L.A. URGED TO ADOPT DEBT POLICY; OFFICIALS DISAGREE OVER WHERE TO SET RED-INK LIMIT.

Byline: Patrick McGreevy Daily News Staff Writer

Saying Los Angeles' bond rating could be at risk, City Controller Rick Tuttle called on the mayor and City Council Tuesday to adopt a formal debt policy that would limit non-voter approved debt payments to 6 percent of revenue, among other curbs.

City debt payments now are approaching 9 percent of revenues. Of that, 5.5 percent is non-voter approved debt.

In a letter to Mayor Richard Riordan and Council President John Ferraro, Tuttle warned that bond rating agencies consider it risky when cities commit more than 10 percent of their general fund revenues to debt payments.

``If it (debt policy) doesn't get adopted, the debt will continue to slide into an area where there is a danger zone,'' Tuttle said. ``We're not there yet. But there is a lot of pressure to go there.''

But the city's top administrator - noting that Los Angeles' total debt payments would likely exceed 10 percent of revenues within two years - suggested the city lift its informal ceiling to 15 percent.

City Administrative Officer Keith Comrie also proposed that the limit on non-voter approved debt payments be 7.5 percent of revenues and the limit on voter approved debt be another 7.5 percent.

Comrie said bond rating agencies have indicated his proposed policy would be acceptable and ``by itself would not result in a negative credit rating.''

But Tuttle said he is concerned that debt not approved by voters and linked to special taxes is competing for general funds without secure revenue streams.

The competing reports are part of a larger struggle by officials within the city, which has no comprehensive debt policy, over just how much red ink Los Angeles can handle - and as Riordan considers putting a bond issue to voters as part of the new budget he is expected to unveil next month.

The Daily News reported Feb. 6 that city departments are carrying about $14 billion in debt. Including debt owed by independent city agencies like the Department of Water and Power as well as the school district, the burden to individual taxpayers is $1,595 - which Tuttle noted exceeds a rating agency median of $1,531 for other major cities.

Comrie and Tuttle both endorsed using figures by Moody's that show what the median debt ratio is for large cities, including the debt compared to assessed value and per capita debt.

The Moody's median for direct per capita debt is $880, which is above the $526 in direct per capita debt caused by the general fund in Los Angeles.

But, in developing a comprehensive debt policy, Tuttle advised the city to begin figuring all of the debt burden facing Los Angeles taxpayers, including the $2.4 billion in bonds approved for the school district in Proposition BB and the $7.5 billion in debt incurred by the city Department of Water and Power.

Tuttle also voiced concern that the situation for city taxpayers will only get worse as the school district issues $300 million in Proposition BB bonds annually in the coming years.

``It's heading north,'' he said of the debt.

City records indicate the overall debt per capita could reach $2,207 in six years.

Tuttle also said the debt per assessed value could exceed the Moody's median level in a few years if overall debt is considered.

Deputy City Controller Tim Lynch said some of that pressure is expected to come in the mayor's new budget to be presented next month.

The competing reports proposing debt policies were presented Tuesday to the council's Budget and Finance Committee, where members voiced support for adopting some form of comprehensive debt policy after they review the plans.

Feuer said he plans to introduce a motion today to enact a city debt policy, although he was not sure late Tuesday which proposals he will favor.