There’s a deep seated frustration and anger among the rank and file due to their low pay.
Det. Tyler Izen – President, Los Angeles Police Protective League, July 28, 2014, KTLA Channel 5
Low pay, of course, is relative. It’s very difficult to objectively determine what a police officer should be paid. There aren’t jobs in the private sector that are easily compared to police work. As a result, police officers typically compare how much they are making in their city to how much other cities are paying their police officers. The problem is no city wants to pay the lowest rates, which creates endless rounds of wage and benefit increases. But a city as big as Los Angeles doesn’t have the option of matching what a much wealthier, much smaller city may pay. Too many billions are involved.
Despite the difficulty in determining what may be a fair rate of pay and benefits for police officers, this very sensitive debate has to be waged. Because without debate, there can be no limit – how do you put a price on safety and security? How do you put a price on enduring the stress and the dangers that come with police work? You can’t. In that context, a fair wage will always be far more than any public institution can possibly afford.
Calculating Average Total Compensation for LAPD Officers
So how much do Los Angeles police officers make? This information is not easily found. Every year California’s cities are required to report to the state controller the individual pay and benefits for all of their employees. The most recent 2012 raw data for cities can be downloaded here. The information can be sorted by city, then by department. Within police departments, by sorting records by the reported pension benefit formulas, sworn officers can be differentiated from administrative police personnel. There is even sufficient data to eliminate records for officers who have not worked the full 12 months in the year being analyzed. Using all of these techniques, we were able to determine that the average LAPD pay and benefits during 2012 for full time sworn officers was $110,285. But the state controller’s numbers are grossly understated because they don’t include how much the City of Los Angeles paid for retiree health benefits or retiree pensions. This adds a significant amount to their actual total pay. Funding these benefits are part of any employee’s total compensation package.
How can that information be obtained for Los Angeles police?
If you review the Actuarial Valuation and Review Of Retirement and Other Postemployment Benefits as of June 30, 2013, performed by Segal Consulting Group for the City of Los Angeles Fire and Police Protection Plan, there is some pretty good information available. Exhibit B in the beginning of the document shows the retirement fund contribution rates as a percent of eligible payroll. The pension contribution last year was 37.82% of base pay, and the retirement health care contribution was 11.69% of base pay. An expert at the LAFPP office confirmed that these percentages exclusively represent the employer contribution and do not include amounts withheld from employee paychecks which are also contributed to their retirement funds. Therefore, the total of those percentages, 49.51%, can be applied to to the average LAPD base salary of $94,660 and apportioned per employee to accurately represent, on average, how much they are making in retirement benefits. As it is, that equates to $59,491 per year – meaning that the average total compensation for LAPD officers is actually $157,151.
LAPD Retirement Payments Affected by Investment Returns
It doesn’t end there, however. If the LAPD retirement systems fail to achieve forecast investment results, the amounts currently being paid by the employer – already nearly 50% of base pay – will have to increase. According to the Segal Report (Exhibit III, page 59), as of 6/30/2013 there were assets of $14.6 billion set aside for retirement pension liabilities estimated – using a discount rate of 7.75% – to have a present value of $17.6 billion, leaving a $2.6 billion unfunded liability. How confident can the LAFPP be that they will be able to grow a $14.6 billion fund at a rate of 7.75% per year? Using formulas provided for this purpose by Moody’s Investor Services, if you lower that annual projected earnings rate just a little, to a still very healthy 7.0%, the unfunded liability grows to $4.65 billion; at projected annual earnings of 6.2%, which represents the historical earnings rate of U.S. equities (including dividend reinvestment), the unfunded liability grows to $6.62 billion. And at the less risky 5.0% annual earnings rate of top grade corporate bonds, that liability grows to $10.1 billion.
In plain English – the unfunded liability for the LAPD pension fund could quadruple if the fund earns 5.0% per year instead of 7.75%. Just dropping the rate of earnings to 6.2% nearly triples the unfunded liability.
And it gets worse. The pension plan – officially analyzed at what some of us would consider to be a ridiculously optimistic annual 7.75% rate of return assumption, has a “funded ratio” of 83.2%. That should still alarm us, actually, because only 100% qualifies as fully funded, but 83.2% is a better ratio than most public employee pension funds out there. The other fund managed by LAFPP, however, for retirement health care, is only 38.5% funded (Segal Report, Valuation Results, Health Plan, page 4), although it is a much smaller fund – it’s officially recognized unfunded liability is “only” $1.6 billion.
