L.A. NEEDS TO BORROW MILLIONS TO COVER LEGAL PAYOUTS

[1/10/17]  The Los Angeles City Council in recent years has repeatedly settled costly, high-profile lawsuits, agreeing to spend millions of dollars to end litigation brought by grieving families, disability-rights groups and people wrongfully convicted of crimes.

City Hall leaders championed some of the settlements as having a silver lining for taxpayers, such as one in 2015 that created a program to fix L.A.’s buckling sidewalks.

But a surge in legal settlements, along with court judgments against the city, is outpacing the city’s ability to keep up.

With payouts projected to total at least $135 million this fiscal year, budget officials said Monday that the city needs to immediately borrow up to $70 million to avoid dipping into its emergency reserve fund.

In a new report, the City Administrative Office said the gap reflected “a new trend of increased liability payouts.” The report recommended raising the money through a bond that would be paid back over 10 years.

Such borrowing would cost the city millions of dollars each year in interest and fees. Under one scenario discussed Monday, the city would pay $9 million each year in principal and interest on a $70-million bond.

Councilman Mitchell Englander voted against the bond at Monday’s budget committee meeting, arguing the city needs to do a better job allocating its money given the repeated lawsuits.

“We’re going to be in the same boat next fiscal year…it’s every year,” Englander said. The measure was approved, 4-1, and sent to the full council.

The city typically budgets $60 million a year for its legal liability fund, but has seen a significant number of settlements since the fiscal year began on July 1.

City Administrative Officer Miguel Santana said his office issued financial reports to the City Council for the last several years warning of costs to the city because of the lawsuits. He also called on the mayor and City Council to “significantly increase” the amount funded for liabilities.

“Ideally we would have budgeted more,” Santana said.

In August, the City Council agreed to a roughly $200-million settlement over a housing-related lawsuit brought by disability-rights groups, with the city expected to pay about $20 million a year.

Last month, the council agreed to an $8-million settlement to end lawsuits related to the fatal Los Angeles Police Department shootings of three unarmed men in separate incidents. The payouts are among the highest by the city for deadly police shootings in the last decade.