BONDS TO HELP CITY PAY BUSINESS TAX SETTLEMENT.Byline: Patrick McGreevy Daily News Staff Writer The City Council voted Wednesday to issue bonds to cover a potential $50 million settlement over unfair business taxes, despite concerns the action may contribute to Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. exceeding its debt limit. The action came days after City Administrative Officer Keith Comrie warned the council that its debt could exceed 10 percent of annual revenue in two years, which could downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. the city's credit rating and increase the city's cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. . Council members Rita Walters Rita Walters (1930-) is currently the commissioner of the Los Angeles Public Library. Prior to this position, she served on the Los Angeles City Council representing the 9th district. During that time, she chaired the Arts, Health & Humanities Committee. , Jackie Goldberg Jackie Goldberg (born June 16, 1937) is an American politician and teacher, and a member of the Democratic Party. She is a former member of the California State Assembly. and Mike Hernandez raised concern about depending so much on debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay , but voted with the rest of the council to approve the new bond issue after Comrie said the city's reserve fund is down to $18 million and can't cover the court judgment. ``The liability could be up to $50 million and quite simply it's an issue of revenue availability,'' said Gerry Miller, an aide to Comrie. The $50 million judgment stems from a lawsuit by General Motors Corp. and other firms that charged that the city was overtaxing companies that sold products inside the city but that were headquartered outside the city. GM, which operated an auto manufacturing plant in Van Nuys until 1992, convinced the court that the city's tax was discriminatory because it exempted manufacturers within the city from paying a business tax on the sale of products but imposed that tax on manufacturers located outside Los Angeles. The $50 million represents the amount of refunds the city might have to pay to the firms after losing in court all the way up to the state Supreme Court. Comrie said the council will have to prioritize pri·or·i·tize v. pri·or·i·tized, pri·or·i·tiz·ing, pri·or·i·tiz·es Usage Problem v.tr. To arrange or deal with in order of importance. v.intr. spending as it begins to consider putting up to $1 billion in bond measures on the ballot this year for police, fire and library facilities. ``There are a lot of proposals on the table and we need to move cautiously,'' he said. Comrie said a proposal to finance repairs of city sidewalks could be switched from debt financing to a special tax. |
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