There may be a lot of deep financial concepts and arguments in play here, but unfortunately, it’s not mere gibberish. There are real world consequences and tough decisions signified by these numbers. The city of Los Angeles is going to have to put more into these retirement funds then they already are, or they are going to have to cut benefits.
What Criteria: Comparable Pay, Affordable Pay, or Appropriate Pay?
If you look around Southern California it isn’t hard to find cities who pay their police officers more than LAPD. The California Policy Center compiled 2011 and 2012 data for a few cities in Orange County and here are some of the numbers they found for average annual total compensation for their police: Irvine, $168,336; Anaheim, $170.866; Costa Mesa, $181,709. One may reliably surmise that immediate neighbors such as the city of Beverly Hills also pay their police more than Los Angeles – and herein lies an irony that will justifiably grate on any officer of a large city like Los Angeles: The wealthy cities have less crime, but can afford to pay more to their police. But are the LAPD receiving low pay, or are the police in these other cities overpaid?
Moreover, there is a converse to this point – small cities cannot possibly absorb and employee thousands of police leaving because they want to earn more money.
Which returns us to the difficult question – is an average pay package of $157,151 really “low pay?” Beyond what rate of pay may be comparable or affordable, what is appropriate? Bear in mind the average LAPD overtime earned per officer, as reported in the 2012 data, was $1,691, which means that most LAPD officers are working the 4-10 or 3-12 shifts and not much more. According to an official summary of LAPD benefits, they also get 13 holidays, and three weeks vacation as rookies, which increases to 4.6 weeks after ten years. And for all those contributions to their retirement benefits, after 30 years work the average LAPD officer can expect to retire with a pension and health insurance package worth between $90K and $100K per year (ref. Evaluating Public Safety Pensions in California, CPC, April 2014).
One of the most significant reasons the City of Los Angeles faces financial challenges is because personnel costs – for all departments – increased year after year, thanks to the power of collective bargaining. But was this appropriate? During the lean years after the internet bubble popped, and again after the real estate bubble popped, people in the private sector felt lucky to have jobs. Meanwhile, in the public sector, year after year, annual cost-of-living adjustments kept being awarded. And even in cases where, finally, cost of living increases were suspended due to financial constraints, “step increases” and “longevity pay” and other annual pay hikes continued per labor agreements. Worse still, the pension funds and retirement health care funds, which appeared to be flush during the bubble years, have now revealed themselves to be in serious trouble. When comparing their pay to what other cities pay, LAPD officers, and all public employees, ought to also compare their rates of pay to what private citizens have experienced. Making $157,151 per year is a LOT of money in virtually any profession in America, including police work if you venture outside of California, New York, and a few other places where, arguably, public employee unions have taken over their local governments.
When confronting the continuous risk and inevitable tragedies that befall police officers, no amount of money will ever be enough. But the Los Angeles Police Protective League, and other public and private unions, should consider the deeper cause of middle class struggle, which is the artificially high cost of living in California. Despite well crafted arguments to the contrary, there is plenty of land and almost limitless conventional energy in California. And if the alfalfa farmers in the Mojave Desert were permitted to sell their water allotments to the LADWP, there wouldn’t be a residential water shortage even in this tough year. Taxes in California are among the highest in the nation, and taxes are driven primarily by public sector personnel costs, along with the costs for an unreformed welfare system that gives California the dubious distinction of having 12% of the nation’s population but 30% of its welfare recipients. Failed immigration policies further strain the system. Public employees could afford to make less, a lot less, and live better, if these needless hindrances to California’s prosperity were corrected.
Along with protecting one of the greatest cities in the world, and hopefully participating constructively in a tough debate over whether or not their compensation is appropriate and affordable – LA’s finest should consider the deeper roots of the economic hardships we share together, and how to engage on those fronts for the good of everyone.
* * *
Where are the charity watchdogs in L.A.? An ugly story from the City of Angels reminds us once again of how dangerous “public-private partnerships” can be, especially that worst of all such partnerships: government employee unions in bed with government officials.
The government of Los Angeles has long granted a monopoly to the Department of Water and Power (DWP), which in turn has long had the overwhelming majority of its workers represented by the International Brotherhood of Electrical Workers (IBEW) Local 18. Partnering against the public at large, the local government pols have enjoyed many millions in campaign donations made possible by the union’s hoovering of dollars from the paychecks of its members, who have little choice in the matter. In return, the pols have granted ever-so-generous paychecks and benefits to the IBEW folks by allowing DWP to charge higher rates than necessary.
