Ex-City Manager Says He’ll Repay Disputed Loan : Government: Legitimacy of $30,000 personal loan from public funds has been questioned.

LYNWOOD — Michael T. Heriot, the Lynwood city manager who resigned last week citing personal reasons, said he will repay a controversial $30,000 personal loan from the city.

Heriot said in a letter to the City Council that he plans to use his retirement funds to repay the low-interest loan, which the council approved in January on a 4-1 vote. The city had been making deductions from Heriot’s paycheck until the city manager unexpectedly resigned.

Heriot said in the letter that he owes $27,176.15 on the loan, and the balance in his retirement fund is $29,139.41. He said he will pay off the loan when he receives his retirement check within two months. The letter was read aloud at Tuesday’s council meeting by Mayor Louis Heine.

Money for the loan came from the city’s general fund, according to public documents. Under the terms of the agreement, the city was to deduct $1,000 a month from Heriot’s paychecks until the loan was repaid. The loan carries an interest rate of 5.5%.

Councilman Armando Rea, who voted against the loan, said Heriot told the council he was planning to use the money for a personal investment. Rea said the council majority reasoned that the loan was legitimate because other cities have granted similar loans to city managers.

The agreement was criticized by some residents, including former Mayor Robert Henning. “The City Council is not protecting city funds,” Henning said before Tuesday’s council meeting. “You go to a bank for a loan, not to a city. We are dealing with public money here, and there is still no guarantee that we will get our money. All we have is a statement from Heriot, not a check.”

Heriot did not attend the council meeting and has not returned calls from The Times. It was unclear whether his resignation was related to the controversy over the loan.

The district attorney’s office is reviewing terms of the loan to determine whether to conduct an investigation, investigator Gail Ehrlich said. A Lynwood resident notified the district attorney’s office in March, Ehrlich said.

Although little case law exists regarding gift-of-public-funds cases, an attorney for the League of California Cities said that the test generally is whether the money was used for a public purpose.

“It’s a judgment call on the part of the City Council,” said JoAnne Speers, general counsel for the league. “That area of the law is not clearly defined because the concept of public purpose is very broad.”

Cities have made low-interest loans as part of compensation packages, Speers said. In some cases, the loans were to help finance the purchase of a house.

Councilman Louis Byrd said he voted in favor of the loan because he thought it was simply an advance on Heriot’s retirement fund.

Heriot had initially requested such an advance but apparently was told by officials at the Public Employment Retirement System in Sacramento that the retirement money was unavailable to him while he was still employed with the city. He then approached the city with the loan request.

Heriot joined the city in 1988 as assistant city manager. He became city manager a little more than a year ago when former City Manager Charles Gomez took a job in Honduras.

Assistant City Manager Faustin Gonzales has been named interim city manager.