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Councilman Questions City Manager's Numbers

As Jack Schnirman presents overview of city's finances, Mike Fagen challenges his hiring practices.


Days before the city announced a plan to borrow $6 million last Friday, City Manager Jack Schnirman was defending his financial projections to a member of his Democrat administration.

Schnirman’s slide presentation at the City Council’s March 20 meeting emphasized that the city must close a $10.2 million deficit before the proposed 2012-2013 budget is adopted next month, or suffer consequences. “If the city’s deficit is not closed, we would lose access to the bond markets, because we would be downgraded again to junk bond status, and be forced to seize many of the city’s critical functions,” said Schnirman, referring to Moody’s Investors Service downgrade of the city’s bond status in December.

Councilman Mike Fagen, however, questioned Schnirman’s management since he was appointed in January, telling him he has done little to stem a growing deficit that was $6 million in December: “There have been no really substantive, mitigating measures, and a month from now we’re going to have to tell the citizens what the real numbers are.”

Schnirman countered that since January the city has saved about $1.2 million through different measures, including reductions in overtime and management salaries.

Fagen also challenged Schnirman’s hiring practices, particularly those involving management-level employees that left.  

“It’s my understanding that you are trying to fill those positions at this time,” Fagen said. “But we’ve also created new positions at additional costs to the taxpayers at a time when we’ve cut CSEA grades, and at the same time that we’re showing the people that we’re $10 million in deficit. I’m not buying this.”

Schnirman reiterated numbers he noted during his presentation: since he took office the city has reduced spending by $258,000 on management appointee salaries, and he asked for a sense of proportionality when considering that such salaries amount to about 6 percent of the city’s budget.

He said the deficit is about 12 percent of the city’s $83.6 million budget. In anticipation that someone may ask why the city can’t just cut 12 percent to balance the budget, he answered: “No, it’s not as simple as a household budget. We have contracts; we have obligations. So the city cannot just unilaterally make changes.”

To help close the deficit, the city will use a $1.5 million budget note that the city borrowed last November for retirement payouts. Schnirman maintains that the city is in the red due to the prior Republican administration’s failure to budget for retirement payouts, overestimating revenue projections and reducing the “rainy day” reserve fund from $14.7 million in 2008 to $107,000 last July.

Resident Kevin Heller, who said he studied the city’s finances in depth and believes bankruptcy is possible, supported the new administration’s move in January to declare a fiscal emergency as a step toward correcting the city’s finances, but he suggested his support is waning.

“The newcomers to the City Council and Mr. Schnirman convinced the public that they would be different,” Heller read from a statement. “They would end the friends and family hiring practices and put the fiscal budget back on a reasonable path. However, instead you have created a huge credibility gap by doing the exact opposite.”

Heller accused Schnirman of filling jobs with friends (some with questionable credentials) and giving raises while declaring a fiscal crisis, and called on him to roll back salaries and eliminate newly created jobs.

“Taxpayers can’t afford more taxes,” said Heller, adding that many people he grew up with in Long Beach are moving. “They just can’t. You have to tackle the cost structure. It’s the only thing that can be done.”

Council President Fran Adelson agreed and asked Heller to join a newly formed Citizens Budget Advisory Commission.

Meanwhile, Fagen accused Schnirman of not preparing or guiding the public on the eve of introducing a budget. “It’s imperative that the people understand what’s coming their way,” said Fagen, who indicated higher taxes and fees are inevitable.

But Corporation Counsel Corey Klein, the person who has sat longest on the present council, defended Schnirman, saying he is the first city manager to give budgetary analysis so early. “Usually we hear these things sometime in May while the budget process is still going on,” Klein said.

The city manager’s office has worked diligently with the comptroller in gathering information, Klein said, and added, “I wouldn’t be commenting on it if I didn’t think it was a step in the right direction.”

Schnirman said that from day one his office has issued information, findings and reforms as they have received them. “[T]hat is exactly what we promised the City Council and Moody’s Investors; we’ve put that out there in full transparency,” he replied.

DR. Jay May 23, 2012 at 12:40 PM
Who Else took cuts ? What about the hefty raises he handed out..
Kevin Heller May 23, 2012 at 01:29 PM
Thanks James. Although I do work in finance, I cannot claim to be an expert in municipal finance, union/contract negotiations or political hiring/firing. When I speak, I hope it is understood that I am not claiming to be an expert but rather offering my opinion and observations as a (hopefully reasonably) informed citizen. I agree with the sentiments behind your remarks and as you know made my comments publicly at council meetings earlier this year. There is no question that in 2012 there were a number of politically motivated firings and hirings. No question. It appears to me that this is typically (& wrongly I might add) the normal course of business when a new political party comes into power. However, part of these new City Council people’s platforms was that they would put an end to the friends and family hiring practices of the past. So, it is disappointing.
Kevin Heller May 23, 2012 at 01:30 PM
Thanks James. Although I do work in finance, I cannot claim to be an expert in municipal finance, union/contract negotiations or political hiring/firing. When I speak, I hope it is understood that I am not claiming to be an expert but rather offering my opinion and observations as a (hopefully reasonably) informed citizen. I agree with the sentiments behind your remarks and as you know made my comments publicly at council meetings earlier this year. There is no question that in 2012 there were a number of politically motivated firings and hirings. No question. It appears to me that this is typically (& wrongly I might add) the normal course of business when a new political party comes into power. However, part of these new City Council people’s platforms was that they would put an end to the friends and family hiring practices of the past. So, it is disappointing.
Kevin Heller May 23, 2012 at 01:31 PM
With all that said, the reality is also that the handful of politically motivated employment changes is a small dollar figure when compared to an enormous budget deficit that was indisputably created by the prior Administration. The bulk of my disappointment is aimed at them. They knew they were spending down the cash surplus and new that liabilities would come on to the books as the new administration came into power. They left Long Beach in a bad state. I do believe the UFA has given some concessions too. My guess is that the PBA is not included yet because they are currently in arbitrage and there is little flexibility the city manager has thereupon while that case in ongoing. It is disappointing if the PBA (and I am really not sure if they were or weren’t) was not asked or volunteered to come to the table to voluntarily offer some concessions to help the city. It is telling that they were the only union to not even attend the budget hearings. The reality is that we have too many police, with too high pay, with too generous benefits. Cash payouts of $500K (in addition to generous pension and full paid healthcare) on retirement, come on!
Kevin Heller May 23, 2012 at 01:31 PM
Lastly, although I am disappointed with the politically motivated employment changes, I cannot reach any conclusion other than that the new city manager was solicited to come to Long Beach and help us out of this mess. I do believe he is making a good faith effort to balance the budget given the hand he was dealt. An objective analysis of our finances would conclude that the cost structure of our city is too high, simply put. In addition, he came into a city that had no cash balance, had to borrow to make payroll and faced a recurrent fiscal deficit due to skyrocketing healthcare and pension costs. Long Beach, New York State and the USA will at some point ALL go bankrupt if we continue to rely on deficit financing and tax increases to support an already high cost structure. Real structure reforms have to take place at all levels of government or we are all headed towards an economic situation you do not even want to imagine.

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