Matters became even dirtier in 2000, when the DWP realized it needed to slash its payroll costs (wonder why those were a problem?). To buy the acquiescence of union leaders, who ended up partnering with management against their own members, the DWP apparently offered a deal: It would set up a new “nonprofit” entity, the Joint Safety Institute, to be run by representatives from the union and the utility, who would enjoy a few million dollars a year fleeced from the ratepayers to fuel this hybrid nonprofit – and neither workers, ratepayers, nor pols would quite know where the millions of dollars went.
A Thirsty City – Sources of Water for Los Angeles
LADWP Should Focus on Providing Abundant, Affordable Water to its Customers
Two years later, a second such entity, the Joint Training Institute, would be set up in exactly the same way, with the identical persons on its board. As long as the pols kept quiet about this cozy arrangement, Angelenos heard little about any of this. In fact, the union’s boss, Brian D’Arcy, successfully schemed to have the state government exempt the nonprofits from a law that requires records and meetings to be made public. But a year ago, despite the union bosses’ best efforts to use their members’ dues to buy a new set of compliant pols (IBEW 18 poured $4 million into a losing candidate for mayor), a few officials were elected who vowed to look into these two nonprofit honey pots, which by now have devoured 40 million ratepayer dollars. Give the L.A. Times credit, too, for writing about the situation and turning it into a political football.
All questions of where the tens of millions have gone provoke outrage and obstruction from the union bosses, who continue to fight disclosure in court despite repeated rebuffs from judges.
The two nonprofits do make public their IRS tax filings each year, but those filings tell the public little. As the L.A. Times observes, the filings…
“…show more than $360,000 spent on travel from 2009 to 2011 and nearly $2.4 million spent on “other.”
The groups are legally established, not under the usual “public charity” 501(c)(3) designation, but under 501(c)(6), the designation used by business leagues like the Chamber of Commerce and the NFL. I’m sure that has nothing to do with the fact that (c)(6) groups can spend their money on politics with far fewer restrictions than (c)(3) groups.
Back in January, longtime IBEW 18 boss D’Arcy had a date to sit down with DWP officials and bring them the real books for the two nonprofits, so that a public audit could begin.
But D’Arcy was a no-show that day and instead lawyered up to keep the public’s eyes out of this public-private partnership’s check book (city officials had asked to see what checks for $1,000 or more had been written). The courts to date have repeatedly refused to buy D’Arcy’s argument that this public-private partnership is just like a private company that’s a vendor to DWP, say, a health insurance provider. That’s nonsense, of course, because DWP can change vendors at will, whereas a trust document requires that DWP take money out of every dollar it receives from ratepayers and transmit the cash to the nonprofits.
The situation has deteriorated so badly that D’Arcy, notoriously publicity shy, wrote an L.A. Times op-ed pleading his case and even went so far as to release an internal financial statement and a “report” on each of the nonprofits (available here, here, here, and here).
So, how much real disclosure of spending has he made? Well, the reports give brief blurbs on various contracts the “institutes” have made with outside vendors from 2001 to November 2013. And if you total every dollar figure in the reports, you’ll find out where $ 10.6 million of the total $40 million has gone — or about one-quarter of the loot. Local blogger and CPA Paul Hatfield read the financials and turned up another $11.8 million. That sums sits unused in the cash balances of the two nonprofits:
“This stash of cash is over three times the annual operating expenses, so its purpose must be more than a rainy day fund. Then what is it for? …
Subpoenas should be issued for all the board members as well as the accountants and the trusts’ managers. Make them testify under oath.”
D’Arcy’s reports on the two different joint institutes have duplicate language, suggesting there’s not much difference between them, which begs the question why two were established.
The report on the newer institute doesn’t even have a section labeled “Results,” but its older brother has a brief paragraph with that heading. There one finds the only concrete claim put forward for the value of either nonprofit:
“In 1999 the total number of Lost Workdays at LADWP was more than 15,000, equating to nearly 70 employees off work every day due to work-related injury or illness. By 2005, that number had been reduced to less than 5,000 Lost Workdays.”
While a drop in injury and illness is obviously a good thing, one wonders why the last year cited in the statistics is almost a decade past? Have any results occurred in the past 18 nonprofit-years of the two groups’ work?
