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Council approves revised plan to keep Los Angeles Community Development Bank operating
Summary
After extensive questioning about past loans and financial exposure, the City Council on March 27 approved a limited, revised business plan for the Los Angeles Community Development Bank and accepted staff recommendations to maintain the bank's current oversight structure, approving the item 12-0 as amended.
The Los Angeles City Council voted 12-0 March 27 to approve a revised business plan and continued oversight arrangement for the Los Angeles Community Development Bank, while directing additional reporting and asking the bank to adopt clearer job-quality criteria for lending decisions.
The council heard several hours of testimony from staff and council members about the bank's problematic lending history and current portfolio. Lisa Johnson of the Office of Administrative and Research Services told the council that the bank originally deployed roughly $97,000,000 in loans; about $45,000,000 of that has been defeased or retired and the remaining portfolio is roughly $52,400,000. Johnson said about 93 percent of the remaining portfolio is classified as high risk or troubled credit.
Council members said the bank's mission — lending in markets that traditional banks avoid — remains valuable but flagged past management and outside pressure to make poor loans. Councilman Hernandez, who has worked on the bank since its inception, and others described structural decisions intended to keep the city at arm's length from daily bank operations. Staff recommended keeping the existing distance in oversight because, they said, the bank has made management improvements and shows potential to operate productively in a smaller, more controlled manner.
Councilman Feuer sought and won an amendment requesting that the bank adopt explicit criteria for what counts as acceptable job creation or retention tied to lending decisions and provide those criteria in future reports. Feuer said raw job numbers are insufficient without standards on wages, career paths and benefits. The council approved item 7 as amended, with the amendment asking the bank to define and report job-quality criteria in quarterly reports.
Why it matters: The bank was created to channel credit to underserved neighborhoods. Council members described past missteps that produced high-risk loans; staff described the current plan as a ‘‘get-well’’ approach intended to stabilize the bank and preserve its ability to provide community lending in the future.
Next steps: The bank will continue limited operations under the approved business plan. Staff and bank leaders will provide quarterly reports back to council, including the requested job-criteria and loan-performance updates. Council members said they will review exposure from outstanding litigation and loans in subsequent reports.
