Development Bank’s Budget Gets Council OK

The City Council on Tuesday unanimously approved the Los Angeles Community Development Bank’s business plan for the coming year, but the plan likely will be reconsidered Friday because many council members voted without reviewing or discussing it.

A spokesman for Councilman Mike Feuer said council members received copies of the inch-thick business plan just minutes before Tuesday’s vote. Because there was no time to review the plan, Feuer’s office asked that Councilman Mike Hernandez today move to reopen the matter Friday for discussion. Hernandez agreed to do so, said Feuer spokesman Daniel Hinerfield.

The plan incorporated significant new amendments by the Community and Economic Development Committee, although council members who don’t sit on that committee were unaware of the changes, Hinerfield said.

The committee directed bank officials to report back to the council in 90 days on some of the broader problems that have plagued the federally funded community lender. The bank’s default rate soared to 32% this year after its biggest and most controversial loan, to a South-Central dairy, ballooned to $24 million and went sideways. The loan exceeded the bank’s $20-million loan limit.

According to the committee recommendations, bank officials must address how to improve the relationship between the bank and the city so there is better oversight, and how they plan to correct the problem of the breached loan limit. The committee also moved to reduce that limit to $10 million and asked the bank to set guidelines for conditions under which the limit could be exceeded.

In addition, the bank must now inform the Community Development Department if it plans to exceed its loan transaction goals by more than 10%, and do so 30 days before actually exceeding that limit.

Linda Griego, the bank’s interim CEO, said all the recommended changes introduced Monday had been discussed at length with bank officials, who support them.

The business plan lays out the bank’s budget for the coming year, but also addresses past performance. Several council members have raised concerns about the condition of the loan portfolio. The bank has also consistently fallen short on its mandate to create jobs for residents of its target zone.

Although such concerns were first expressed a year ago, the mandate and performance of the bank has never been discussed in open session by the City Council. A motion by Councilman Rudy Svornich Jr. that directed two council committees to take up the issues was passed last February, but the joint committee meeting was never scheduled.

Claudia Vizcarra-Barton, economic development deputy to Councilwoman Jackie Goldberg, said council members viewed the business plan as separate from the more controversial issues of loan limits, default rates and oversight. Those issues will eventually come before the City Council for discussion once the bank submits its report in 90 days, she said.