The Glen Cove City Council voted Tuesday night to borrow up to $900,000 to pay termination payments for eight employees who retired, resigned or died this year.
Termination payments are made to employees, or their estates, for unused sick leave, personal leave, holidays, vacation days and comp time.
"The question always arises about borrowing for separation; unfortunately money was not put aside in the 2014 budget," Mayor Reginald Spinello said during the meeting. "In a better world we wouldn't be doing that," he said, referring to the borrowing.
About $440,000 is for the beneficiaries of Ralph Bruschini, a Glen Cove police lieutenant who died last month. A similar amount of borrowing will finance termination payments for seven employees who are members of the Civil Service Employees Association, who accepted buyouts from the city earlier this month. Their payments range from $12,149 to $130,500.
In borrowing for termination payments, Spinello is continuing a practice of his predecessor, former Mayor Ralph Suozzi, that has drawn criticism in the past from State Comptroller Thomas DiNapoli's office.
"Issuing debt for the payment of recurring operating expenditures is imprudent," Deputy Comptroller Steven Hancox said in a 2012 letter to the city's elected officials about borrowing for termination payments. "This practice will saddle future taxpayers with repayment of past service costs, with interest, for which they received little or no benefit."
The comptroller's office recommended that the city create a reserve fund to make the payments.
Glen Cove only recently got the ability to borrow for what is a regular operating expense. The State Legislature amended state law to permit Glen Cove to borrow for termination payments beginning in 2012. In October 2013, the comptroller's office again criticized the practice in a letter that said the "City Council did not address our recommendation to adjust recurring budget problems regarding termination payments."
In 2012, then-Councilmember Spinello, an Independent, was critical of the practice, cautioning that it was a burden on taxpayers, but voted for it anyway.
"This year is an anomaly," Spinello said at the time.
Spinello said the borrowing this year was different from 2012, when the city faced 11 police retirements. He said the city was borrowing now to pay for buyouts that would save the city money.
"We're borrowing to actually reduce costs," Spinello said. "We're going to have savings every year so I think this is a borrowing that certainly justifies itself."
The city plans to repay the debt in five years, he said.
Councilman Anthony Gallo Jr., a Republican, also approved the bond issue, but said the city should create a reserve fund to limit future borrowing.
Gallo said Tuesday night that although borrowing should always be limited, "the circumstances are at a point where you have to borrow."
Councilmember Efraim Spagnoletti, a Republican, said after the meeting that though they had no choice this year, it should change in the future.
"Going forward we should really start allocating some funds to a reserve so when these retirements take place, we don't have to borrow," Spagnoletti said.
Moody's Investors Service downgraded Glen Cove's credit rating in 2011 to Baa3, one notch above junk-bond status, citing fiscal distress and recurring deficits. In November, the rating agency revised its outlook for the city to stable from negative.