Long Beach plans to slowly rebuild fiscal reserve
Long Beach has adopted legislation designed to replenish and maintain the city's surplus, which became a deficit during its multiyear fiscal crisis.
A resolution unanimously approved Tuesday by the Democratic-dominated City Council "recommends" the city maintain a fund balance equal to 5 percent of its annual budget. This year, that would be slightly more than $4 million.
However, city officials said, it could be years before the reserves are restored to that level.
The former Republican administration created an $18 million deficit and spent $21 million in surplus between 2008 and 2012, according to a report issued this month by state Comptroller Thomas P. DiNapoli. The fund balance was $15 million in the red at the end of the 2012 fiscal year, city comptroller Jeff Nogid said.
The city's plan is to rebuild the surplus over time with frugal budgeting and maintain it at the 5 percent level once it is replenished, city manager Jack Schnirman said.
"We're starting from a position where our fund balance is negative," Schnirman said. "There's no way to push a magic button and get there. This is part of the process of rebuilding."
The recommendation does not include penalties if the city fails to reach the 5 percent standard. It states that the city must replenish the reserves if they fall below the 5 percent mark.
John McLaughlin, the City Council's lone Republican, voted for the resolution but said he doubted the city could replenish its reserves without raising taxes. He estimated it will take six years to rebuild the fund balance.
"I think it's a good idea to have a rainy-day fund, but there's going to be repercussions for that rainy-day fund," McLaughlin said. "I don't see how it's going to be a rapid influx of money."
The council's action came eight weeks after the city approved an $83.4-million budget that was a 2 percent decrease from the budget of the previous fiscal year, which ended June 30. The budget carried a 1.5 percent tax increase for fiscal year 2013-14.
DiNapoli's report said that from 2008 to 2012 revenues were overestimated by more than $12 million and actual expenditures exceeded budgeted appropriations by $2.8 million.
The city's deficit is scheduled to be fully paid off by 2015, city officials have said.