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Budget Crisis Costs $2.5 million Too Easily, Too Soon

Retirees: Ask not what Long Beach can do for you. Ask what you should do for Long Beach.

The Long Beach City Council voted to borrow $1.7 million Wednesday to meet payroll for the month of December. This money is borrowed against expected tax revenues. This first shortfall is in the middle of the city’s fiscal year.

The council also voted to borrow $2.5 million to pay for resignations from the police department, two of which have not been submitted yet. We know that only one resignation has been submitted, Commissioner Sofield. It is anticipated to be $500,000. The remaining $2 million is in preparation for people who told City Manager Charles Theofan that they were planning to retire. Theofan said something about these resignations not being anticipated before the election.

There was banter about the budget with a frightful revelation that most of the people on the stage Wednesday night did not know much about the budget. If they did speak about the nuances of money spent and revenue shortfalls and expected manna from heaven, they did so with careful wording of deception where a simple “yes” or “no” should work.

If you remember the 0 percent tax hike, you remember that it had “been achieved by reduced spending and literally watching every penny,”  (Charles Theofan introduction to the budget, April 11, 2011). The City used 24.4 percent of its reserve fund ($930,000) to prevent a tax increase, leaving the fund with $2.87 million. I think I heard them say there is no more money in that reserve fund.

I was not prepared to speak before the council, but I did clumsily try to make a suggestion. If I prepared my remarks, I would have said:

Four career police officers are possibly retiring before the end of 2011. If they retire, they have sick day pay due them in the amount of $2 million at the same time that the city is “temporarily” out of money. These retiring folks are all lifelong residents of Long Beach. No one in the room disputed their entitlement (shocking as the amount is). 

The retiring detectives, being taxpayers, neighbors and public servants, should be approached for the good of the city, and offered the payment of their termination salaries over time. Council members Michael Fagen and John McLaughlin seemed to agree with me.

This is the kind of thinking that government has to adopt. Council members and the City Manager have to be creative. While retirement benefits are contractual obligations, they are not critical to the management of the city. It might have been good in 2003, but it is an awful idea in 2011 to pay retirees by floating bonds.

Prior to the emergency meeting City Council President Thomas Sofield Jr. called, only his father submitted his resignation. That amount is roughly $500,000. The current budget allows for $617,589 for termination salaries.  The council could have borrowed against potential tax revenues for Commissioner Sofield along with moneys for the December salary shortfall and operate within the 2011-2012 fiscal year budget

Then, if and when others decided to retire, the next administration can consider how it could be done in the context of a fragile budget and a new contract in uncharted waters. Change in government is going to require creative thinking and planning so everyone wins.

