Only a few years after the Great Recession, a coalition of labor groups released a report this week that says Los Angeles City Hall spent $204 million in fees on “Wall Street banks” in 2013.
The Fix LA Coalition, which includes the Los Angeles County Federation of Labor, the Coalition of LA City Unions, and SEIU Local 721, among other groups, says the city spent less than that last year ($163 million) fixing and maintaining the worst roads in the nation.
See also: America's Worst Roads Are in L.A.
There is one caveat here:
The fiscal year ends in June. The city is headed for a $242 million deficit as budget-cutters will be sharpening their knives and union workers will be scurrying toward the shadiest corners of the farm.
That said, the coalition and its Fix LA report has a point: we're giving more than $200 million to the big banks that helped to get us into the Great Recession (and that we sometimes bailed out with taxpayer cash)?!
The cash includes investment manager fees ($133.1 million !!!), natural gas swaps described as hedges against fluctuating prices ($23.1 million), letters of credit (some of them unused – $17.9 million), bond insurance ($12.9 million), and more.
Particularly enraging is one of those “complex financial instruments” (Great Recession-era products sold by big investment banks) that is costing taxpayers dearly. The coalition explains:
Wall Street sold many cities, states and school districts complex deals called “interest rate swaps” that were similar in their risky nature to the predatory mortgages they sold to homebuyers.
The deals were sold on the assumption that they would save LA taxpayers money. But after the banks crashed the economy, the federal government drove down interest rates as part of the bank bailout, and now the banks are reaping a windfall at taxpayers' expense. LA is currently paying $4.8 million annually to New York Mellon Bank.
The City of Los Angeles is locked into a swap deal through 2028 that could cost taxpayers an additional $65.8 million. New York Mellon won't let the city out of the toxic deal unless it pays $24.7 million in penalties to terminate the swap. The city already paid NY Mellon $26.1 million in 2012 to terminate part of another swap that was costing the city an additional $2.5 million per year.
We're still not quite sure why City Hall is spending our money this way.
But the Fix LA folks think that something can be done. For one, nearly $106 billion in city taxpayer money flows through those big banks.
That gives City Hall leverage to renegotiate some of those fees. An SEIU reseacher involved in the report, Lisa Cody, told us:
The story of the day is L.A. streets are crumbling but we spend $200 million on bank fees. These fees can and should come down. Banks negotiate fees all the time.