Council Hears New Plan to Pay Rampart Suits

A top Los Angeles manager recommended Monday that the city not pursue Mayor Richard Riordan’s plan to issue bonds against future tobacco settlement money to pay for lawsuits stemming from the Rampart police scandal.

The mayor’s proposal is premature and there appear to be less costly alternatives, said City Administrative Officer William Fujioka in a report to the City Council.

Fujioka said the city should instead set aside $20 million in reserves annually from the general fund to cover Rampart-related bills during the next few years and then consider issuing special bonds, as required by police lawsuit settlements, against city general fund revenue.

Judgment obligation bonds backed by the general fund could save the city 2% in interest and tens of millions of dollars over the proposal to bond upfront against less certain revenue from the city’s share of the national settlement with tobacco companies, Fujioka said.

“It’s a lower interest rate and it’s a more secure form of financing,” said Fujioka, who has been facing attempts by Riordan to remove him from office.

The chairman of the council’s Budget and Finance Committee, which will consider the report Wednesday, said he generally agrees with Fujioka’s recommendations.

“I do feel it would be less expensive than the tobacco fund approach,” said Councilman Mike Feuer.

Riordan is reviewing the report, but stood by his proposal to use the tobacco funds.

“The mayor feels good about what he proposed,” said Jessica Copen, a spokeswoman for the mayor.

The mayor’s office has argued behind the scenes that judgment obligation bonds tied to the general fund put taxpayers on the hook for repayment, but that using tobacco money shifts the risk to private investors who would buy the city’s right to the $300 million in tobacco funds.

Monday’s debate over finances is the latest round of bickering over the city’s response to the Rampart scandal, in which police officers are alleged to have framed innocent people, beaten others and covered up unjustified shootings.

The city attorney’s office has estimated that the city could face lawsuit payments totaling $125 million on just the first 99 cases.