Long Beach, N.Y., names 'turnaround specialist' to tackle fiscal woes

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Financially struggling Long Beach, New York, which is just two notches above junk status, has tapped a municipal finance veteran with experience stabilizing distressed municipalities to try and steer a turnaround following years of structural deficits.

The Long Beach City Council appointed Donna Gaden as interim city manager last week marking the fourth person to hold the leadership post since 2017. Gaden, who was most recently the interim finance director for the Illinois cities of Country Club Hills and Bradley, brings more than 25 years of financial management with the last decade spent operating as “turnaround specialist" helping multiple municipal governments overcome fiscal challenges.

Long Beach, New York was forced to raise property taxes by 7.9% last year and 10.26% in 2018 to combat declining reserve levels.

“Donna brings with her the fiscal and budgetary skills Long Beach desperately needs at this stage," Long Beach City Council president John Bendo said in a statement. "We need a fresh set of eyes not bound by past practices or beholden to any interests except those of Long Beach residents if we're going to get out of this mess."

Moody’s Investors Service downgraded Long Beach’s general obligation bonds one notch to near-junk Baa2 from Baa1 in February 2019 citing escalating deficits and dwindling reserves. Moody’s also kept Long Beach on a negative outlook it first assigned in May 2018 when it faced a cash crunch after the city council failed to pass a $2.1 million bond measure for funding employee obligation payments.

State Comptroller Tom DiNapoli released an audit last year showing that Long Beach overpaid former city employees $500,000 in separation payments for unused sick and vacation time. The state report also noted that Long Beach issued roughly $15 million of bonds to cover employee separation payments since fiscal 2012.

"While it's certainly a daunting task, I look forward to the challenge of helping to restore a sense of trust in government among residents and pride of work among the city's employees,” Gaden said in a statement. “This is what I do.”

Gaden, who replaced acting Long Beach city manager John Mirando, held previous leadership stints with the local governments of Fairburn, Georgia, Hazel Crest, Illinois and Glenwood, Illinois. From 2006 to 2010, Gaden was comptroller and vice president of finance for Illinois’ Cook County Community and Economic Development Association. She oversaw an annual budget of $225 million at the CEDA, which is the nation’s largest community action agency.

Mirando, who was previously a Long Beach public works commissioner, resigned in late February marking the third city manager lost since 2017. Previous longtime City Manager Jack Schnirman left in January 2018 after he was elected Nassau County comptroller.

“The city manager essentially functions as the CEO of Long Beach,” Moody’s analyst Robert Weber wrote in a Feb. 28 report. “The management turnover is a contributing factor in the city's structurally imbalanced operations and makes the prospect of a financial recovery more difficult, a credit negative for the city.”

Weber noted that while reserves have largely stabilized, Long Beach’s fund balance remains “minimal” compared to operating revenue and the city has been borrowing for operating expenses. Property taxes were raised 7.9% last year and 10.26% in 2018 to combat declining reserves. The city’s outstanding debt climbed to $112.5 million from $50.6 million between fiscal 2013 and 2018 , according to Moody’s.

Long Beach, which is located 35 miles east of Manhattan on Nassau County’ South Shore, was hit hard by Superstorm Sandy in October 2012 forcing a major infrastructure rebuild. The seaside city has an estimated year-round population of 33,407 that grows much larger during the summer months.

Before Sandy, Long Beach was on the verge of bankruptcy in 2011 prompting a five-notch credit downgrade by Moody’s. The city received two separate one-notch Moody’s upgrades in 2015 a year after using deficit-reduction bonds.

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