is more coming.

Let's turn to the city's real estate practices. In October 2003, in a Metro Investment Report interview, you called the city's approach to real estate management " extremely unproductive, and amateurish..." Over the last year, the city has acquired hundreds of millions of dollars of real estate. Are you now more satisfied with the real estate holding practices of the city?

It would be hard for me to be satisfied. First of all, I'm truly not an expert in real estate deals and valuation. I'm actually hopeful that the buildings and the land that the city has bought in the last couple of years play out to be very wise investments. Certainly, the commercial real estate marketplace in Los Angeles, and especially downtown, is very hot. It's very possible that these recent transactions could prove to be very good ones in terms of financial investment.

What hasn't improved, and what needs to change radically, is how we manage our real estate. We don't have a very specific, easily understood vision of what the city's real estate holdings are about and why we have them, or a strategic plan about what we need, what we don't need, and what we want to acquire. And then, how do we manage the real estate that we have? I think that we should also ask whether the city should be in the business of all of these different aspects of real estate asset management. Or, maybe we should actually be getting the help of outside experts on some of it.

Given your observations above, could you also comment on the City's Redevelopment Agency and its real estate and investment practices?

I must temper what I say about the Community Redevelopment Agency because I will release a series of three audits of the agency toward the end of October. I certainly know that everything I just said about General Services and how they manage real estate is true of the CRA. I would say that there's not a clear, overarching vision that the public is aware of and understands – a real specific one, maybe a ten-year or five-year strategy. Also, don't forget the Airport, the Harbor, and the Department of Water and Power, all three of which are significant land-holding departments and have their own lists of their real estate holdings. There is no consolidated sense of what the city owns.

Real estate and the way the city approaches and manages it is an area that needs enormous improvement. It is an area that's been getting some attention and some attempts to improve for well over a decade. That is too long. We can't afford to take that long. That is why I kept the consultants who did the real estate audit working with the General Services Department and a group of heavy hitting L.A. real estate experts that I have convened to be like an advisory group. We came out with a strategic vision for how real estate asset management can be done in the city. Councilmembers Greuel and Weiss have picked up that baton, and I'm hopeful that they're going to take that strategic vision and force it to be implemented.

To give context to the above audits, please describe the City Controller's responsibilities regarding public accountability. Why is it that the City Council is unable to offer much fiscal oversight, and the Controller's Office is now thrust into the limelight as fiscal watchdog?

Don't forget, the same charter that mandated the City Controller do performance audits also took some authority, control, and accountability away from the City Council and gave it to the Mayor. In particular, in the proprietary departments such as Airport, Harbor, and DWP, the Mayor was given control over the management and over all commissioners. The direct line of authority goes to the Mayor now. It's a very short and a very dark line. And it says that the Mayor hires and fires general managers, who are no longer protected by civil service and no longer have the same kind of protection from the City Council that they used to. The same thing is true with the commissioners. The only role the Council plays now with commissioner appointments is to confirm the Mayor's choices, and if they don't confirm that position sits open.

I'm not critical of the Council. I feel that a whole variety of councilmembers, especially committee chairs such as Councilmember Greuel, have jumped on our audits, brought them into committee, and tried to push their implementation. But it really could be done so much faster, so much more effectively and efficiently, if it was the Mayor's Office directing that the departments implement audit recommendations and findings. And by the way, this is important for me to say to you, this doesn't mean that the Mayor, the Council, and/or the departments can't disagree with some of the recommendations. They're not locked into cement. But the problems that are being exposed are real and accurate. To not take action – to not tackle solving these problems – is a big mistake and a disservice to the people of the city.

Let's bring this to a close with two last questions. Do you support Proposition 1A on the November state ballot, a constitutional measure that is intended to protect local governments from further fiscal raids by the state. You have long been involved in working to reform our dysfunctional state-local fiscal relationship in California. Are you satisfied that Prop. 1A is the solution?

No. That's not to say I won't vote for it, because it does protect local money in a new and better way. In the short 11 years I've been in city office, I've watched the state stretch its claws down from Sacramento and scoop up our money twice. Now as Controller I feel the pain on an even greater scale, because I'm a citywide elected official. That said, I am very much interested, specifically, in seeing a reallocation where local governments could increase their share of property taxes and give back sales taxes. Why? Because I watch fights between cities over trying to attract things like big-box retailers that deliver on sales taxes. They also kill the heartbeat of our economy, thriving small businesses. If we at the local level were more reliant on property taxes, I think that would be an incentive to the political leadership to look at how to make sure all our communities are thriving and healthy and safe and clean – the things local government should be protecting.

So, given what is on the ballot now, I don't like leaving local government and the people that we serve unprotected again with such a shaky fiscal situation up in Sacrament. I have learned that unfortunately you sometimes have to settle for a partial solution. I would hope, of course, that Prop. 1A doesn't lock in the current system beyond any revision and say, "It has to stay this way forever." The legislative process can find a way to go back and revisit it once this protection is in place.

Finally, you have announced that you will be running for reelection as the City Controller. What is it you hope to accomplish in a second term?

I was elected under the loud, ticking clock of term limits, so I'm very conscious of time. I have less than five years even if I'm reelected. One, I want to keep pushing the transparency issue. By the time I leave the Controller's office, I want to see a city government that is understandable and visible to the public we serve and ways that the public can easily understood how their dollars are being spent in the city. Actually, one of the positive outcomes I think came from the secession battle is that those questions were being asked. I didn't want the city to split up, but I did want the city to be able to answer questions about how our dollars are spent. So, that is one item that I'm focused on.

Another thing is the elimination of waste and fraud. I know I'll never do it 100 percent – it's just human nature to goof up sometimes. But, there are such wide and deep swaths of inefficiency and old ways of doing things that no longer make sense in this city, I could just focus on that and have a very full-time job.

Lastly, by the time I finish a second term as City Controller, I really would like to be able to look taxpayers straight in the eye and say that the biggest portion of their tax dollars are actually being spent wisely and well. I think that is doable – to be able to reassure the public that that is the case and to make that be the case. So, I'm very hopeful and eager to have a second term. I think this office still isn't fully and finally shaped, and subsequent controllers will probably reshape it again. The city is in very interesting and exciting times, with great opportunities for change and improvement. I'm looking forward to a very active, knock-your-socks-off second term. But it will be knock-your-socks-off with public involvement.