The Los Angeles City Council voted Tuesday to begin preparations to sell $60-million in judgment obligation bonds, at a cost to taxpayers of about $20-million.
Councilman Paul Krikorian said the bond money may be needed to replenish a reserve fund.He said that fund could be critical if the City is found liable in another, "horrendous," lawsuit, for possible funding cuts due to the Trump administration, and to cover even more costly pension fund obligations.
"As it stands now I would not go forward," Krikorian told the Council.
"But conditions could worsen in coming months, and if they do, then I believe we need to have...that option available to us in case we need it," he said.
The Council voted 13 to 1 to begin the financial planning for the bond sale, that alone was expected to cost about $100,000.
The Council began to consider the bonds after the City's administrative office warned the deficit for the current fiscal year could reach $245-million, according to the City Controller's Office.
That forecast has now shrunk to $38-million, and the once-depleted reserve fund has been restored to within about $1-million, according to a letter sent to the Council from Controller Ron Galperin.
"I believe that debt financing of liability claims should only be used in extraordinary circumstances and in times of great need," Galperin wrote, warning the Council not to move forward with the borrowing.
"We strongly encourage you to once again make the fiscally responsible choice, rather than committing the City to spending $20-million in interest over the next 10 years for a one-time gain of $55-million in 2017," he wrote.
The Council will have to vote again before any bonds can be issued.
-- Eric Leonard (@LeonardFiles)