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Santa Monica's Assembly Rep Staves Off Financial Disaster for Metro

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Harding, Larmore Kutcher & Kozal, LLP

By Jason Islas
Staff Writer

September 19, 2013 -- Governor Jerry Brown is expected to sign into law this week a new bill sponsored by Assemblymember Richard Bloom, Santa Monica's former mayor, that will save $3.6 billion of Federal funding slated for public transit projects in Los Angeles.

Approved by both the State Assembly and Senate, Bloom's bill -- AB 1222 -- will clear the way for the L.A. County Metropolitan Transit Authority (Metro) to receive Federal money. Washington had threatened to deny the money to California's largest public transit agency after the U.S. Department of Labor contended that a California pension reform initiative violated Federal labor law.

The bill -- cosponsored by Assemblymembers Roger Dickinson and Ken Cooley -- will temporarily exempt nearly all of California's public transit employees from Brown's Public Employees' Pension Reform Act (PEPRA). By using State law to reform pensions, Sacramento is denying transit workers' their right to collectively bargain, according to the U.S. Department of Labor.

With the bill sitting on Brown's desk, good news already began rolling in Wednesday when Moody’s Investor Service announced that it would not lower Metro's credit rating.

“That was the first shoe that might have dropped that would've had a fairly dramatic impact,” Bloom told The Lookout Wednesday, adding that if Moody's had dropped Metro's rating, it would have constricted the agency's ability to seek funds elsewhere.

With two major projects in the pipeline -- both dependent on significant Federal funding -- Bloom said that Metro can't afford to lose that money.

Metro, which is one of the fastest expanding public transit systems in the country, has been banking on Federal financing to help fund the “Subway to the Sea,” an extension of L.A.'s subway system from Wilshire Boulevard and Western Avenue all the way to Westwood Boulevard.

In addition to that project, Metro plans to connect the Expo Line to the Gold Line in Downtown Los Angeles, eventually creating a continuous route from Santa Monica to Pasadena and East L.A.

“Had this bill not been approved, it would have delayed (the projects) for a minimum of a couple of years,” said Bloom, who represents Assembly District 50, including Santa Monica, Brentwood and West Hollywood.

Such a delay, he said, could have effectively killed the projects.

These are “crucial projects for our county-wide mobility,” said former Santa Monica mayor Denny Zane, who founded of Move LA -- a public transit advocacy group -- in 2007. He congratulated all who were involved in making the bill, singling out Bloom's efforts.

Santa Monica Mayor Pam O'Connor, who sits on Metro's Board of Directors, shared Zane's sentiments.

“I'm really glad that Assemblymember Bloom helped us to resolve this issue,” said O'Connor, who is also chair of the Expo Constriction Authority Board.

O'Connor, who shared the dais with Bloom when he was on the City Council, said that she was “thrilled” her former colleague was there to sponsor the bill because, “he understood the issue.”

With Moody's announcement and assurances from the Federal government that the bill will secure promised funds, Metro is able to breathe a sigh of relief.

“All's good in the universe,” said Marc Littman, a spokesperson for Metro. “We're good for now. We're waiting for the governor to sign the bill.”

And that, Bloom said, is just a matter of time. While he cautioned that no outcome is a foregone conclusion, he is confident that there will be no surprises “in large part because of the groundwork that was laid before hand,” he said.

Hammered out through extensive negotiations with labor representatives, the Federal government, the Governor's office, Metro representatives and State lawmakers, AB 1222, Littman said, is “an example of the State and Federal government working cooperatively to resolve an issue.”

But the battle is not over.

AB 1222 only exempts transit workers from PEPRA for 15 months, enough time to allow Sacramento's transit authority -- the one organization not covered by the bill -- to sue the U.S. Department of Labor.

“Sacramento transit has been decertified from receiving Federal grants,” Littman said. Sacramento's transit authority was left out of the bill deliberately so that it could challenge the U.S. Department of Labor in court.

Littman said that the Federal agency's position is based on an “arcane” law from the 1960s meant to protect unions' bargaining rights at a time when many privately-owned transit systems were being taken over by local governments.

Should the Federal government win in court, AB 1222 would shield transit workers indefinitely from the effects of PEPRA. However, should Sacramento prevail, transit workers will see adjustments to their pensions, Littman said.

Under PEPRA, most public employees in the State hired after January 1, 2013 are required to pay a higher share into their pension funds. It also places limits on pensions and tries to stop “pension spiking,” the practice of raising an employee's salary in his final year to artificially raise his pension.

Pension reform has been a major concern for cities and agencies throughout California as they struggle to keep pace with rising pension costs.

Santa Monica alone has seen its pension costs quadruple over the last decade as the California Public Employees' Retirement System (CalPERS) adjusted its rates to compensate for low returns on its investments.

The need for reform has been underscored by the fact that Stockton, San Bernardino and Vallejo have all declared bankruptcy in the face of their mounting debts to CalPERS, the largest such agency in the nation.

According to a 2012 analysis of PEPRA by the San Francisco-based public law group Renne Sloan Holtzman Sakai, “PEPRA was enacted with a stated goal: to create a more sustainable pension system by reducing employer pension liability and increasing employee contributions toward their pension benefits.”

Littman said that though pension reform is still a concern for Metro, the agency's priority was to deal with the potential loss of nearly $4 billion, the two major projects and the 43,000 jobs they are expected to create.


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