August 26, 2019
Effort to Make Property Tax Increases Easier to Pass Falls Short in Assembly
Written by Sarah Boot, CalChamber
A proposed constitutional amendment to make it easier for local governments to increase property taxes failed to secure enough votes to pass the Assembly this week.
The California Chamber of Commerce opposed ACA 1 (Aguiar-Curry; D-Winters), which would have asked voters to decide whether property tax increases for affordable housing and infrastructure could be approved by just a 55% vote instead of two-thirds.
In opposing ACA 1, the CalChamber pointed out that the proposal is overbroad because it provides the increased tax authority for every government agency in California, not just cities and counties.
If ACA 1 were approved, potentially thousands of overlapping special districts would gain the ability to increase property taxes. Moreover, ACA 1 undermines the protections of Proposition 13 and permits discrimination against certain classes of taxpayers.
Two-Thirds Vote Appropriate
For more than a century, two-thirds voter approval has been required for general obligation bonds. The debt obligations backed by the increased property tax ACA 1 seeks to allow often would be in place for as long as 30 years.
The stronger consensus among voters implicit in a two-thirds vote margin is appropriate given that taxpayers would be obligated to an increased tax rate for such a long period.
Increased Housing Costs
Although supporters of ACA 1 argued the measure is needed to support affordable housing in California, it actually will increase housing costs for millions of people.
The result of the increased tax authority for numerous special districts could be a single taxpayer being burdened with uncoordinated and ill-advised layering of new taxes from multiple special districts.
Thus ACA 1 could reduce even further the percentage of California households that can afford to buy an existing, median-priced home. A recent report from the California Association of Realtors puts that figure at 30%.
ACA 1 failed to pass on a vote of 44-20 on August 19. As a proposed constitutional amendment, ACA 1 needed approval by two-thirds of the Assembly.
Ayes: Aguiar-Curry (D-Winters), Berman (D-Palo Alto), Bloom (D-Santa Monica), Bonta (D-Oakland), Burke (D-Inglewood), Calderon (D-Whittier), Carrillo (D-Los Angeles), Chau (D-Monterey Park), Chiu (D-San Francisco), Chu (D-San Jose), Cooper (D-Elk Grove), Eggman (D-Stockton), Frazier (D-Discovery Bay), Friedman (D-Glendale), Gabriel (D-San Fernando Valley), Eduardo Garcia (D-Coachella), Gipson (D-Carson), Gloria (D-San Diego), Lorena Gonzalez (D-San Diego), Gray (D-Merced), Grayson (D-Concord), Holden (D-Pasadena), Jones-Sawyer (D-South Los Angeles), Kalra (D-San Jose), Levine (D-San Rafael), Limón (D-Santa Barbara), Low (D-Campbell), McCarty (D-Sacramento), Medina (D-Riverside), Mullin (D-South San Francisco), Nazarian (D-Van Nuys), Quirk (D-Hayward), Rendon (D-Lakewood), Reyes (D-San Bernardino), Luz Rivas (D-Arleta), Robert Rivas (D-Hollister), Rodriguez (D-Pomona), Blanca Rubio (D-Baldwin Park), Santiago (D-Los Angeles), Mark Stone (D-Scotts Valley), Ting (D-San Francisco), Weber (D-San Diego), Wicks (D-Oakland), Wood (D-Santa Rosa).
Noes: Bigelow (R-O’Neals), Boerner Horvath (D-Encinitas), Brough (R-Dana Point), Cervantes (D-Corona), Chen (R-Yorba Linda), Choi (R-Irvine), Cooley (D-Rancho Cordova), Cunningham (R-San Luis Obispo), Diep (R-Westminster), Fong (R-Bakersfield), Gallagher (R-Nicolaus), Kiley (R-Roseville), Lackey (R-Palmdale), Mathis (R-Visalia), Melendez (R-Lake Elsinore), Obernolte (R-Big Bear Lake), Patterson (R-Fresno), Petrie-Norris (D-Laguna Beach), Quirk-Silva (D-Fullerton), Voepel (R-Santee).
No vote recorded: Arambula (D-Fresno), Bauer-Kahan (D-Orinda), Daly (D-Anaheim), Flora (R-Ripon), Cristina Garcia (D-Bell Gardens), Irwin (D-Thousand Oaks), Kamlager-Dove (D-Los Angeles), Maienschein (D-San Diego), Mayes (R-Yucca Valley), Muratsuchi (D-Torrance), O’Donnell (D-Long Beach), Ramos (D-Highland), Salas (D-Bakersfield), Smith (D-Santa Clarita), Waldron (R-Escondido).
After ACA1 Failed to Get Enough Votes, Lawmakers Shouldn’t Bring It Back
Opinion Written by the Editorial Board of the Press Enterprise
If the definition of democracy is two wolves and a lamb voting on what’s for dinner, the California Assembly was nearly the picture of democracy on Monday.
Assembly Constitutional Amendment 1 is the latest proposal to attack Proposition 13’s requirement for a two-thirds vote of the electorate to pass tax increases for a special purpose. ACA 1 would change the state constitution to allow taxes for infrastructure or affordable housing to pass with the approval of just 55 percent of voters.
ACA 1 fell eight votes short of the 54 votes needed in the Assembly to advance the measure to the Senate. Constitutional amendments proposed by the Legislature require a two-thirds vote in each house in order to get on the ballot, but once on the ballot, they require only a simple majority to pass.
Proponents argued that cities, counties and special districts find it too difficult to persuade two-thirds of voters to raise taxes to build costly infrastructure projects as well as much-needed housing for low-income or homeless Californians.
If taxpayers are skeptical of such requests, they have reason to be. Pensions and post-employment benefits costs are gobbling an ever-larger share of local government budgets, while politicians take no action to control costs. Instead, they routinely approve new contracts that increase salaries and pension obligations. The Los Angeles City Council recently approved new pay hikes for city workers in an unusually secretive process that offered the public little or no transparency about the cost of the new contracts.
Actions like that serve to increase cynicism on the part of California voters, who have seen their taxes go up repeatedly as problems go unsolved or grow worse.