Then there’s the question of whether the nonprofits had much to do with the old improvement. Even D’Arcy’s report admits that the group…
“…cannot take credit alone for such improvement, but it is widely believed that the focus, drive and partnering effort the JSI provides has been a major part of that change.”
Actually, it is not all that “widely believed.” Joseph Tsidulko of LA Weekly retorts:
“DWP already expends $127 million a year conducting in-house training of its workers, including millions on employee-safety programs.”
Speaking of the LA Weekly, it first exposed these nonprofits in 2005, when they’d already made $12 million disappear, and more recently it reported on how the IBEW’s nemesis, the newly elected Mayor Eric Garcetti, has played along for years as a city council member who had no desire to upset the IBEW or its public partner, the DWP.
So, to review the bidding, we’ve got tens of millions of ratepayer dollars going for over a decade into a murky sinkhole with a crude sign over it labeled “Nonprofits at Work.”
Following a classic pattern, the union bosses involved never showed much concern for members who were going to lose their jobs, largely because of the excessive wages and benefits the bosses demanded the company pay. Nor did the union bosses shed a tear for (a) the many workers who would never get a job in the first place, thanks to the high costs of hiring new workers, or (b) the poor and middle-class citizens served by the DWP, who were paying significantly more for their basic utilities than they should have. No, the bosses just focused on helping themselves and ensuring that any remaining union members would have outsized compensation.
How outsized? Well, DWP personnel who aren’t laid off enjoy an average salary of over six figures, as well as $17,000 per year in health insurance, an amount 50% to 70% higher than other city workers. Plus a few lucky union and DPW officials supplement their pay with the million dollars a year the two nonprofits pay their staff.
It would have been nice if charity watchdogs had barked over this mess earlier (Nonprofit Quarterly did run one item last November). And it would be even nicer if left-of-center folks in and out of the nonprofit sector could admit that a lot of money is wasted, and the poor oppressed, by government officials in bed with government unions (Rick Cohen, my friend, call your office).
Let’s give the last word on this public-private partnership to Steve Lopez of the L.A. Times:
“With DWP, it’s always about power and politics, with [union boss Brian] D’Arcy having had his way for years, bankrolling political candidates who showed their love by delivering spectacular contracts in return, making D’Arcy one of the most powerful players the city has ever known. D’Arcy bet wrong last year, throwing millions behind Wendy Greuel for mayor, and now he’s trying to prove he won’t be pushed around just because of a bad bet.
Let’s not let City Hall off the hook, though, because D’Arcy would be powerless if not for it. [New] Mayor and former councilman Eric Garcetti didn’t stand in the way of D’Arcy’s power grabs over the years. And as this paper has reported, Garcetti’s appointment of a new DWP assistant GM who was involved in a financial scandal years ago while overseeing DWP, and was also there when the nonprofits were established, is a head-scratcher.
Business and politics as usual in L.A.”
FOOTNOTE: Perhaps the worst public-private partnership of all time involved groups that helped cause the housing collapse that launched the Great Recession, a topic I wrote about here. For more on the outrages involving IBEW 18, read the coverage provided by CityWatch.
About the Author: Scott Walter is executive vice president of the Capital Research Center in Washington, D.C. This post originally appeared in Philanthropy Daily and is republished here with permission from the author.
Los Angeles is unique among the big, world-class American cities. Unlike New York, Boston, or Chicago, L.A. lacks a clearly defined core. It is instead a sprawling region made up of numerous poly-ethnic neighborhoods, few exhibiting the style and grace of a Paris arrondissement, Greenwich Village, or southwest London. In the 1920s, the region’s huge dispersion was contemptuously described—in a quotation alternately attributed to Dorothy Parker, Aldous Huxley, or H. L. Mencken—as “72 suburbs in search of a city.” Los Angeles’s lack of urbane charm led William Faulkner to dub it “the plastic asshole of the world.” But to those of us who inhabit this expansive and varied place, the lack of conventional urbanity is exactly what makes Los Angeles so interesting. My adopted hometown is the exemplar of the modern multipolar metropolis: less a conscious city than a series of alternatives created by its climate, its diversity, and a congested but still-functional system of freeways that historian Kevin Starr calls “absolute masterpieces of engineering.”
