LOS ANGELES — The Los Angeles City Council approved plans to issue a $60 million judgment obligation bond to cover millions in legal settlements and close a budget gap.
The 13-to-1 vote in favor of the bond issue Tuesday comes after City Controller Ron Galperin recommended against such a move two weeks ago, saying the budget gap has shrunk.
Though the city is better off than it was earlier in the year when former City Administrative Officer Miguel Santana first recommended issuing the bond, Budget and Finance Committee Chair Paul Krekorian advocated for the city keeping its options open.
"We still face tremendous uncertainty with the president threatening to cut off all federal funding to the city and the state," Krekorian told council members prior to the vote.
Krekorian also mentioned that the stock market appears to be overheated and the city should protect the city's 5% reserve fund to protect against an economic downturn.
The city is also looking at $48 million in unbudgeted liabilities from lawsuits, he said.
When Santana proposed the bond issuance the city faced a potential $245 million deficit in the current year operating budget, but that deficit now stands at $38 million, according to the controller's March 1 revenue forecast.
"Given the improvement in the city's fiscal outlook, it no longer appears that issuing a Judgement Obligation Bond is necessary to maintain compliance with the 5% Reserve Fund policy," Galperin wrote in his letter to the mayor and City Council.
"I believe that debt financing of liability claims should only be used in extraordinary circumstances in times of great need," Galperin wrote.
The CAO will come back to the council for a vote to reconsider the issue before moving forward with issuance.
"As it stands now, I wouldn't go forward, but I would like to have that option," Krekorian said.
City Councilman Mitchell Englander cast the only dissenting vote.
The estimated cost to lay the groundwork for the bond issuance is $100,000, according to Ben Ceja, assistant city administrative officer.