But the cynicism of voters is no match for the cynicism of ACA 1 proponents, who effectively argued that the solution to high housing costs was to raise property taxes.
ACA 1 was not itself a tax increase, it was worse—a mechanism to make it easier to raise taxes for virtually any government construction project, with the burden falling disproportionately on homeowners.
Under Proposition 13, passed by voters in 1978, local taxes for any special purpose require the approval of two-thirds of the electorate. These taxes can include bonds or parcel taxes, which show up in a long list of extra charges at the bottom of property tax bills, in addition to the 1% tax on the assessed value of the property.
Without the two-thirds vote requirement, it would be easy for people who don’t own property to vote for taxes on people who do. But the expense of public infrastructure and affordable housing projects should not be borne only by property owners, many of whom already struggle with the high cost of mortgage payments, utility bills and insurance.
Instead of trying to enable local tax increases, lawmakers could allocate money from the state budget to support infrastructure and housing projects needed by cities, counties and special districts. The state has a growing surplus, while California taxpayers are burdened with the highest income taxes, sales taxes and gas taxes in the nation.
ACA 1 is eligible for another vote in the Assembly before the end of the year, but California lawmakers should not vote to raise taxes or to make it easier to do so. Taxpayers in this state should tell their representatives that they’ve had enough.
How Much Could PG&E Rates Rise?
Written by Judy Lin, CalMatters
Pacific Gas and Electric’s customers were warned about the cost of massive wildfires that it may have sparked. Even before California’s largest utility filed bankruptcy proceedings at the start of the year, lawyers, policymakers and consumer advocates all cautioned that the company’s liabilities in those fires would, one way or another, hit the pocketbooks of its 16 million customers.
So how much could consumers throughout northern and central California be facing in higher costs?
We don’t have a full picture yet. We do know PG&E is seeking double-digit rate increases to help reduce the risk of future fires. But there isn’t agreement yet on how much the company will be held financially responsible for the deadly and destructive wildfires in 2017 and 2018. And we don’t know how much of that liability might be passed on.
Just recently, U.S. Bankruptcy Judge Dennis Montali ruled that a jury can decide whether the utility is liable in the Tubbs Fire in Sonoma County, even though investigators pinned the source on private electrical equipment, not PG&E (more on this later).
One thing is sure: Consumers will shoulder a big share of any liabilities. Here’s what we know so far about how much PG&E’s rates could go up.
How much does PG&E charge?
PG&E’s customers are already paying some of the highest electricity rates in the state, if not the country. The utility’s average rate is 20.06 cents per kilowatt hour, compared with an average 16.06cents statewide and 10.48 cents nationally.
But interestingly, those higher rates are offset by California’s higher efficiency. The state’s average monthly consumption is about 300 kilowatt hours less than the U.S. average, with California’s average monthly electricity bill at $101.49 compared to $111.67 nationwide.
The average residential PG&E customer pays $113.64 a month for electricity and $52.30 for gas, or about $165.94 a month, according to the company.
How much have PG&E’s rates already risen?
In the past decade, the utility’s rates have been going up faster than inflation. According to the Public Advocates Office, residential rates have risen 31% between 2009 and 2019 — higher than the consumer price index of 19%.
But PG&E isn’t alone. While Southern California Edison rates largely appear to keep track with inflation at 18%, San Diego Gas & Electric’s have jumped 51% in the past decade. That’s partly because SDG&E’s customers have been installing solar panels at a higher rate, which distorts the average cost because each customer appears to be consuming less electricity.
How much more will customers’ costs go up?
Based on what we know, the average residential PG&E customer could pay nearly $300 more a year in the next three years, or a 15% increase in their monthly bills. This is because the utility is asking permission from state regulators — separately from the bankruptcy proceedings — to increase its revenue in two ways. Most, but not all, of the new revenue would be passed to consumers.
First, PG&E has asked for a three-year increase totaling $2 billion.That would include a 12.4% jump next year, a 4.7% increase the year after that and a 4.8% hike in 2022. That’s nearly a 22% rise. PG&E says much of the extra money is needed for fire-safety improvements such as more fire-resistant poles, covered power lines, new weather stations and high-definition field cameras.
In this scenario, for the average PG&E residential customer using both electricity and gas, the current bill of $165.94 a month would go up to $186.24 in three years.
On top of that, PG&E wants to raise the guaranteed rate of return for capital investments that it gets under California law from 10.25% to 12%. It had sought a return as high as 16% in April. PG&E is arguing that it needs to offer investors bigger profits to offset the financial risks of liability in major wildfires.
This request would add an additional $4.12 a month to the average residential bill. Combined, the increases would be $293 a year.
Can this really happen?
Yes, but it depends on state regulators. The California Public Utilities Commission will need to approve both rate increases, and PG&E may not get everything it wants. Already the commission, which oversees investor-owned utilities, is hearing an earful from residents in Santa Rosa and Fresno overwhelmingly opposed to paying more.
The commission is expected to announce a decision next year.
What’s going on with the bankruptcy?
The bankruptcy case is proceeding in court in the meantime, but key issues have yet to be resolved. Perhaps the biggest unknown is how much PG&E will be on the hook for past wildfires. PG&E initially stated it could face as much as $30 billion in potential damages from a series of catastrophic wildfires in Northern California in 2017 and 2018. The utility has since lowered that estimate to $17.9 billion.
While the utility has all but accepted liability in the Camp Fire that leveled the northern California town of Paradise, it has been trying to minimize liability in the Tubbs Fire, citing a Cal Fire investigation that blamed private electrical equipment. But the bankruptcy judge ruled that victims can pursue a jury trial.
Fire victims argue that PG&E is at least partly to blame. They’re eager to show jurors a winery’s surveillance video they say is the moment when high-voltage PG&E lines exploded first, near the private power system. Rex Frazier, president of the Personal Insurance Federation of California, which represents insurance companies, said a jury could award victims up to $10 billion.
Is there a deadline for the bankruptcy proceedings?