* * *
Transplants from the East Coast make great sport of belittling Los Angeles as an adolescent New York or a second-rate Chicago. Developers and city boosters, eager to counter that image, placed their hopes on big projects such as the region’s ultraexpensive rail system. Yet billions of investment dollars have done almost nothing to increase the L.A. Metro’s ridership, which remains stuck at 6 percent of city population. By contrast, a majority of New Yorkers and about a quarter of Chicagoans use their cities’ public transportation. Critics also (rightly) depict the downtown residential revival as a misguided attempt to create a mini-Manhattan. That’s not in the cards: downtown L.A.’s 50,000 or so residents—about on par with San Fernando Valley neighborhoods such as Sherman Oaks and suburban areas such as San Bernardino County’s Eastvale—are a drop in the bucket for a region of some 18 million people. And despite billions in direct and indirect public subsidies, downtown boasts barely 3 percent of the region’s jobs. In the minds of most Angelenos, the only reason to go downtown is for jury duty or the occasional sporting or cultural event.
* * *
The “real” L.A., as experienced by most residents, exists at the neighborhood level. Spread across the region, a multiplicity of neighborhoods offers an unusual variety of housing options in a great global city. Gardener Aurelio Rodriguez and his family choose to live in Sylmar, where he keeps a lush half-acre filled with fruit trees, tropical plants, and aging farm equipment, while remaining within the Los Angeles city limits. It’s the kind of place where pedestrians need to keep an eye out for more than just cars. Like Juan, some residents amble through the narrow streets on horseback.
* * *
Los Angeles’s myriad little villages are enjoying a new surge of interest. City politics are at a low ebb—with voter turnout in 2013 the tiniest ever for a contested citywide election—yet neighborhood groups proliferate, including some 90 neighborhood councils. People may not be passionate about what goes on at City Hall, but they care deeply about where they live.
I live in Valley Village, a tree-lined corner of Los Angeles made up of single-family houses built on lots that range from 5,000 to 20,000 square feet. Enclosed between four major thoroughfares, my part of Valley Village manages to be both diverse and highly cohesive—a city within a city. Crime tends to be limited to petty thefts from cars. Monthly neighborhood-watch meetings draw middle-class families as well as gay and childless couples. Armenians and orthodox Jews live side by side. The local markets have an ethnic flavor. At the Cambridge Farms supermarket on Burbank Boulevard, signs are posted in English and in Hebrew. Oxnard Boulevard has an Armenian feel, with a functioning lavash bakery and restaurants selling kabobs.
“We fell in love with the neighborhood once we got settled in,” says Grettel Cortes, who lives in a modest house several doors down with her husband, Efraim, and her three young children, Gaea, Eva, and Benjamin. “There’s a great family feeling here. If I need something, I ask Patty across the street. It’s a great place for kids to grow up.” Cortes manages the neighborhood’s heavily trafficked Shutterfly site. A recent article about a coyote devouring a local cat was big news for weeks.
The hot topic in Valley Village these days is the rise of the McMansions. New homes are going up on a scale that feels out of sync with the neighborhood’s low-rise character. One of the larger parcels has sprouted a gigantic, two-and-a-half-story monstrosity that neighbors have christened “the hotel.” During construction, the property’s owner chopped down several trees, some of which may have been protected by city ordinances. Only relentless protests from the locals kept him from further destruction.
“We love the neighborhood but hate the mansionization,” notes Tim Coffey, a 30-year resident whose wife, Chary, led the fight to save the trees. “To us, chopping down trees ruins what this place is all about.”
Despite the McMansions, Valley Village has remained mostly unchanged since I moved here over a decade ago. The area’s appeal lies in the quality of its private spaces—backyards, front yards, gardens—and its neighborliness: people actually say hello to strangers on the street. The many trees also provide an ecosystem for a vast array of birds, from hawks to hummingbirds, as well as various mammals, including raccoons, opossums, and, as we now know, the occasional coyote.
As neighbors, we share a fierce determination to protect and preserve our shaded enclave. Yet the people here are not your stereotypical suburbanites. Chary, for example, sells her own line of lingerie. Grettel is a website developer. Many others work in the entertainment industry. Studios such as Disney, CBS Radford (where Seinfeld was produced), NBC, Universal, and Warner Brothers are all a ten- to 15-minute drive away. Many of my neighbors work from home, including a voice-over artist, a scriptwriter, several actors and musicians, and even a magician. It turns out that Hollywood people want many of the same things from a neighborhood that the rest of us do.
