City Council Moves Forward With $60M Loan To Cover Civil Lawsuit Settlements

LOS ANGELES (CBSLA.com) — The Los Angeles City Council voted Tuesday to move forward with a plan to borrow up to $60 million to help pay for civil lawsuit settlements – against the recommendation of the city controller’s office.

The plan moves forward, but the council maintained the option to back out if the city’s financial picture keeps improving.

Before the vote, Councilman Paul Krekorian pointed out that the city’s financial outlook was bleaker in January when the idea was first approved, and noted the looming threat by President Donald Trump to pull federal funding from the city or the entire state.

Amid other financial uncertainties, Krekorian recommended that the council authorize moving forward with the judgment obligation bond, but tacked on an amendment that the council would take another vote before it became official, likely in June or July.

“I think it would be foolish, frankly, to take that option off the table at a time when we still face so much uncertainty about where we might be in the coming fiscal year,” Krekorian said.

The motion was approved on a vote of 13-1, with Councilman Mitch Englander casting the dissenting vote. Englander had been against the proposal from the beginning, saying in January that it was like “putting a mortgage payment on a credit card.”

The City Council had already approved $67 million in settlement payments over what was budgeted when it initially approved the plan in January. At the time, the city faced a potential $245 million deficit for the current fiscal year.

Controller Ron Galperin wrote in a letter to the City Council on March 23 that the city should not take out the loan because the projected fiscal year-end deficit has been adjusted down to $38 million.

The payments this fiscal year include an agreement last August to spend at least $200 million over the next 10 years to settle a disability lawsuit.

The city had to dip into its reserve fund to help pay for this year’s settlements, which caused it to fall below 5 percent of the operating budget, and because the city tries to keep its reserve above 5 percent, former City Administrative Officer Miguel Santana recommended using a judgment obligation bond to reimburse the fund.

(© Copyright 2017 CBS Broadcasting Inc. All Rights Reserved. City News Service contributed to this report.)

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