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MAY 14, 2012

COMMENTARY

LOS ANGELES BUSINESS JOURNAL 47

Time and Time Again Proposal to make Measure R tax permanent would give transportation officials a ‘Forever Blank Check.’ By JOHN MIRISCH

Y

OU’VE undoubtedly heard of the “Forever Stamp.” Once

bought, it can be used for first-class postage regardless of future rate increases. Not a bad concept, actually. You don’t ever have to worry about buying those pesky one or two cent stamps. While the concept of the Forever Stamp is one of the few good things to come out of the Postal Service in recent years, the idea of something lasting forever is a singularly bad idea when it comes to new taxes. Just three-and-a-half years after the public narrowly passed Measure R, which increased the sales tax in Los Angeles County to fund transportation improvements within the county, they’re baaaaack. This time they want to continue this regressive tax quite literally forever because the Feds won’t lend them money. Essentially, they want to be able to spend money from the tax extension now, borrowing against future tax revenues decades into the future. While investment in infrastructure and development of sensible mass transit is good public policy, the same can’t be said about spending money we don’t have on ill-defined schemes with no specificity, no accountability, no metrics, no performance criteria and no adequate oversight. Essentially, they are asking us to turn on the faucet forever and to issue a “Forever Blank Check,” despite the fact that government agencies such as the Metropolitan Transportation Authority have shown time and time again that they can’t be trusted with blank checks. Some of the specious arguments used to try to “rationalize” the conversion of the temporary Measure R tax into a “Forever Tax” are that construction costs can be locked in at today’s dollars, which can be paid off with tomorrow’s inflationary dollars, and that the borrowed money spent on construction jobs today can somehow kick-start the still moribund economy. These arguments are bogus. The first one doesn’t take into account the significantly higher interest costs involved: We’ll be paying back the money borrowed up front for decades and significant chunks of future taxpayer dollars will go to debt service

While the concept of the Forever Stamp is one of the few good things to come out of the Postal Service in recent years, the idea of something lasting forever is a singularly bad idea when it comes to new taxes. rather than actual investment. We’ll also lose flexibility and be stuck paying off today’s equipment and technology that could be outdated – or even obsolete – decades after we’re still footing the bill. Even if we could create some jobs now by a spending spree, rather than burdening future generations more than we already have, it’s time to start trying to live within our means. Kafkaesque bureaucracy What makes the Forever Tax even worse is that we would mortgage our children’s future to the hilt in order to funnel even more money into Metro. As a local official whose city has had frequent dealings with the agency over the past few years, I

have experienced up close how Metro is exactly the kind of Kafkaesque bureaucracy that seems to be the governmental version of the banks that were “too big to fail.” It’s an organization that is intoxicated with its own power, has been repeatedly chastised for civil rights violations and spends like a drunken sailor on sexy new projects while neglecting maintenance on core services. No wonder it was recently described in the Los Angeles Times as “a poorly run transit agency.” Short of being dismantled and replaced with a more transparent, efficient and democratic successor agency, what Metro needs is a major governance overhaul and a rational system of checks and balances to stop it from running amok. The last thing it needs is more blank-check taxpayer funding. The Forever Tax will likely be one of multiple tax initiatives on this November’s ballot. Even in this economy, the politicos’ solution is to raise and extend taxes rather than make necessary systemic changes by dealing with such important issues as pension reform. Guess they feel that with the Supreme Court ruling in the Citizens United case that loosened special interest funding, they’ll get enough special interest moola to be able to sell anything to anybody. In reality, though this Forever Tax seems like nothing more than an ego play by powerful local politicians who like to play with choo-choos. Ironically, they seem not only to have forgotten the core values of local democracy, but also the core values of a sensible, effective mass transit system. As sexy as choo-choos are, great mass transit is a combination of various modes of transportation, including light rail and bus service. While Metro has spent more on heavy-rail subways, it has drastically cut back on bus service, sometimes affecting the most downtrodden in society. A new Forever Tax is a bad idea, particularly in this economy. Bad ideas sometimes die hard, but according to the title of the book upon which “Die Hard” is based, “nothing lasts forever.” Except, it seems, governmental waste, lack of accountability and insider politics. Though special interests may try to convince us with Citizens United campaigns otherwise, blank checks in this or any economy are not the answer. We need to reject this ego-driven, shortsighted measure and to vigorously oppose the transformation of what was only meant to be a temporary tax into a Forever Tax. Because forever is a long, long time. John Mirisch is vice mayor of the city of Beverly Hills.

