In an effort to fund a $10.25 million budget deficit, the Long Beach, N.Y., City Council on Tuesday approved a resolution to submit a request to the New York Legislature to authorize the city to issue bonds.
Long Beach, which declared a fiscal emergency in February, is currently rated Baa3 by Moody’s Investors Service and is on review for downgrade.
If authorized, the issuance would have to meet certain criteria under New York state finance law for municipalities that incur debt to liquidate deficits. These include a review by the state’s comptroller, submitting a budget proposal to the state and preparing a three-year financial plan.
Jack Schnirman, who became Long Beach’s city manager in January, said that would mean additional annual budget scrutiny and review by state Comptroller Thomas DiNapoli.
“Let me first say very clearly what it is not. It is not a state control board, it is not a state takeover, it is not NIFA,” Schnirman said at Tuesday’s City Council meeting.
NIFA, the Nassau County Interim Finance Authority, last year imposed fiscal control over Nassau County, where Long Beach is located. Schnirman pointed to the control board as an example of a situation that he would like the city to avoid.
Photo: Abigail O’Brien-Scarchilli |
Moody’s analyst Rob Weber said that the agency views deficit financing as a sign of credit stress for a municipality. “What it does is it allows the district to eliminate the negative fund balances that it has accrued over the last couple of years,” he said. “What it doesn’t do is fix the ongoing negative variances and credit pressures.”
Long Beach Comptroller, Jeffrey Nogid said if it got approval, the city would issue bond anticipation notes. After the state comptroller completes an audit and determines the deficit amount — expected to be sometime this fall — it would take out the notes with $10 million to $15 million of bonds.
Bond counsel would be Orrick, Herrington & Sutcliffe LLP and the financial advisor would be New York Municipal Advisors Corp.
Nogid said officials have yet to determine if the bonds will be offered in a competitive or negotiated deal.
Last week, Schnirman announced that all exempt management employees, as well as elected officials, would begin paying 10% of their health care costs starting July 1.
“We all have to share the pain, and we feel that it is very important for management to lead by example,” said City Council vice president Len Torres.
Schnirman also explained how Long Beach got into its situation — revenues were overestimated and expenditures were underestimated — and how he hopes to get the distressed city out.
“Going forward, we have to make our cost go down and our revenue go up. It’s very simple,” he said.
To increase revenue, Schnirman said they will seek additional grant opportunities, fee-for-service models and public-private partnerships. The City Council will vote on or before May 31 on final adoption of a budget that will take effect on July 1.
“Moody’s is watching,” Schnirman said. “They’re waiting to see what we do at the end of this budget process so they can affirm this rating or downgrade us.”
