DEBT-LADEN CITY FREEZES BORROWING; LIMIT COULD AFFECT CONSTRUCTION PLANS FOR VAN NUYS.Byline: Patrick McGreevy Daily News Staff Writer Warned that the city's debt could jeopardize jeop·ard·ize tr.v. jeop·ard·ized, jeop·ard·iz·ing, jeop·ard·izes To expose to loss or injury; imperil. See Synonyms at endanger. its bond rating, the Los Angeles City Council  The Los Angeles City Council is the governing body of the City of Los Angeles, California, United States. voted Friday to declare a moratorium A suspension of activity or an authorized period of delay or waiting. A moratorium is sometimes agreed upon by the interested parties, or it may be authorized or imposed by operation of law. on new borrowing until a formal debt policy is drafted and adopted. The decision to restrict borrowing could affect efforts by Councilwoman Cindy Miscikowski Cindy Miscikowski represented the 11th District on the Los Angeles City Council for two full terms from 1997 through 2005. Previously, she was an aide to Councilman Marvin Braude and the Executive Director of the Skitball Cultural Center in its beginning stages. and others to get $40 million or more to rebuild the Van Nuys City Hall and to build a large city office building nearby. Miscikowski said she expects an agreement on the debt-restriction policy to come in a matter of weeks, so the moratorium itself should not harm the Van Nuys plan. ``I feel very confident that it's not going to interfere with the work that's going on regarding the Van Nuys project,'' Miscikowski said. However, with only $6.5 million in voter-approved bond money committed for the Van Nuys construction, any new debt policy that severely limits new borrowing could keep the project stalled. Deputy Controller Tim Lynch said he believes the shortfall in the Van Nuys project should be made up with already approved bond funds tentatively designated to make up any cost overruns Noun 1. cost overrun - excess of cost over budget; "the cost overrun necessitated an additional allocation of funds in the budget" cost - the total spent for goods or services including money and time and labor on the downtown City Hall renovation project. Another potential roadblock for the Van Nuys work is the city's use of nonvoter-approved debt. The downtown sports arena project and judgment bonds to pay a settlement in the General Motors business-tax lawsuit will increase nonvoter-approved debt and could severely hamper Mayor Richard Riordan's ability to use 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 in his next budget. ``Every year, certainly for the past several years, debt has played an important role in the balancing of our budget,'' said Councilman Mike Feuer. One source of revenue that was being looked at for the Van Nuys project was nonvoter-approved debt financing. Councilman Rudy Svorinich Rudy Svorinich (born 1960) is a Republican who served on the Los Angeles City Council representing the 15th district. A resident of San Pedro, his diverse district also includes the community of Watts. He was elected to the council in 1993 and served two full terns. Jr. likened the potential outcome of the city's borrowing binge to the actions of people who exhaust their credit cards and end up, for years to come, paying more in interest than on principal. ``I really do feel if we do not get a firm grasp on this quickly, it will not bode bode 1 v. bod·ed, bod·ing, bodes v.tr. 1. To be an omen of: heavy seas that boded trouble for small craft. 2. well for the people of this city, not in the far future but in the very near future,'' Svorinich said. The council took the action after City Administrative Officer Keith Comrie warned them that annual debt payments will exceed 10 percent of Los Angeles' annual general fund revenues in two years, if current borrowing trends continue. Feuer said that in talking with rating firms, including Moody's and Standard & Poor's, one concern is that debt has increased while the city's reserve fund has plunged from $180 million 10 years ago to $13 million today. The moratorium applies to debt not already approved by the council and which is dependent on the general fund for repayment. It would not preclude the city from getting voter approval for new police bonds tied to a tax increase. Feuer said exceeding the 10 percent limit without adopting a policy to better manage debt could damage the city's bond rating, hindering hin·der 1 v. hin·dered, hin·der·ing, hin·ders v.tr. 1. To be or get in the way of. 2. To obstruct or delay the progress of. v.intr. how the city provides services. ``The costs of funds to the city can go up if our ratings go down,'' Feuer said. |
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