LA’s liability costs have been growing for years. The City Council is seeking a solution

Liability payments have cost the City of L.A. an average of 35% more each year since 2022, a new city report shows, growing faster than other large cities like New York and Chicago.

The City Council asked the city attorney and city administrative officer to look into ways to reduce liability risks back in October 2024, and their findings were presented to the Budget and Finance Committee last week.

The full City Council received the report Wednesday and approved recommendations from the Budget and Finance Committee to do additional research on options to bring down costs. The options to be researched include obtaining liability insurance for the city, setting up incentives for departments to reduce their risk and improving the planning and oversight of liability costs.

Slide from L.A. City Administrative Officer and City Attorney presentation to the Budget and Finance Committee on April 13.

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City of Los Angeles

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City Controller Kenneth Mejia found in June that liability costs — bills from legal settlements or lawsuits where the city was found liable — totaled $287 million last fiscal year and were the primary reason for the city’s budget deficit. The biggest source of those costs is the LAPD, which racked up $152 million in liabilities, followed by $44 million from the Bureau of Street Services. The controller updates the city’s liability costs by department on a public dashboard.

City Administrative Officer Matt Szabo told the Budget and Finance Committee last week that the city is on track to spend $207 million on liabilities this fiscal year, which ends June 30.

Slide from L.A. city administrative officer and city attorney presentation to the Budget and Finance Committee on April 13.

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City of Los Angeles

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What LA might do

“We already know that we have a serious liability as it relates to sidewalks and curb ramps and ADA compliance,” Szabo told the Budget and Finance Committee last Monday. “We know we have serious liability as it relates to the condition of our streets for both drivers, pedestrians and cyclists. We know what we need to do.”

He said actually reducing the risk of dangerous city infrastructure, though, would take a multi-year plan.

Mayor Karen Bass established a committee to write such a plan in October 2024. The committee was tasked with laying out the funding options and steps required to fix streets, sidewalks and other public infrastructure years in advance. The committee has not yet delivered a comprehensive plan.

The Charter Reform Commission recommended earlier this month that a capital improvement plan be required by the city, and if the City Council gives its approval, voters could make that a reality in November.

Along with better planning, Szabo told the Budget and Finance Committee there may be ways to stabilize costs through using liability insurance “in areas of predictable, ongoing liability.”

Insurance might help to reduce large swings in cost from year to year, according to the report from the CAO and city attorney but would likely increase the city’s total spending toward liabilities.

“No insurance company would provide this coverage to the city,” the report said, “unless the payment that it received exceeded the amount that it was required to pay in costs and payouts over a period of time.”

One option the city could consider to actually bring those costs down, Szabo said, would be to hold departments accountable for their own liabilities.

That could mean that departments that overspent their liability budget would have less to spend on other things, he said, but the City Council would need to weigh how that could change necessary city services.

Councilmember Bob Blumenfield said at the Budget and Finance Committee meeting that this strategy “makes a lot of sense” but might have some unintended consequences for certain departments.

“If we hold an infrastructure department liable, then that just means less infrastructure for the city,” he said. “Or if we hold the police liable, then we end up with less police, which doesn't hurt that department as much as it hurts the general public.”

Councilmember Katy Yaroslavsky said she doesn't want liability issues to be something the city keeps “punting down the road.” She said she hears often from constituents who are concerned about the dangerous state of L.A. sidewalks and wants to find solutions the city can act on.

“Let's start the conversation about really tackling each of these specific issues,” she said.