The city of Los Angeles is heading toward bankruptcy, and city officials hope to solve the problem by borrowing a whopping $80 million.
One report says city officials are spending millions of dollars overspending, at least $215 million over budget for the fiscal year that begins July 1. financial analysis It was first reported that Los Angeles Times.
At last week's meeting, City Council members, including City Administrator Matt Szabo, proposed borrowing $80 million through a “judgment bond” to cover the costs of litigation against the city.
These legal issues include payments for misconduct by Los Angeles Police Department employees, discrimination claims by city employees, and accidents caused by aging infrastructure.
Cities often borrow money to pay for infrastructure repairs and updates, but taking out loans to pay for ongoing litigation is a whole different ball game for one important reason: interest.
Based on current interest rates, an $80 million loan could cost Los Angeles as much as $20 million in interest. According to the Los Angeles Times, the interest payments are roughly equivalent to the entire city department's budget.
The bond proposal is expected to carry an interest rate of 2.73% and is still awaiting approval.
City representatives spoke out against the risk of accumulating interest on such large loans.
“This is short-sighted and irresponsible, as there is no plan to hold departments accountable for their debt or provide funding to underinvested departments (public works, animal services, etc.),” Los Angeles City Commissioner Kenneth said. Mejia said. I wrote it in X's post.
Mejia uploaded a series of posts through his X account warning that the city was “going bankrupt.”
Mejia said the city has already spent $141 million in restitution payments in the first four months of the new fiscal year. Los Angeles, on the other hand, has an annual budget of just $87 million, he wrote.
If the City Council approves the $80 million loan, the city would use reserves to pay legal costs and use borrowed cash to replenish the reserves.
Los Angeles Mayor Karen Bass did not respond to a request for comment.