Yes. Under a new law signed by Gov. Gavin Newsom, PG&E will need to have an exit plan resolved by June 30, 2020, in order to tap special funds for future wildfire damages. PG&E is expected to present a draft of its plan in court next month.
Consumer advocates worry that PG&E may also try to stick customers with damages from past fires — the debt that drove them into bankruptcy. “PG&E wouldn’t be PG&E if they weren’t always looking for a bailout,” says Mindy Spatt, a spokeswoman for The Utility Reform Network, a consumer advocacy organization.
Is there a bailout?
TBD. Assemblyman Chad Mayes, a Republican from Yucca Valley, has proposed allowing PG&E to sell $20 billion in bonds to pay off past wildfire liabilities. Mayes says PG&E shareholders, not customers or taxpayers, would shoulder the debt. A group of PG&E shareholders created a websiteto tout the plan.
But a group of bondholders led by Paul Singer, a significant contributor to the Republican Party, has mounted a challenge for control of PG&E. The group has teamed with agriculture and food-processing customers — major commercial customers — to warn that consumers and taxpayers would in fact pay more. Its website is here.
It’s unclear if lawmakers will take up the additional legislation before they adjourn in a few weeks.
These common spelling mistakes cost investors millions each year
Article first appeared in the Hustle
Automotive behemoth Ford Motor will release it’s Q3 earnings on October 24th, and when it does, countless investors will scramble to purchase shares of stock ticker “FORD.”
Only one problem…
“This is not the FORD you’re looking for”
“FORD” is the ticker symbol for “Forward Industries,” a manufacturer of “carrying cases for medical monitoring systems” worth $10m — not the $40B car company listed under ticker symbol (F).
And we thought the newsletter industry was niche…
In fact, experts estimate that this mistake costs investors an average $1m in trading fees alone. Most investors don’t even catch the mistake until at least a week later, and some never correct it at all, “they just rationalized the purchase as still being a good investment,” one researcher writes.
Other notable ticker travesties:
- HP vs. HPE: “HP” stands for Helmerich & Payne, a drilling rig company, not Hewlett Packard (which trades under “HPQ”), or Hewlett Packard Enterprises, which trades under “HPE.”
- ZOOM vs. ZM: “ZOOM” is an obscure Chinese wireless company. “ZM”is a $25B video conferencing platform.
- TWRTQ vs. TWTR: “TWTRQ” is a bankrupt home entertainment retailer whose stock spiked 1000% in 2013 after Twitter IPO’d under ticker symbol “TWTR.”
- This is just the short list — Professors at Rutgers identified “250 company pairs where the possibility of confusion is particularly high.”
- Even “robo investors” make mistakes
Big institutions that rely on algorithms to watch for big movements in stocks often get tripped up when a bunch of poor proofreaders dump money into the wrong companies.
Computers don’t ask why a bunch of investors are suddenly optimistic about a defunct stereo seller, they just execute. That means the responsibility falls on investors to “spellcheck” their holdings, whether they’re a basement daytrader, or a hedge fund hotshot.
August 19, 2019
The Gilroy Chamber of Commerce Board of Directors and staff would like to thank the hundreds of car owners and thousands of people who flocked to downtown to enjoy the mild 75° weather for the Gilroy Chamber’s annual Garlic City Car Show this past Saturday. This year’s car show featured Dennis Gage from “My Classic Car,” which is a weekly car show that airs in 105 million homes across the country.
350 cars were on display throughout the downtown area encompassing Monterey Street from 3rd – 6th Streets and Eigleberry from 4th to 6th Streets. Cars were also staged on 4th, 5th and 6ths Streets. There was even a military tank displayed at the corner of 4th and Eigleberry. The car show drew approximately 10,000 people to the downtown area.
Four music stages provided live music performances throughout the day. Many of the artists were local bands. Elvis (Don Prieto) also performed to a swooning audience at the end of the car show.
Dennis Gage, who has done his TV show for 25 years, said, “The Gilroy Chamber’s car show has a great mix of vehicles on display.” During the car show, Dennis interviewed a number of car owners, signed autographs, posed for pictures with attendees and even had his portrait painted by local artist, Nacho Moya. There was plenty to see and do at this year’s event.
According to Dennis Gage, the Gilroy Chamber’s Garlic City Car Show will air on My Classic Car in early 2020. The Chamber will be notified of the exact date and will provide that information to the community. Stay tuned.
Car Crazy Californians Slow Their Purchases of New Vehicles
Article written by Phil LeBeau, LeBeau Car News
New car sales in the largest U.S. auto market have slowed this year as more and more drivers opt for less-expensive used cars.
New vehicles sales in California dropped 5.6% in the first half of 2019, setting the state on track for full-year sales to fall short of 2 million vehicles for the first time since 2014, according to the California New Car Dealers Association.
“It is not a huge surprise that after years of increased sales, we are seeing the market level off, reflecting the broader economic and political climates,” Ted Nicholas, the association’s chairman, said in a release Wednesday announcing sales for the first half of the year.
The drop in new vehicle sales in California is greater than the 1.5% decline seen in the U.S. from January through June. One reason could be that cars make up a bigger percentage of new model sales in California than around the rest the country. Sales of new cars, which include sedans and compacts, dropped by 10.8% during the first half of the year across the state while sales of new pickups, SUV’s, crossover utility vehicles and other light trucks fell by 1.1%.
Californians, who have long been known for their love of cars and trucks, are still buying vehicles. But they are increasingly turning to the used market. Sales of preowned models in California climbed more than 5% in the first half of the year.
Sales of new electric and hybrid vehicles continue to climb in a state where green transportation is in demand. In fact, the trade group says EVs and hybrids made up 13% of all new models sold. In addition, the California car group now estimates sales of fully electric vehicles will top 100,000 this year.
Much of the rise in EV sales in the Golden State is due largely to the popularity of the Tesla Model 3, which is built in Fremont, just outside of San Francisco. In the first half of this year, Californians bought 33,005 Model 3s. That means 1 in 4 Model 3s sold worldwide in the first half of this year was purchased in California.
