At the same time, it generated a dispute between Councilman
Koretz, who has been leading the effort to renegotiate the rate swaps, said he does not trust the CAO's office on the issue because of the different opinions it has offered as to the benefits of the swap.
But CAO Miguel Santana said he was not in charge when the rate swaps were originally developed, and he has been trying to get the banks, New York Mellon and Drexia, to renegotiate the deals.
In 2006, the city agreed to interest rate swaps to reduce its borrowing costs for a wastewater treatment system. However, the city was unable to take advantage of the proposal because the recession soon hit. As a result, interest rates were driven lower, but the city was unable to refinance its debt because it was locked into the interest rate swap.
"We are stuck in this deal," Koretz said, adding the city signed a 22-year agreement, whereas private companies were using it for only one or two years.
Koretz said he wanted a report back within the next month so the city could resume negotiations with the banks.
City unions have been pushing the renegotiation as a way to free up tax dollars for other services. However, Santana said the money could not be used for general fund services because it comes from a special bond measure approved by voters for wastewater projects.
(c)2014 the Daily News (Los Angeles)
Visit the Daily News (Los Angeles) at www.dailynews.com
Distributed by MCT Information Services