The Los Angeles City Council authorized staff to begin the process of borrowing up to $70 million to help cover the rising cost of civil lawsuit payouts, which have created a budget deficit.
The city has made over $135 million in liability payouts since the fiscal year began on July 1, which is $67 million above what was budgeted, according to a report from former City Administrative Officer Miguel Santana. He said higher liability payouts “appears to be a new trend.”
The payouts this fiscal year include an agreement last August to spend at least $200 million over the next 10 years to settle a disability lawsuit and a vote in December to settle lawsuits for a total of $8.15 million with the families of three men shot and killed by Los Angeles Police Department officers.
The motion asks for a review of existing cases so the budget’s liability account could be more adequately funded for the 2017-18 fiscal year.
Santana, whose last day on the job was Friday after serving as CAO since 2009, told the Budget and Finance committee he did not believe he had ever recommended a judgment obligation bond before.
Councilman Mitchell Englander expressed hesitation at the plan when it was before the Budget and Finance Committee on Jan. 9 and said it was like “putting a mortgage payment on a credit card.”
Councilman Paul Krekorian, the committee’s chair, also expressed hesitation but ultimately voted for the plan, with Englander being the only one on the committee voting against it.
The council vote went 11-1, with Englander voting against issuing the bond.
“There’s been a lot of work put into this report. With that, I would say the vast majority of it I agree with,” Englander said before adding that he still had the same criticisms he had voiced at the Budget and Finance Committee meeting.
Santana told that committee that it takes up to six months to issue the bond, and the council would have an opportunity to cancel it before that time.
Krekorian made a few amendments to the motion before it was voted on, and removed several items, including ones asking city departments to adjust hiring plans for the year and for staff to examine generating revenue from billboards on public property so that several council committees could discuss them.
The motion also directs city staff to look at ways to improve the city’s revenues, including creating collection agreements with short-term and vacation rental websites similar to one recently formed with Airbnb, and also instructs city departments to provide budget reduction suggestions and eliminate any new spending requests.
—City News Service