Opinion written by Peter Leroe-Munoz, Silicon Valley Leadership Group
Paid time-off, retirement planning, worker education – benefits each of us want and deserve from our jobs. That is precisely what is being proposed by Lyft and Uber.
One of the biggest debates in the California State Legislature is over who is classified as an employee versus an independent contractor. Our legislators are uniquely positioned to protect flexible, on-demand work while simultaneously improving work quality and security. That is, as long as they take seriously the recent path forward jointly offered up by the leaders of Lyft and Uber.
Lyft and Uber connect passengers and drivers. Passengers have access to affordable transportation and greater options for mobility. Drivers benefit by earning on their own time, with the freedom to set their schedule. Because they are not bound by rigid work shifts or a boss telling them if, when and where to work, drivers are classified as independent contractors, not employees of the companies themselves.
We all agree that drivers would benefit from some of the protections and additional financial security that exist in many other lines of work.
One such protection included in the proposal offered by Lyft and Uber is to establish a commitment around earnings that would provide greater financial stability for drivers, many of whom use their on-demand work to supplement income from other jobs or balance other priorities in their lives. Other driver protections proposed by the ride-sharing companies include benefits such as paid time-off, retirement planning, resources for worker education and a collective association for workers.
Transportation network companies (TNCs) recognize that the legal framework around independent work needs updating to address these driver protections. To their credit, Lyft and Uber have proposed a variety of policies that preserve driver flexibility while increasing benefits and wages.
But Lyft and Uber are legally prevented from providing many of these benefits today and need legislators to modernize existing law to allow companies like theirs to implement these policies. If legislators choose to pass up this opportunity, Lyft and Uber will become fundamentally different services, and both drivers and passengers will lose the flexibility and accessibility they love most about these apps.
Politicians are also concerned with protecting independent workers. But unlike Lyft and Uber, their approach is overbroad and overlooks the benefits of this type of work.
A current bill in the state legislature seeks to reclassify independent contractors as employees. Under this designation, drivers would lose flexibility and gain a boss they don’t want or need. Constrained work shifts would be the new norm. Those who drive only occasionally to supplement income from other jobs, like parents, students, part-time workers and the like, would lose the opportunity to work for TNCs. This happens to be the majority of drivers on these apps.
Another downside of legislators’ approach regarding ride-sharing would be a reduction in reliability for passengers. TNCs increase mobility for the elderly and infirm, as well as those who do not possess a driver’s license or opt out of driving or who may otherwise drive under the influence. Reclassifying Lyft and Uber drivers as employees decreases the number of potential drivers available to meet demand at any given time, thereby increasing consumer costs and wait times for passengers.
TNCs were built on innovative technology that seamlessly connects drivers and passengers. As these companies grow, they must adapt their thinking to meet the needs of independent workers. Politicians may want sweeping legislation, but it will result in hurting the workers they seek to assist. Instead, policymakers should seek a better alternative and work to expand worker protections in creative ways, while preserving the independence drivers value most.
Peter Leroe-Munoz is vice president of technology and innovation at the Silicon Valley Leadership Group.
Provided by CalChamber
Employees vs. Independent Contractors
One of the most important bills moving through the Legislature is AB 5 (Gonzalez; D-San Diego), Barrera, who heads the CalChamber policy team, tells Zaremberg.
AB 5 codifies into the Labor Code the court decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, which rejected the long-standing Borello test (where employer control over the worker was a key) and adopted the “ABC” test for determining whether workers should be classified as either employees or independent contractors. The bill also carves out exemptions from the “ABC” test for certain professions, reverting those industries back to the Borello standard, which is much more flexible, Barrera explains.
“For example, insurance agents are carved out, hair stylists, doctors, lawyers, accountants, direct sellers—there’s a list of different professions and industries that are currently carved out under AB 5,” she says.
What is particularly problematic in the “ABC” test is the “B” factor, which requires that an independent contractor perform work which is outside the usual course of the hiring party’s business.
“That makes it difficult for doctors in rural hospitals, and real estate agents who are in the real estate profession, and you can go on and on and on, and that doesn’t work for everybody” Zaremberg says.
“Exactly. Which is why you see so many exemptions being added to AB 5 right now—it’s because it doesn’t work for everyone,” Barrera replies.
More exemptions are expected to be added to AB 5, Barrera says, including an exemption for business-to-business contracts, which were never contemplated to fall under the ABC test.
Zaremberg points out that the Dynamex case was brought before the courts before the iPhone was ever introduced, and thus before the gig industry played such a big part in the state’s economy. The facts of the case were such that the workers would have been employees under the Borello test, Barrera comments.
Although AB 5 does not address the gig economy, Barrera says, “It is not out of the realm of possibility that there may be additional legislation introduced to specifically address the gig
economy in relation to the Dynamex decision.”
Bills to Fix Privacy Law Stalled
Taking effect on January 1 is a new privacy law that limits the use of consumer data by all businesses. The law, which passed after only a week of consideration in the Legislature, contains several challenges that could harm consumers and has far-reaching impacts.
For example, Zaremberg says, consumers cannot obtain a FICO score without data, and loyalty programs depend on shopping habits and history to issue discounts.
Moreover, Zaremberg points out, although Europe recently passed privacy laws as well, the European Union took 4 years to craft its laws, while California’s lawmakers drafted the California Consumer Privacy Act in only 5 days.
“After the law was passed, the business community really came together and tried to narrow down the changes and the fixes that were necessary to protect consumers as intended by the bill and also to allow the businesses to implement the law,” Barrera explains. “There was a list of bills that were doing just that…and they all passed out of the Assembly, but were unfortunately stalled in the Senate.”
Pay for Striking Workers
Still moving through the Legislature is AB 1066 (Gonzalez; D-San Diego), which would allow employees on strike to receive unemployment benefits if the strike lasts more than four weeks. The bill would not only burden the Unemployment Insurance (UI) Fund, but also would burden employers, who pay into that fund, Barrera says.
“So the employer pays into it to pay workers who are voluntarily striking and leaving their company and leaving them at risk for losing business,” Zaremberg says.
