Long Beach Seeks State Aid for Deficit, Sandy Costs

The City of Long Beach is looking to borrow more money again.

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The City Council last week unanimously approved a home rule resolution to ask New York state for permission to borrow money in an effort to help correct its fiscal woes, just as it did last year.

Last year, the city was confronted with a $10 million deficit and tried to borrow $15 million from the state that it promised to pay back over 10 years, but Sen. Dean Skelos, the Republican senate majority leader from Rockville Centre, denied this attempt at deficit financing last June.

The council on March 5 approved a request to borrow up to $12 million in serial bonds to close that budget gap, as well as pay for “extraordinary expenses” due to Hurricane Sandy, including flood relief projects in public places and interests on payments for disaster relief funding, according to the resolution. The storm-related expenses are ineligible for reimbursement from state and federal grants, read a city memo attached to the resolution. The state senate and assembly and Gov. Andrew Cuomo must approve the request.

“Given that we’re all obviously recovering from the storm … we all know that now is not the time to raise taxes, and now is not the time to start talking about mass cuts in city services,” said City Manager Jack Schnirman, who added that the only other alternative is the home rule legislation.

Skelos and Assemblyman Harvey Weisenberg, D-Long Beach, have filed bills in the senate and assembly in support of the request.

“This bill will help ease some of the astronomical expenses Long Beach taxpayers are left with, even after state and federal assistance grants,” Weisenberg told Patch.

In a statement about the request, Skelos said that in light of Hurricane Sandy’s devastation, “we're looking to give local governments the tools they need to recover. All options are on the table."
                  
After the senator refused the home rule bill to reach the senate floor for a vote last June — later telling Schnirman in a letter that he was “troubled” by his “insistence on borrowing to address” the city’s financial woes rather than finds ways to cut spending — the city council approved a 6.6 percent deficit-reduction surcharge for three years, bringing last year’s tax increase to 14.5 percent that included a 7.9 percent increase in the $87.9 budget for 2012-13, approved in May.

Schnirman said last week that the city is working “very closely” with both Skelos and Weisenberg to get the bill approved, which would return the city’s timeline to pay back the $12 million to 10 years instead of three.

Before voting for the resolution, Councilman John McLaughlin expressed concern that the city still hasn’t received audits from the state and the city’s own accountants from last year. Similarly, resident Larry Benowitz asked the city manager how he knew the city needed the $12 million without an audited financial report.

About the city requesting for $3 million less than last year’s home rule request, Schnirman said: “The deciding factor into what we could finance with the state is a state comptroller’s audit of the city finances, which determines what they believe the gap for that year, before we took office, to be. And so you could borrow only up to that dollar figure, whatever that would be. The estimate is $12 million. If it’s more or less, that’s to be determined by them.”

Schnirman noted that if the bill passes the state houses and the governor signs it, that triggers a state comptroller’s audit that would certify a level at which the city could borrow.

When Benowitz asked why the city’s internal audit was never completed, Schnirman suggested that the city’s was too focused on recovery efforts after Hurricane Sandy slammed the barrier island on Oct. 29, to which Benowitz said the city had nearly four months after the end of the budget cycle on June 30 to produce an audit. Benowitz also noted that the city has two maturing anticipation and budget notes, at $4.5 million collectively, that a prior council approved in November 2011.

Resident Virginia Daily asked how the city was going to pay back the $12 million that she said will eventually amount to a tax increase. Schnirman said that the city is requesting that the money be paid over 10 years as opposed to three, will advocated that state and federal governments pick up “the entire percentage of [the cost] of the storm,” and must plan carefully for the possibility that it may pay a piece of the cost of the storm. He said that if the home rule request is approved, it would help to roll back the 6.6 percent surcharge the city “had to put in place when this resolution didn’t go forward last year.”

Resident Kevin Heller said that the city has to end its “cycle of borrowing,” and reiterated his belief that he expressed during budget season last year that the city is bankrupt.   

“We were in a pretty bad way before the storm,” he said. “We used up our rainy day fund and then we had a pretty big rainy day. And I know that culpability is not necessarily in this room, but at some point we’re going to have to address that without some pretty radical changes, we are in fact bankrupt. It’s just a matter of when.”

Schnirman said the city has no intention of declaring bankruptcy, which would be a “horrible message and doom our local economy,” and characterized the city’s pre-Sandy finances as on a “trending positive trajectory.”

“The city is moving forward, we were moving forward before the storm financially, and we will continue to move forward and our finances will continue to get better,” he concluded.

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