* * *
* * *
Native Mississippian Brad Smith, a successful songwriter and performer with the band Blind Melon, sees Valley Village as a refuge from the insanity of the entertainment business. Brad and his wife, Kim, a Michigan native, like the homey and familiar feel. They have lived here since 2000 and are raising a young daughter, Frankie. They have a dog and a trampoline out back. “In L.A., a lot of places seem like you can live there but never leave the car,” he says as he strums a tune in his backyard. “But here, it’s different. You come home from tour, and you come to a neighborhood with dogs, cats, and kids. It makes living in the big city far more palatable, even for someone from a small town.” This is one of L.A.’s enduring charms: the option to live in a quiet neighborhood in the heart of an important city.
Los Angeles is constantly reinventing itself, combining and recombining people and neighborhoods from the ground up. Out of its crazy quilt of ethnic enclaves, new districts arise all the time, often spontaneously, notes Thomas Tseng, a native of the suburban San Gabriel Valley and a student of urban planning. Take the neighborhood now known as “Little Osaka,” which follows along Sawtelle Boulevard in West Los Angeles. Forty years ago, when I lived there, the area was home mostly to working-class Japanese and Mexican families. The few modest restaurants were far from fashionable, mostly offering ethnic home-style cuisine. But over the past few years, Tseng says, many of the old families—as well as investors from Korea, Taiwan, and China—have opened new restaurants, bars, and clubs in the neighborhood. Far from the downtown hotspots and the Hollywood scene, Little Osaka’s streets bustle with young people, a majority of them Asian. Many live in the area or attend nearby UCLA. “There was nothing planned,” says Tseng, who has been getting his hair cut and belly filled in the area for years. “It just happened.”
* * *
* * *
Even more impressive is the 626 Night Market in the parking lot of the Santa Anita Track. Every month, some 160 food vendors descend on the place. You can get everything from preserved fertilized eggs to sea-urchin rice balls (my favorite), lamb skewers, stinky tofu, and grilled squid. Up to 40,000 people gather in this monthly celebration of L.A.’s entrepreneurial grassroots food scene. After all, Los Angeles invented the food truck—the perfect analogy for a city perpetually on the road and spanning hundreds of neighborhoods.
Los Angeles may lack the kind of dynamic urban core that we associate with traditional great cities. But to most of its residents, the city is an urban feast on a gourmet scale. We wouldn’t trade it for the world.
About the Author: Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA. This story originally appeared at City Journal and is republished with permission. Photographs are by Ted Soqui.
When I arrived in Los Angeles almost 40 years ago, there was a palpable sense that here, for better or worse, lay the future of America, and even the world. Los Angeles dominated so many areas — film, international trade, fashion, manufacturing, aerospace — that its ascendency seemed assured. Even in terms of the urban form, L.A.’s car-dominated, multipolar configuration was being imitated almost everywhere; it was becoming, as one writer noted, “the original in the Xerox” machine.
Yet today the nation’s second-largest city seems to have fallen off the map of ascendant urban areas. Today’s dynamic cities in terms of job and population growth are the “new Los Angeleses,” such as Houston, Dallas, Phoenix or Charlotte; at the same time L.A. lags many more traditional “legacy” cities in job creation and growth, notably New York, Boston and Seattle. Worst of all, L.A. has lost its status as the dominant city on the West Coast; that title, in terms of both economic and political power, has shifted to the tech-heavy Bay Area.
With a weak economy and little media outside Hollywood, the city has lost much of its cachet. A Businessweek survey last year ranked San Francisco asAmerica’s best city to live in. Los Angeles was 50th, behind such unlikely competitors as Cleveland, Omaha, Tulsa, Indianapolis and Phoenix. In another survey that purported to identify the top 10 cities for millennials, Seattle ranked first, followed by Houston, Minneapolis, Dallas, Washington, Boston and New York. Neither L.A. nor Orange County made the cut.
L.A.’s relative decline reflects a collective inability to readjust to changing economic conditions. Some of this has to do with the end of the Cold War, but also with the loss of the headquarters of many of the area’s top defense contractors, such as Lockheed and, most recently, Northrop Grumman. In 1990, the county had 130,100 aerospace workers. A decade later, that number dropped by more than half to 52,400. By 2010, the county’s aerospace jobs numbered 39,100.