And that was never the intention of the UI Fund, Barrera stresses.
“The Unemployment Insurance Fund was for individuals who, through no fault of their own, don’t have a job anymore,” she says. “And that is not the case when you have employees who are out on strike, voluntarily…because they just are asking for more benefits, or higher pay, etcetera, and they’ve decided to walk away from their job in an effort to leverage that.”
Also concerning is the fact that the UI Fund went bankrupt during the recession due to a shortage of funds. The state was forced to borrow $10 billion from the federal government, and employers were then taxed to pay back that loan, Barrera says.
As it stands, the fund is barely solvent, and overburdening the fund runs the risk of bankrupting it again, Zaremberg warns.
Ban on Arbitration Agreements
The last bill discussed on the podcast is AB 51 (Gonzalez; D-San Diego), which would ban arbitration agreements made as a condition of employment.
“Employers don’t utilize arbitration because they want to get out of any liability or they want to not resolve a dispute with an employee,” she explains. “They utilize arbitration because they want to get away from the court costs and attorneys’ fees associated with protracted litigation that can take five to seven years to resolve, whereas arbitration can be resolved in a year or less.”
AB 51 is similar to past legislation vetoed by Governor Edmund G. Brown Jr. for plainly violating federal law. If passed, the bill would create more cost, litigation and uncertainty for employers, who would have to wait until a court definitively resolves the conflict with federal statute, Barrera says.
Why It’s Harder Than Ever To Run A Restaurant in Los Angles
Written by Jen Harris, Staff Writer, Los Angeles Times
Chef Shirley Chung hasn’t given herself a paycheck in more than a year. After she and her husband, Jimmy, spent more than $200,000 out of pocket to open Ms. Chi in Culver City in September they realized they needed to funnel any money the restaurant was pulling in to keep up with payroll, equipment and rent.
It’s not that Ms. Chi isn’t busy: The fast-casual place is usually packed with people digging into bowls of hand-pulled noodles and handmade dumplings. But the cost of running a restaurant in the Los Angeles area has become so high that Shirley Chung says she has to rely on other income streams to get by.
“Right now, we live on my side hustles,” the “Top Chef” alum said, including catering gigs, speaking appearances and a two-week stint cooking at the Coachella Valley Music and Arts Festival in Indio in April.
“We live minimally, because this is our dream. I want longevity and to make sure it’s not just around for two to three years.”
The financial challenges that Chung faces are common in the restaurant world, which has long contended with notoriously slim margins, fickle diners and fluctuating ingredient costs. It’s a cutthroat business that fells even the most promising and acclaimed restaurants — this year alone, Fiona on Fairfax, Native in Santa Monica, Spring and B.S. Taqueria downtown and Simone in the Arts District have all closed. But now, with the increase in minimum wage for many areas in and around Los Angeles and rising rents in many desirable neighborhoods, restaurant owners say an already tough business is starting to feel prohibitively expensive.
“When you look at the regulatory red tape, the accelerating minimum wage laws and the increase in taxes, it’s really harder to do business here now than it was even five years ago,” said Kevin Burke, founder of Trinity Capital, a Los Angeles investment banking firm that specializes in restaurants. “Everything is becoming more expensive, which puts a lot more risk on the owner.”
Local chefs say they worry that big chains and deeply funded independent restaurants will soon be the only places that can feasibly go into and stay in business here, pushing small, market- and chef-driven places out.
Part of the problem: The two biggest expenses for restaurants owners — rent and payroll — have risen steeply in recent years.
On July 1, the minimum wage in Los Angeles rose to $13.25 for businesses with 25 or fewer employees, up from $12; three years ago, it was $10. Next year, it will increase to $14.25. California minimum wage is set to increase to $15 by 2023, but some municipalities, including Los Angeles and Pasadena, will reach that wage by 2021.
“All of my kitchen staff are already making more than $15 an hour,” Chung said. “But my check average is a lot lower than most restaurants; it’s about $37 for dinner and $16 for lunch.”
Christy Vega, who owns the Mexican restaurant Casa Vega in the Sherman Oaks neighborhood of L.A. , along with chef Ludo Lefebvre of Petit Trois, are part of a small, independent restaurant group in the San Fernando Valley that has lobbied L.A. City Council members, Gov. Gavin Newsom and the California Restaurant Assn. to implement a tip credit. In that model , restaurants would be responsible for making up the difference if a tipped employee didn’t earn $15 an hour after his or her hourly wages and tips were combined.
“It’s absolutely not because I don’t want to pay my employees fairly or feel like they are not deserving of a certain wage,” said Brooke Williamson, chef-owner of multiple L.A.-area restaurants, including Playa Provisions, the Tripel and Hudson House. The “Top Chef” alum is another proponent of a tip credit system.
“The dishwasher is one of our most valued employees and someone we cannot pay what they deserve because we have other employees making $500 a day,” she said, “and not to mention the taxes that we have to pay on their tips.”
Some chefs worry that the CRA is focusing more on lobbying for chain restaurants, leaving the smaller players to fend for themselves.
“They are much more inclined to listen to Chipotle and big chains that pay massive amounts of money to them — places that would be happy to see all the fine dining sit-down places go away,” Vega said.
Sharokina Shams, vice president of public affairs for the CRA, said that 80% of its members are independently owned restaurants and that all members receive the same benefits. Instead of a tip credit, Shams said the association prefers a model where the guaranteed hourly pay for a tipped employee would not be capped at minimum wage and could instead be set at $18 or $20 an hour.
At the same time, restaurant rents are also on the rise. In Santa Monica, commercial real estate is leasing for $7.50 per square foot , up from $4.50 in 2010, according to real estate firm CBRE. In Koreatown, during that same period, prices doubled to $6 per square foot ; in downtown Los Angeles, they rose to $2.95 from $2.19 per square foot.
“It’s different, depending on the area, but we’re definitely seeing a lot more turnover these days,” said Johnny Choi, a senior associate at CBRE. “We’re noticing that it’s getting very difficult for a lot of these smaller, independent restaurants to stay afloat if their fixed costs are too high.“
Rising rent was a major factor in Evan Kleiman’s decision to close Angeli Caffé in 2012 after 27 years. She’s still paying off debt from the Melrose Avenue restaurant.