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Publius December 06, 2011 at 07:39 PM
There is a difference between acknowledging a debt -- e.g., a retirement obligation(not sure there's a current debt yet in any event, as I don't know if the other retirees have submitted their retirement paperwork) and borrowing money to pay for it and when you borrow money to pay for it. The obligation of the City Council is to do what is best for this City, nothing less, nothing more. And there is no obligation of the City to borrow money to pay for anything, let alone, to borrow to pay for a debt that has not yet become a debt because, at least at the time of the vote, had not yet matured (because not yet submitted). So, let's all be a bit more straight about what's happening here.
Outraged Dem December 06, 2011 at 09:39 PM
Suart, You mention the city has a "stelar" credit rating, correct? In 2004 when the coalition took office, the city had a horrible bond rating, with a "negative outlook." How is it that that rating went from tat bad place to a stellar rating? What was done so well? You also say that the current city manager used the surplus funds to prevent a tax increase? Isn't that a good thing? Shouldn't government try to offset tax increases on people if they can? I don't have clue what the point of your blog is? Its a good thing you don't work for me! What the hell are you saying? Finally, what is this business about you being paid as a consultant? What is all that about? What is Spellman referring to? All that stuff in your "note" at the ned of your blog; whats it all about, i.e. conflicts of interests etc?
Christopher December 10, 2011 at 04:16 PM
wow great comment. I am best of friends with Sofield after witenessing certain thing lies, false promises, I had to vote for the Democrats. In my gut just felt that the city's finances were in bad shape after Mike Fagen put that out there in the Good N Welfare meeting. Everyone in the City had to know he would vote on a measure to pay his dad his $ 500,000.00. City Hall needs an Overhaul Clean house. Everyone is talking about Zapson and Nigro the main issue is the City's finances and how is the next group going to get the mess straight.
Outraged Dem December 10, 2011 at 06:09 PM
No response? Interesting
Margaret December 11, 2011 at 12:38 AM
Just heard that the new city manager was picked.. Where's the transparency here?Why all the secrets from the new admin?
Vera December 11, 2011 at 05:20 AM
Christopher - go listen to the audio of the meeting. Did you notice what the Coalition said after Mike Fagan brought that up at the meeting? Thank You. AND moved onto the next subject. They were trying so hard to paint a rosy picture, knowing all along it was not the case. Notice that Theofan didn't accuse Fagan of living in fantasy land at that point as he had in the past. Nobody argued that it wasn't true - BECAUSE they knew they were at the helm of a sinking ship and i'm sure were hoping that they could keep bailing water till after Jan 1st - and then blame the incoming Dems for the mess they left. Sure, they campaigned touting Moody's, but who give a darn about Moody's at this point? A spokesman at Moody's was recently quoted as saying “We’re aware of the situation and we’re currently reviewing it.” Wonder what that means? I'm guessing a change of that great rating the Coalition quoted in their campaigning.
Joseph Kellard (Editor) December 11, 2011 at 01:30 PM
Where did you get your information? I've just been told by someone in the new administration that they are still in the process of interviewing candidates, and no one has been chosen yet.
Margaret December 11, 2011 at 03:24 PM
It's been posted on a few blogs and then I made a few phone calls and it has been confirmed...
delete me December 11, 2011 at 03:52 PM
Jim you're talking about transparency while posting under the name Margaret. You're so weird.
Neutron December 11, 2011 at 04:01 PM
If someone was chosen, who is it?
Margaret December 11, 2011 at 09:42 PM
Mr. Kellard, even if my information is incorrect- you say you have been told they are still in the process of interviewing- in light of transparency do you believe we, the people who elected them, should be kept informed of what this process is? They ran on a platform of transparency yet the citizens of Long Beach have not once been invited to see or be informed of the process. The applications are sent to Mr. Mandel's law office in Roslyn, there were no qualifications on the job posting-- with transparency as their number 1 election promise why are we all kept in the dark regarding the first major decision they are making (or have already made). I'd like to hear why they like a certain person and what makes them qualified and I'd also like to ensure that the council members have truly had the sole responsibility of choosing a city manager and that it hasn't been left up to Zapson and Nigro... When everything is done behind closed doors as this process has been, how do we know what really is going on???
laocoon December 11, 2011 at 10:04 PM
You suggested the retiring police be: "... offered the payment of their termination salaries over time..." Quite simply, this would be illegal.
Candygram for Mongo December 11, 2011 at 10:36 PM
Who did you make your phone calls to?
Tom December 12, 2011 at 12:43 AM
Curiosity what would make this illegal?
Tom December 12, 2011 at 12:46 AM
For those who may not be aware holding off payment to vendors is common place in Corporate America. Most companies do it on the up and up communicating and negotiating in good faith to a solution both parties can live with. Others go the road of the Allegria...catch me if you can. Either way to suggest renegotiating contracts doesn't happen is just false.
anna December 12, 2011 at 03:09 PM
Because as a Democrat, I actually care about this City and the people in it and not just me. I would not forego what was due me, but I would certainly consider having it paid out over time if a lump sum payment would be unduly difficult because of the large amount of money involved.
anna December 12, 2011 at 03:10 PM
Well Margaret, as the transparency proponent - how about you spill the beans?
paul.d.spellman December 12, 2011 at 03:16 PM
"Because as a Democrat, I actually care about this City and the people in it and not just me." Is your arrogance so great that you are implying that only democrats care about this city? --Do you have any idea what the contract calling for this payout says? --Would the recipient even be able to modify the contract to allow for a payout over time?
Stuart Osnow December 12, 2011 at 08:29 PM
