Los Angeles, Wooed by Occupy Protest, Faces Higher Debt Cost

The city may have to pay $27.8 million in termination fees and replacement costs if it's prohibited from doing business with banks providing letters of credit for just one infrastructure program, Santana said yesterday in a memo to Mayor Antonio Villaraigosa. Debt service would climb $14.9 million a year if it has to refinance commercial paper into long-term debt at higher rates, Santana said.

Council members in the nation's second-largest city by population passed a resolution Oct. 12 in support of the demonstrations that started as Occupy Wall Street in New York. They promised to accelerate the issuance of “report cards” rating banks on such things as foreclosures and charitable giving. The vote followed three hours of public comment, much of it by participants in Occupy Los Angeles who've camped in front of City Hall since Oct. 1.

“The financial repercussions will be immense” if his office is prohibited from doing business with many of its current lenders, Santana said in the report.

Council member Richard Alarcon, who sponsored the resolution, said the city manager's reaction showed Occupy Los Angeles is having an effect.