“The margins are really tight, and I think real estate is insane,” she said. “If somebody wants to open a restaurant, they should pay me $5,000 and I’ll get them in a room and talk to them until they decide it’s not for them.”
Chef Nyesha Arrington closed her celebrated restaurant Native in March after just a year and a half. She was paying more than $20,000 a month, along with an additional $6,000 per month for extra storage space in the building.
“You have to fight for every dollar, every guest and everything you’re doing in this business,” Arrington said.
Another challenge restaurants face: the rising cost of ingredients. The price of fresh vegetables was 28% higher in April than the same month a year ago, according to the National Restaurant Assn.
“A case of avocados is now $100, and it used to be about $60,” said Vega, whose family uses income from residential properties, filming at the restaurant and catering to help supplement the money they make from Casa Vega. “Limes were $20 a case, and now they are $60. Should we stop giving guacamole for free with all the dishes? No, we ride it out for customer consistency.”
Chefs are thinking of ways to adjust their businesses to manage rising costs.
“You’ll see more of a model where there’s a blurred line between chefs and servers,” Kleiman said. That’s already happening in San Francisco, where some restaurants have started using a grab-your-own-plates-and-silverware model to save money.
Chad Colby, chef-owner of the new Italian restaurant Antico in the Larchmont area of L.A., decided to employ just one crew member and have limited hours: dinners only, weeknights only. He said adding lunch would likely not be worth it because his labor costs would soar.
Raising prices might seem the easy solution . But that can be a risky move.
“You raise your prices [too much] and people are going to go to the restaurant next door,” Arrington said.
Or they’ll simply stay home, a choice many people are already making.
“It’s increasingly more affordable to eat at home and increasingly more expensive to eat outside of the home,” said David Portalatin, vice president and food industry adviser for the market research firm NPD Group. “Restaurants are bearing the brunt.”
Colby, who includes a 20% service charge on all checks, believes the solution is to have a fixed charge on the bill that can be used to help cover healthcare and wages for kitchen staff, which cannot legally be included in a tip pool with waiters.
“If you raise prices, it doesn’t necessarily distribute the way that it should,” Colby said. “People may get upset by the fixed charge because they don’t understand the intention behind it is to distribute that money evenly among the staff.”
Kleiman believes that all-in pricing, a model where everything is included in the cost of your meal and tipping isn’t allowed, is the solution more restaurants will turn to.
Casa Vega, which opened in 1956, is trying to keep up. While there’s a nostalgia factor that attracts a solid base of regulars, introducing a service charge or drastically raising prices to keep up with rising costs is not a viable option, Vega said.
“Do we sell our properties to float the restaurant?” she wondered. “Do we cut healthcare, which is against our moral values? Do we cut busboys and reduce the labor cost?”
These are questions Vega asks herself daily.
“We are a very busy restaurant and we are running on cents,” she said. “I hope costs stabilize a bit and stop increasing. I hope that as we are approaching$15 an hour, we can grow into it. And that we can keep our doors open.”
August 12, 2019
7 Core Beliefs of Great Bosses
Written by Travis Bradberry, Ph.D.
Great bosses change us for the better. They see more in us than we see in ourselves, and they help us learn to see it too. They dream big and show us all the great things we can accomplish.
Great leadership can be a difficult thing to pin down and understand. You know a great leader when you’re working for one, but even they can have a hard time explaining the specifics of what they do that makes their leadership so effective. Great leadership is dynamic; it melds a variety of unique skills into an integrated whole.
One thing is certain—a leader’s actions are driven by his beliefs. It’s through a leader’s actions—and ultimately her beliefs—that the essence of great leadership becomes apparent.
“I am just a common man who is true to his beliefs.” – John Wooden
Great leaders inspire trust and admiration through their actions, not just their words. Many leaders say that integrity is important to them, but only those leaders who truly believe it walk their talk by demonstrating integrity every day. Harping on people all day long about the behavior you want to see has only a tiny fraction of the impact that you achieve by believing so deeply in the behavior that you demonstrate it yourself.
Great bosses believe in their people, and this belief drives them to create an environment where people thrive. Let’s explore some of the driving beliefs that set great bosses apart from the rest of the pack.
- Growth should be encouraged, not feared. Average bosses fear their smartest, hardest-working employees, believing that these individuals will surpass them or make them look bad. They hesitate to share information or to enable authority. Exceptional bosses, on the other hand,love to see their employees grow. They are always grooming their replacements and doing whatever they can to create leaders. Research shows that the number-one thing job seekers look for in a position is growth opportunity and that 80% of all job growth occurs informally, such as in conversations with managers. Exceptional bosses want their best employees to maximize their potential, and they know that good feedback and guidance are invaluable.
- Employees are individuals, not clones. Average bosses lump people together, trying to motivate, reward, and teach everyone in the same way. Exceptional bosses treat people as individuals, respecting the fact that everyone has their own motivation and style of learning. Something different makes each employee tick, and the best bosses will stop at nothing to figure out what that is.
- Employees are equals, not subordinates. Ordinary bosses treat their employees like children; they believe that they need constant oversight. These bosses think that their role is to enforce rules, make sure things run their way, and watch over people’s shoulders for mistakes. Exceptional bosses see employees as peers who are perfectly capable of making decisions for themselves. Rather than constantly stepping in, exceptional bosses make it clear that they value and trust their employees’ work and only intervene when it’s absolutely necessary.
- Work can and should be enjoyable. Ordinary bosses see work as something that everyone has to do, whether they want to or not. They believe that their role is to make sure that their employees don’t slack off or grow lazy. They say things like, “If it weren’t for me, nothing would ever get done around here.” However, exceptional bosses love their jobs and believe that everyone else can too. They give people assignments that align with their strengths, passions, and talents. They celebrate accomplishments and douse people with positive feedback when they do good work.
