COUNCIL ASKED TO SUSPEND NEW DEBT.
Los Angeles City Council members called Wednesday for a moratorium on the city incurring more debt until a formal policy is adopted to prevent overborrowing that might harm the city's bond rating and fiscal health.
Council members Mike Feuer and John Ferraro introduced a motion that would halt all new borrowing while the city controller and city administrative officer work out differences on a policy to limit future borrowing.
Feuer and Ferraro proposed the measure after CAO Keith Comrie warned that the city will, in two years, face debt service payments that exceed 10 percent of revenue, the informal standard currently applied by the city. Some officials, including Comrie, have proposed raising the informal limit to 15 percent.
``In order to prevent the gradual erosion of the city's sound fiscal policy, it is imperative that the city adopt a comprehensive debt policy,'' Feuer said.
The proposal for a moratorium could impact on Mayor Richard Riordan's budget for next year, which is expected to include $650 million or more in new bonds for new police, fire and library facilities.
A spokesman for Riordan did not return phone calls Wednesday.
City Controller Rick Tuttle welcomed the proposal, which came a day after he warned that the city's bond ratings could be downgraded, making it more expensive for the city to finance important projects, unless it adopts a formal debt policy.
The Daily News reported last month that the city's debt totaled $14 billion, and cited a study done by the elected Charter Reform Commission that warned there was no central oversight and management of all the debt. The city's debt load does not include that of the Los Angeles Unified School District or the Metropolitan Transportation Authority.
Tuttle and others say the latest measures are consistent with the claims made in a recent letter to the Daily News by Tuttle, Ferraro and Councilman Richard Alatorre that defended the city's handling of debt.
``The fact is,'' the letter said, ``rigorous procedures and varied levels of review are required before debt can be issued, and the city goes to great lengths to ensure that all debt is properly administered.''
On Wednesday, the motion signed by Ferraro said, ``For too long, the city has had no formal, comprehensive policy on key public debt issues. We need one.''
Ferraro did not return calls for comment, but Tuttle said his previous comments referred to the past practices for issuing debt, which does not mean there isn't a need for a formal policy to guide future city leaders.
Tuttle proposed a policy limiting debt not approved by voters to 6 percent of revenue, because such debt does not have a secure revenue stream such as the taxes adopted for voter-approved bonds. He has not said what kind of cap should be placed on total debt.
Comrie has proposed limiting payments on non-voter-approved debt to 7.5 percent of revenues and limiting payments on total debts at 15 percent.
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||Mar 12, 1998|
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