Latinos Should Give Philanthropy Some Thought By CLARA POTES-FELLOW

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ITHIN the next 10 years, Los Angeles will see one of the single largest transfers of wealth of any major metropolitan area in the country, according to a new report by the California Community Foundation. The report, “The Future of Philanthropy in Los Angeles: A Wealth of Opportunity,” estimates L.A. residents’ net worth to be $1.5 trillion, a net worth resulting from assets gained over a lifetime, savings and investments. Among those driving this wealth creation are entrepreneurs who start and grow businesses, as well as highly educated immigrants with high net worth who make Los Angeles their destination of choice. The report signals the extraordinary opportunities that wealth transfer among generations will create for Angelenos in all sectors of the economy. For instance, by 2020, Angelenos will transfer almost $114 billion between generations. L.A. nonprofits of any size, but especially those considering endowment building, must prepare and position themselves to acquire a portion of this wealth. If non-profits could capture 5 percent of the transfer of wealth taking place, the report says, “$5 billion can be used for philanthropy by 2020 [and] $5 billion would fund all of the operating expenses of 75 percent of L.A.’s active non-profits.” The report also should be used as a call for business owners and individuals of any ethnic group to step up their charitable giving. As the report points out, “Giving by new companies is still in an embryonic stage. Entrepreneurs and immigrant business owners may not know how to give and the business advantages of being philanthropically active.” Let’s take, for example, the case of Latinos and organized philanthropy. Latino Angelenos represent approximately 50 percent of Los Angeles County’s population and own 21 percent of businesses in the region. According to a Hispanic Business’ 500 ranking, the top 20 Latino-owned companies in the greater L.A. area produced revenues of $779 million in 2011. According to Census data, Hispanic households with median

incomes of $100,000 or more represent more than 1.3 million households in the United States. And even though the recession has hit Hispanics hard in terms of job losses and foreclosures, marketing forecasts project that U.S. Hispanic buying power will reach $1.3 trillion in 2015. Yet, despite their economic gains, Latinos are relative “newcomers” to organized philanthropy, says Henry A. J. Ramos, a researcher on philanthropy. The reason is not that Latinos are not charitable. On the contrary, they are quite generous, but they give in ways and for reasons different than those of mainstream philanthropists. There is a strong tradition of Latino giving to church-affiliated causes, and to family and relatives. Studies by the Center on Philanthropy and Civil Society report that approximately 41 percent of Latino households that regularly contribute to charity do so to religious organizations Tax incentives, which in mainstream populations are a philanthropy energizer, are not the driving force for the bulk of Latino dollars destined for charity. Latin American and Caribbean emigrants living in industrialized nations sent more than $32 billion in remittances back to their homelands in 2002, according to the Inter-American Development Bank. Mexico, alone, received $10.5 billion. This extraordinary sum suggests that many Latinos direct their generosity outside of the United States, and that personal relationships and duty to family, rather than tax incentives, drive the priorities for Latino giving. There is no time like the present for a shift in Latino attitudes toward philanthropy. Latinos must consider planned giving and support of endowment-building efforts of local mainstream and Latino-serving non-profits. A small number of Latinos already have a voice in the planning and shaping of the future of Los Angeles. For the most part, this voice has been exercised through the political process. An important next step must be undertaken through institutionalized philanthropy. Strong participation of Latino dollars in organized philanthropy would give the community a voice to direct grants and funding to the areas of specific interest to Latinos – be it immigration, research, image building, visual and

performing arts, civic participation, violence prevention, higher education, economic empowerment or any other area that drives one’s passion. Strategic giving requires vision, philanthropic expertise, and collaboration among leaders, policymakers and organizations. But the return on investment is high in terms of lasting benefits for individuals, communities and regions. The California Community Foundation is using the report to call upon Angelenos to pledge to give at least half of their wealth to L.A. non-profits. For longstanding Latino Angelenos and well-to-do immigrants, that call presents an opportunity for self-examination and strategic thinking about their charitable activities. When Latinos accept their share of responsibility to help bring solutions to their communities’ pressing needs, they will make a very positive statement about their civic-minded presence and contributions to the vitality of Los Angeles. Engaging in philanthropy here and now should be another important indicator of Latinos’ success and economic impact. To read the California Community Foundation report, visit www.calfund.org/transfer. Clara Potes-Fellow is director of community partnerships for the California State University system and is pursuing an M.B.A. in nonprofit management at American Jewish University, Los Angeles.

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Time and Again - LABJ editorial opposing extension of Measure R