- Diversity, not like-mindedness, bears fruit. Average bosses want their employees’ ideas to align with their own, and because of this, they try to hire like-minded individuals. They encourage their employees to think similarly and reward those who “just put their heads down and work.” Exceptional bosses actively seek out a diverse range of individuals and ideas. They expose themselves and their companies to new ways of thinking.
- Motivation comes from inspiration, not agony. Ordinary bosses think that strict rules and rule enforcement drive employees to work effectively. They believe that people need to fear layoffs, explosions of anger, and punishment in order to operate at 100%. People then find themselves in survival mode, where they don’t care about the product, the company, or the customer experience; they only care about keeping their jobs and appeasing their boss. Exceptional bosses motivate through inspiration—they know that people will respond to their infectious energy, vision, and passion, more than anything else.
Change is an opportunity, not a curse. Ordinary bosses operate by the motto, “This is the way we’ve always done it.” They believe that change is unnecessary and that it causes more harm than good. Exceptional bosses see change as an opportunity for improvement. They constantly adapt their approach and embrace change to stay ahead of the curve.
Bringing It All Together
If you’re currently a boss, is this how your employees would describe your beliefs? If not, you’re leaving money, effort, and productivity lying on the table. You’re also probably losing some good employees, if not to other jobs, then at least to disengagement and lack of interest.
Dr. Travis Bradberry is the award-winning coauthor of Emotional Intelligence 2.0 and the cofounder of TalentSmart® the world’s leading provider of emotional intelligence tests and training serving more than 75% of Fortune 500 companies. His bestselling books have been translated into 25 languages and are available in more than 150 countries. Dr. Bradberry is a LinkedIn Influencer and a regular contributor to Forbes, Inc., Entrepreneur, The World Economic Forum, and The Huffington Post. He has written for, or been covered by, Newsweek, BusinessWeek, Fortune, Fast Company, USA Today, The Wall Street Journal, The Washington Post, and The Harvard Business Review.
Opinion written by Michael Saltsman, Employment Policies Institute
The Golden State has long prided itself on being a global leader in protecting employees and the environment, but new evidence suggests the state’s “progress” on the employment side is hurting its environmental goals.
California’s minimum wage is rising rapidly toward $15, and the wage floor has already surpassed that level in a number of cities. The consequences for small businesses with narrow margins (and the people they employ) have been as tragic as they are predictable. For each dollar increase in the minimum wage in the Bay Area, a Harvard study found a 10 percent spike in closures for restaurants with average customer reviews. Elsewhere in the state, a University of California Riverside study identified a severe slowdown in restaurant growth.
These impacts on restaurants were expected, but a new victim gained notoriety last week: RePlanet, the state’s largest recycling chain. An early warning sign came three years ago when the company closed 191 recycling centers, citing a reduction in state fees and a steep increase in labor costs. This week, it announced the closure of its remaining 284 centers, marking more than 1,000 lost jobs.
A spokesman for the company stated that, in addition to changes in the market for recyclables, “the rise in operating costs resulting from minimum wage increases and required health and workers’ compensation insurance” made operation unsustainable. RePlanet isn’t alone in reaching this conclusion: Last fall, CBS reported that over 40% of California’s recycling centers closed in the past five years.
Beyond jobs lost by workers at these recycling centers, it leaves consumers without the ability to redeem bottle deposits — a $272 million missed opportunity, and one that many low-income Californians depended on.
The fallout from these closures has sullied the state’s “green” reputation. Reports from the California Department of Resources Recycling and Recovery, or CalRecycle, show that recycling rates for plastic and other beverage containers in the Golden State have dipped to their lowest point in over a decade. Prior to RePlanet’s announcement that it would close its remaining facilities on Aug. 6, it was estimated that over 3.5 million additional plastic beverage containers were littered or put in landfills daily as a consequence of the closures. This number will now grow immeasurably.
Recycling isn’t the only industry where California’s good intentions on minimum wage have hurt the state’s image. Iconic businesses with storied histories in the state, such as Broguiere’s Dairy in Montbello and Pann’s Diner in Los Angeles, have slashed hours or faced closure in response to rapidly rising labor costs. In Emeryville, a new minimum wage decimated its “Little City Emeryville” coalition of independent businesses — most of which closed, moved locations or sold their business, according to reporting in the E’Ville Eye.
Even working parents are hurting: The Los Angeles Times reported some families dependent on subsidized childcare have come to regret the increase in their pay, which has caused them to lose more in state assistance than they gained in their paychecks.
Some initial backers of $15 have wised-up to these realities. Bill Phelps, founder of the California-based franchise Wetzel’s Pretzels, was initially a proponent of the state’s new minimum-wage policy — even penning an op-ed for Forbes claiming it was “good for business.” Flash forward several years: Phelps now says the upcoming increases in the state’s minimum wage will “result in less jobs, less restaurants, and less service,” and he warns they’ll be “bad for employees.” Phelps’ biggest concern is that, by the time legislators acknowledge these consequences, it will be too late to fix them.
California’s Legislature is notoriously slow to acknowledge harm from its feel-good policies. (Case in point: I serve on the board of a trade association forced to sue California over a law called the Private Attorneys General Act, because legislators have lacked the political will to fix its transparent flaws.) If hundreds of business closures and thousands of lost jobs aren’t enough to convince Sacramento to fix $15, perhaps severe harm to the state’s “green” reputation is the wake-up call legislators need.
Article written by Andrew Khouri, Los Angles Times
Home builders are pulling back from new construction, the opposite of what economists say is needed to ease California’s housing affordability crisis.
In the first six months of 2019, builders gained approval for 51,178 new homes in California, nearly 20% fewer than the same period a year earlier. That puts the state on track for the first meaningful annual decline since the recession.
In the Los Angeles-Orange County metro area, total permits — an indication of future construction — fell by 25%, according to data from the U.S. Census Bureau. Single-family permits dropped 18.5% in the region, while those for multifamily projects such as apartment buildings — a category in which activity tends to be more volatile — fell 28.6%.
“We are going in exactly the wrong direction,” said Christopher Thornberg, founding partner of Beacon Economics.
