The City Council voted Wednesday to try to renegotiate or terminate so-called interest-rate swap deals the city made with two banks in 2006 to finance wastewater system upgrades.
The action came after Fix L.A., an advocacy group that includes city employees and residents, pressed city leaders to get out of what they called “toxic” deals with Bank of New York Mellon and Dexia, a European bank.
On a 14-0 vote, the council instructed its financial staff to try to renegotiate the deals and report back in a month on the status of negotiations.
The council also asked City Attorney Mike Feuer to explore “legal remedies” against the two banks if the city cannot rework the loans.
If the banks refuse to negotiate, City Administrative Officer Miguel Santana will have to report back with the pros and cons of pursuing termination of the deals. Santana told the council today the banks have already refused to renegotiate and that terminating the deals would prove costly for the city.
Councilman Paul Koretz, the author of the motion, responded that Santana “has absolutely no credibility on this issue.”
Koretz suggested that the city attorney take the lead in renegotiating the deals.
It was unclear if Feuer has the authority to take on the renegotiation process, with Councilman Bernard Parks noting that the city charter may not allow it.
“If it were at all possible, I would like the City Attorney do it,” Koretz said.
The city struck the deals with the banks in 2006, essentially refinancing more than $300 million in bonds that were issued in the 1980s and locking in what was then considered a low fixed interest rate. But interest rates eventually dropped even lower thanks to a national recession. Officials from Fix L.A. contend the city has paid more than $100 million in interest to the banks.