Iacoon, Termination salaries over time is not illegal if it were discussed and agreed upon. We often hear people say that government should be run as a business. You've got to start somewhere. Let's say hypothetically that the City Council voted not to borrow 2.5 million dollars for anticipated retirements. Would the City be in court with the newly retired Police Commissioner? Probably not. They would have shown a responsible decision and he would have bought into it. When new contracts are negotiated, this experience should loom large. Regarding the selection of a City Manager. I agree we should know a lot more about the process. We have discussed here, the process of electing a Mayor to replace the City Manager form of government. If we hired a Mayor, they would run for office and all the scrutiny they could bear. But, it would clearly be the people's choice who will lead. When we cannot follow the City Manager selection, how can we be anything but disillusioned. And for the new CM, he or she is going to be presented to a skeptical public like the president of a university. So, they had better be good, wise, experienced and articulate, because they are taking over in City filled with hope that things will be different. This being the first critical decision of the City Council, all things will emanate from whom they pick.
Stuart Osnow December 12, 2011 at 08:33 PM
Is Margaret really an alias?
paul.d.spellman December 12, 2011 at 08:52 PM
Stuart, Do you have any idea what you are talking about? The "contract" was not between the city and the acting commissioner, the collectively bargained contract was between the city and the union. The retired acting commissioner could not have unilaterally "bought" into any decision by the council. Could some other member of the union arbitrarily decide to renegotiate his part of the contract? What effect would this have on the others who come after them? "When we cannot follow the City Manager selection", I see you have a wealth of knowledge on HR matters. Do you really think it would be in the best interest of the applicants if incoming administration was to make public the names of those people who have applied for the position? "like the president of a university", not sure what that even means????
Candygram for Mongo December 12, 2011 at 09:54 PM
Which is why we should have a mayor elected by, and answerable, the residents
anna December 13, 2011 at 01:34 AM
Paul.d.spellman - I am sure Republicans care about this City too, but I bet everyone who has posted outrage at the thought of asking for $500,000 payments to be made over time as opposed to in a lump sum, is NOT a Democrat.
Stuart Osnow December 13, 2011 at 02:10 PM
Lot of questions there, Paul. The City borrowed $2.5 million to pay $500,000. You and I agree on the entitlement. Some people agree that borrowing money was inappropriate at this time and in this instance. Some people are shocked by the huge severance amounts. This is a big deal in a small town. You know exactly what I am talking about. Regarding a City Manager, I don't need to see a list of applicants. I was hoping to know how the applicants were found, what criteria the council members are using to make this hire, who else is involved in the interview? How are they vetting the applicants? How many finalists are there? What interests me is the process. Again, a new City Manager is a big deal in this small town. There would be no downside to have an article about this written in the Patch and the Herald as it happens.
Margaret December 14, 2011 at 02:08 AM
Stuart, I completely agree with that should have been transparent during the process of hiring a city manager. We should have gotten information on the process, as they promised transparency for all major decisions. As for the $2.5 million, at the city council meeting, it was voted that they will borrow UP TO $2.5 million, depending on if the other anticipated police officers did in fact retire. If they did not put their papers in, we would not borrow that much.
LBLouie December 21, 2011 at 04:05 PM
As seen in Today’s( Wed. Dec. 21st) Newsday, Moody’s downgraded the city’s rating to Baa3. According to the report the Allegria Hotel is in arrears for $300,000 for unpaid, and overdue taxes owed by the Allegria Hotel. And yet the City officials continue to support this Hotel by holding their dinners and meeting there. One would think that they would be so angry at this charade that they wouldn’t even enter this place. Why do they continue to get all the special courtesies, and privileges from city? Why are they allowed to use the middle of the gutter for private parking?
laocoon February 05, 2012 at 06:26 PM
What does Liberal Boy have to say now that the new administration is a month old? The City has been plunged $3,000,000 deeper in debt by them, they have filled City Hall will Democratic rejects from the County and created even more positions for their friends and hacks. What say you, Liberal Boy?
Candygram for Mongo February 05, 2012 at 11:08 PM
What say you, Liberal Boy? Out with it!
Stuart Osnow February 07, 2012 at 03:40 PM
Hey Knuckleheads, If you have some truths that you want to share with me to comment about, come out from behind those masks and tell me who you are and what you know. Nothing I have written should lead you to call me names like liberal boy. I think everything I wrote about the last administration proved to be dead on correct. Most of what I have seen so far would lead me to believe that the City is headed in the right direction. Long Beach still needs to function. I believe you will find that the new city manager intends to run an efficient government and his hires will be functioning in such a way as to get back the City's respectability, lost money, and credit rating. I believe the City Council intends to run an open and efficient government. You'll also find that Councilman McLaughlin is in on the rebuild.
Stuart Osnow February 07, 2012 at 03:40 PM
Hey Knuckleheads, If you have some truths that you want to share with me to comment about, come out from behind those masks and tell me who you are and what you know. Nothing I have written should lead you to call me names like liberal boy. I think everything I wrote about the last administration proved to be dead on correct. Most of what I have seen so far would lead me to believe that the City is headed in the right direction. Long Beach still needs to function. I believe you will find that the new city manager intends to run an efficient government and his hires will be functioning in such a way as to get back the City's respectability, lost money, and credit rating. I believe the City Council intends to run an open and efficient government. You'll also find that Councilman McLaughlin is in on the rebuild.

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