Economists, developers and trade groups said the slowdown in permits has a simple explanation: It’s become harder to make money building homes.
Home prices and, to a lesser extent, rents, have softened as Californians find it harder to stretch their dollars and balk at stratospheric price points. Sales of existing and new homes have fallen, forcing some builders to cut prices on developments already underway.
In June, sales fell 8.8% in Southern California’s six counties. The median sales price was $541,250, up just 1.2% from a year earlier.
At the same time, construction costs are high and, by some measures, still rising. For new projects, builders said, there’s a limit to how low they can set prices or rents to stoke demand.
Builders cited the high costs for land, labor, materials and government fees, as well as tariffs on myriad building products and appliances. Over the last year, they said, the potential profit on many new projects has shrunk to the point at which it doesn’t make sense for builders or their financiers to take the risk.
“You can’t wish yourself into high rents and make a project feasible,” said Kevin Farrell, chief operating officer at apartment developer Century West Partners.
“No one is interested in doing loans to lose money,” said Scott Laurie, chief executive of Olson Co., which builds single-family and town homes throughout Southern California.
Last year, Laurie said, he walked away from a town home project Olson was planning in northern Orange County, giving up a $1-million-plus deposit, because construction costs jumped and he wasn’t confident potential buyers would pay a price that would make the deal pencil out.
According to John Burns Real Estate Consulting, costs for labor and materials rose 7.2% in June in Northern California compared with a year earlier, while home prices were essentially flat. In Southern California, costs rose 2.1% while prices increased 2%. In March, costs rose 4.1% while prices were flat.
Rick Palacios, director of research at John Burns, said developers are always cautious in a softening or declining market, fearful their projects won’t get filled. On top of that, the beginning of 2018 was a relatively strong time for housing construction, making the comparison with this year especially tough.
On the upside, Palacios said construction costs have shown signs of stabilizing. And some builders say lower mortgage rates have lured more people back into the market. The average rate on a 30-year fixed mortgage was 3.6% this week, down from 4.94% in November, according to Freddie Mac. The drop would save $314 a month if the buyer put 20% down on a $500,000 house.
In Los Angeles, developers have also flooded the city with proposals to build dense projects through a new program that loosened zoning and streamlined approval near mass transit lines. But many of those projects haven’t received approval or broken ground, and developers elsewhere still often face a lengthy approval process before they can build.
Even before sales slowed sharply over the last year, investors were focusing on deals with ready-to-build lots, or so-called entitled land, rather than projects that needed time-consuming government approvals to break ground. But now there are fewer lots ready to go and investors have grown even less optimistic, said Michael Marini, principal of developer Planet Home Living. “It’s worse now,” he said. “Everyone wants entitled land only.”
Permits have fallen nationally too, by 6% in the first half of the year. Thornberg, of Beacon Economics, said the decline is worse in California because the market has slowed the most on the most expensive homes, which fill much of coastal California.
He said it’s extremely difficult to build moderately priced housing in California, given high costs, tight environmental laws and neighborhood pushback that delays projects and drives up cost. He and other economists contend the main reason a 1,640-square-foot, 1920s-era house in Silver Lake sells for nearly $1.5 million is that for decades too few homes were built relative to population and job growth.
The slowdown in construction could shape some of the discussion about how to tackle the state’s housing crisis. Richard Green, director of the USC Lusk Center for Real Estate, said government should make it more profitable for private companies to build moderately priced homes by reducing fees and allowing more homes on individual lots.
Tenant groups have called for stricter rent control laws, viewing the private market as insufficient in tackling the crisis. Mark Vallianatos, policy director of advocacy group Abundant Housing LA, said government could also increasingly step in to subsidize projects or support nonprofit developers during a down cycle.
“We should use this slowdown as an opportunity to remove barriers to the traditional type of home building and also advance new ones,” he said.
In places like Oregon, Nevada and Arizona, it’s far easier to build moderately priced housing, said Dan Dunmoyer, president of the California Building Industry Assn. As demand softens, he said, companies in those markets can keep building for longer and, in a downturn, return quicker.
Laurie, of Olson Co., said land sellers also have gotten a bit “more realistic” with their pricing, which could help more builders like him break ground. But it’s still hard to find places to build the $400,000-to-$650,000 homes the firm specializes in.
“We want the same thing as the affordable-home buyers — they want to buy an affordable home and we want to build it,” he said. “But right now there is a limited amount of land to build to those price points.”
I’m Independent… and Want to Stay That Way
Article written by Scott Budman, NBC Bay Area
Samantha Saucedo drives for Lyft, she does it part time, and that’s just fine with her, thank you.
“My daughters have field trips, and I can attend to them,” she says. “One daughter went to yoga, one went skating, and I was there. Each time. I just turned off the app.”
Despite what you may hear, not all rideshare drivers want full-time jobs. Many of them, like Samantha, want flexibility. It’s why they joined the gig economy in the first place.
James Fox is a young man who calls himself an “independent contractor.” He turns on the app and drives for Lyft when he wants. “In San Francisco, there’s never a dull moment. I always have someone in my car. There are a million people looking not to park.”
Samantha, James, and several other Lyft and Uber drivers showed up at a WeWork office in San Jose to represent the I’m Independent Coalition, which says it represents 2 million people in California who want to remain just that – independent.
It says since last April, the California Supreme Court has made it tougher to be an independent contractor, negatively affecting some hairdressers, security guards, truckers .. and gig economy workers.
“They want to keep their flexibility,” says Kim Ericksen of the I’m Independent Coalition. “They want control over their own schedules, and their own incomes.”
As someone who has covered many a rally where rideshare drivers are pushing for full time status, it’s easy to think, well, everyone must want a full time gig. But then, I remember all the stories on TaskRabbit, DoorDash .. the list goes on. Some, apparently, want more freedom.
Rideshare driver Ezra Turner, who has driven for both Uber and Lyft, puts it this way: “I drive when I want. I start early, which allows me to drive when there’s not much traffic, and I get home when I want.”
And isn’t that what we want from a gig?