The city of Los Angeles is going broke – and city officials want to fix the problem by borrowing a whopping $80 million.
City departments have been overspending in the millions, going at least $215 million over budget for the fiscal year that started July 1, according to a financial analysis first reported by the Los Angeles Times.
During a meeting last week, city council members, including City Administrative Officer Matt Szabo, proposed borrowing $80 million through a “judgment obligation bond” to cover the costs of lawsuits against the city.
These legal matters include payouts for misconduct by LAPD officers, discrimination claims by city workers and accidents caused by deteriorating infrastructure.
While the city often borrows money to pay for infrastructure fixes and upgrades, taking out loans for ongoing legal costs is an entirely different ball game for one important reason: interest.
An $80 million loan could cost Los Angeles as much as $20 million in interest based on current rates. That interest payment is roughly the size of an entire city department’s budget, according to the Los Angeles Times.
The bond proposal, which is expected to have a 2.73% interest rate, is still awaiting approval.
City representatives spoke out against the risk of accumulating interest on such a massive loan.
“With no plan to hold departments accountable for their liabilities or fund underinvested departments (e.g. Public Works, Animal Services, etc.), this is short-sighted and irresponsible,” LA City Controller Kenneth Mejia wrote in a post on X.
Mejia has uploaded a series of posts via his X account warning that the city is “going broke.”
The city has already spent $141 million on liability payouts in the first four months of the new fiscal year, according to Mejia. Meanwhile, Los Angeles’ annual budget is only $87 million, he wrote.
If the council approves the $80 million loan, the city would use its reserve fund to pay off the legal charges, then refill its reserve with the borrowed cash.
Los Angeles Mayor Karen Bass did not immediately respond to a request for comment.
Credit: Source link