With the exception of drone technology, the region’s aerospace industry, as one analyst put it, has become “dormant,” a victim of a talent drain and a difficult business environment. This decline has weakened the metro area’s standing as an industrial center — L.A. has lost almost 20% of its manufacturing jobs since 2007. Meanwhile STEM employment in the Los Angeles-Santa Ana area is still stuck below its 2002 levels; once arguably the world’s largest agglomeration of scientists and engineers, the region has now dipped below the national average in the proportion of STEM jobs in the local economy.
In contrast to the Bay Area, whose tech community also was largely nurtured by defense contracts and NASA, L.A.’s defense and aerospace industries never pivoted into the vast civilian market. Capital, too, has played a role. The L.A. area has lots of rich people, but a relatively weak venture capital community. For example, the Bay Area was a recipient of roughly 45% of U.S. venture capital investment in the third quarter of 2013, while far more populous Los Angeles-Orange County took in under 6.5%.
The growth of VC-financed companies is one reason why L.A. has been less able to produce high wage jobs than its northern rival. According to a recent projection by Economic Modeling Specialists Inc., high-wage jobs will account for only 28% of L.A.’s job growth from 2013 through 2017 compared to 45% in the Bay Area.
Far greater problems can be seen further down the economic food chain. The state’s heavy industry — traditionally the source of higher-paid blue-collar employment — entirely missed the nation’s broad manufacturing resurgence. In the first decade of the 2000s, according to an analysis by the Praxis Strategy Group, L.A. lagged all but 10 of the nation’s 51 large metro areas in creating manufacturing jobs.
Two other once-unassailable economic niches in L.A., its port and entertainment, also are under assault. The expansion of the Panama Canal has increased the appeal of the Gulf ports, as do plans for expanded port facilities in Baja, California. These shifts threaten many of the roughly 500,000 generally well-paid blue-collar jobs in the local logistics industry.
Then there’s the slow but steady erosion of L.A.’s dominance in its signature industry, entertainment. Motion picture employment is down 11,000 since 2001. In the same period New York has notched modest gains alongside growth in New Orleans and Toronto. New announcements of industry expansions and an uptick in production in L.A. show that Tinseltown is far from dead, but challenges continue to mount from overseas and domestic competitors.
Perhaps most shocking has been the tepid response to this relative decline among L.A.’s business and political leaders. Once local entrepreneurs imagined great things, like massive water and port systems, dominated the race for space and planned out the suburban dreamscapes of Lakewood, Valencia and the Irvine Ranch.
Arguably the signature achievement of this past decade, and the one getting the most attention in the media, has been the revival of downtown as a residential and cultural hub. Having essentially abandoned the model of a multipolar city, L.A. has poured billions in infrastructure and subsidies into a half-baked attempt to turn Los Angeles into a faux New York. This is something of a fool’s errand since barely 3% of area residents work downtown, and most cultural consumers live far away on the westside or in the San Fernando Valley.
New Mayor Eric Garcetti is also a density advocate, and is placing huge bets on the massive building of high-end high-rise housing, all this despite weak job and population growth. In his campaign he emerged as the candidate of developers who want to densify the city, including Hollywood, over sometimes fierce grassroots opposition.
Compared to his inept and economically clueless predecessor, Antonio Villaraigosa, Garcetti represents something of an upgrade. He at least knows jobs matter at least as much as development deals for contributors. Yet he remains pretty much a creature of the failed leadership culture of L.A., which is dominated by public employee unions, subsidy-seeking developers and greens, largely from the city’s affluent westside.
Can L.A. turn itself around? The essential ingredients that drove the city’s ascendency remain: its location on the Pacific, its near-perfect climate and spectacular topography. The key now is for the region to build an economic strategy that allows it to use its assets, and build around its increasingly immigrant-dominated grassroots economy. Innovation in music, fashion and food continue at the grassroots level, with much of the inspiration coming from the city’s increasingly racially diverse mestizo culture.
What L.A. needs now is not a slick media campaign, but a concerted effort to tap this neighborhood-centered energy. The city of the future needs to reinvent itself quickly, before it fades further behind its competitors on the coasts and in Texas. Successful cities such as Boston, San Francisco, Seattle and Houston all managed to find ways to nurture new industries to supplement their traditional ones. Los Angeles should be able to do the same, but only if it seizes on its fundamental assets can it again become a city with a future.
About the Author: Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA. This story originally appeared at Forbes.com and is republished here with permission.