Good morning! Welcome to L.A. on the Record, your City Hall newsletter. Dakota Smith and David Zahniser bring you the latest in local political news. Recently, Los Angeles has faced financial challenges, largely due to skyrocketing legal settlements and court judgements against the city. City departments exceeded their budget by at least $215 million since the fiscal year began on July 1. A significant portion of this overspend stems from lawsuits. To address these challenges, city leaders are considering borrowing money to manage legal payouts. While this strategy provides immediate relief, it adds to the city's overall debt.

On Wednesday, a committee meeting set the stage for borrowing at least $80 million using a judgment obligation bond. This bond aims to cover payouts from issues like police misconduct, buckled sidewalks, and discrimination claims. City Administrative Officer Matt Szabo emphasized the urgency of this move to halt financial losses. Typically, Los Angeles issues bonds for tangible assets like building repairs, but borrowing for ongoing legal expenses is less favored due to interest costs. Current interest rates mean borrowing $80 million could cost up to $20 million in interest. To compare, the Cultural Affairs Department's annual budget is $18.6 million.

The council must approve this bond proposal, expected to bear a 2.73% interest rate. If passed, the city would use its reserve fund to settle legal bills and repay it through the borrowed funds. Budget Committee member Traci Park expressed her concerns about resorting to debt financing without tangible benefits, noting recurring legal issues. City Controller Kenneth Mejia critiqued the borrowing plan, pointing to future limitations on project funding due to interest costs. The last judgment obligation bond was issued in 2010 for over $53 million, covering legal settlements related to incidents like the 2007 May Day Melee in MacArthur Park.

In 2017, the council considered borrowing $60 million for significant legal payouts but dropped the idea. During the COVID-19 pandemic in 2020, economic declines prompted discussions of borrowing, but federal relief provided $1 billion, rescuing the city's finances. Szabo urged the council to identify budget cuts across departments to replenish the reserve fund this fiscal year. As the upcoming City Council elections loom, new council members may face budgetary decisions, alongside determining whether to renovate the convention center for the 2028 Olympics. A potential Trump presidency could also impact city funding.

Mayor Karen Bass's spokesperson, Zach Seidl, assured that the city's initiatives aim for stable financial footing. Despite financial strains, optimists note decreased homelessness, higher LAPD applications, and improved compensations for city workers. Turning to politics, the upcoming Tuesday election involves three council races and several ballot measures. Key focus is on Council District 14, where tenant rights attorney Ysabel Jurado challenges incumbent Kevin de León amidst controversies. The race continues to debate police presence and the idea of abolishing police, with the police union endorsing Nazarian and De León.

Meanwhile, the Democratic Socialists of America support Burgos and Jurado. Controversies include alleged campaign donations from De León's supporters and accusations of harassment by activist Najee Ali, affiliated with De León. In other news, former Sheriff Jim McDonnell could earn over $507,000 annually as the city's police chief, pending council approval. A new ethics enforcement agency for the county could cost around $22 million annually and require 93 new hires, dwarfing the city's current budget. The City Council is revising eviction rules for renters and beefing up renter protection laws, demonstrating ongoing urban policy evolution.

A county investigation found issues in contractor suspension processes and award transparency, yet no widespread fraud. Meanwhile, District Attorney George Gascón utilizes social media to boost his campaign, reflecting on his office tenure amidst polling challenges. Also, the DWP's Aram Benyamin announced his stepping down despite earlier expectations he might lead the utility. It's a dynamic time in L.A. politics, and we're here to keep you informed. Stay tuned for updates!