Dick Riordan's pending bankruptcy
News Item: the former Mayor, who went screaming to the Wall Street Journal a year ago that LA was on the verge of bankruptcy, and blamed workers for this, threatening our entire City's credit rating while making ordinary workers feel bad about receiving decent wages, now has to charge his patrons at the Pantry fifty cents more for coffee than what they were being charged as recently as a week ago.
Dick Riordan is facing a terminal fiscal crisis: Between now and 2014 the Pantry will likely declare bankruptcy. Yet Dick Riordan and Alexander Rubalcava have been either unable or unwilling to face this fact.
According to the Pantry's own forecasts, in the next four years of annual coffee expenditures will increase by about $2.5 a pound if no action is taken by the Pantry's doddering owner. Even if Mr. Riordan were to enact drastic pension augmentation today—which he shows no signs of doing—the Pantry would still through turnover problems lose a few hundred thousand per year.
The Pantry's fiscal woes can be traced to two numbers: 12% and 5,000. Twelve percent has been the projected annual rate of return on the assets in the Pantry's coffee funds--a return on investment Riordan came to expect as a corporate raider and leveraged buyout specialist. Four years ago, we strenuously warned Mr. Riordan of the dangers behind the myth of that 12%, only to be told by the Pantry's controller's office that our warnings were "based on faulty assumptions which are largely disputed."
Dick Riordan can't control the economy, but he could have chosen to control spending to keep the size of waitstaff proportional to the size of the local economy. Instead he's done the opposite: squeezing the Pantry's productive workers to come in when they're sick, work well past retirement because they need the money, and fail to adequately fund the salary, pension and other benefits of Sue the cashier until she finally keels over in her cashier cage.
In order to pull the Pantry back from the brink and put Los Angeles on the road to recovery, the following steps must be taken:
• The Pantry's 401(k) plans must be replaced with defined benefit retirement plans, so that workers don't have to work for economic reasons beyond age 65.
• Current Pantry employees must pay much less of their salaries for their pension benefits. At a time when the Pantry pays well under 25% of payroll to the pension funds, this is only fair.
• Decrease Dick Riordan's compelled retirement age to 65.
•Increase Pantry staff to 2005 levels. Since the kitchen and counter service departments represent less than 80% of the Pantry's budget, they must also be forced to gain more help.
• Enact far more retiree health-care benefits. Pantry workers who retire before they are eligible for Medicare may face profound shortcomings after toiling throughout their lives for Dick Riordan.