The City of Long Beach’s proposed budget is structurally unbalanced because it relies on "one shot revenues" and borrowing to cover separation pay, according to a state comptroller’s analysis last week.
Long Beach is proposing a $93.6 million budget for its fiscal year, starting July 1. City officials said new beach revenue projections may lower its proposed tax increase by 1.4% — from 6.3% to 4.9%, but still required piercing the state’s tax cap of 1.23%.
Long Beach city officials said last week that lifting beach restrictions, expecting to reach full capacity by July 1, would add $696,000 in revenues and reduce the tax levy to $49.8 million. The proposed increase would drop from $283 per average home to $207 in additional taxes.
The City Council must approve its budget by May 31 for the next fiscal year and is expected to vote May 24.
"City officials worked diligently with the state to lobby for 100% capacity at our beaches," Comptroller Inna Reznik said. "We feel projections in beach capacity will allow access to nonresidents at 2019 beach levels."
The state comptroller completes a budget analysis every year as a condition of the city’s 10-year deficit financing plan in 2012 to issue debt to fund operating deficits.
Comptroller auditors said the city’s original proposed tax levy of $50.5 million was $3 million above the legal limit.
The proposed budget also plans to issue $3.1 million in bonds to cover termination salaries and payouts.
The city has long been criticized by financial analysts and auditors for borrowing to fund operating expenses like separation pay, but city officials said Long Beach had been in dire straits for years and could not afford to budget for employee pension and vacation-payout costs.
The city is counting on getting $1.5 million in state aid, not included in the budget, to pay for a team of restructuring attorneys and financial advisers to manage $128 million in bond debts and $340 million in other liabilities and obligations.
City Manager Donna Gayden said Long Beach was working to include separation pay in future budgets.
"It's a process we’re building through multiyear budgets and look at other revenue sources," Gayden said. "Hopefully after restructuring, we won’t have to borrow."
Long Beach also faces a $130 million judgment after it was found liable in a dispute over an oceanfront condo development.
The city is budgeting $800,000 for legal consultants next year. It is adding $600,000 in management positions, including a $12,000 salary increase for Gayden, and a corporation counsel, a human resources director and a deputy city manager.
City officials plan to use $3.6 million in federal COVID-19 recovery funds to help repay a $4.3 million bond issued last year to cover payroll and operations during the pandemic.
"Although the City appears to have budgeted sufficiently for the 2021-22 fiscal year, we caution the City that its continued practice of borrowing to fund these operating costs is not fiscally prudent," The comptroller’s analysis said.
The budget projects $3.7 million in overtime, but the city has exceeded those projections the past three years by $2.7 million, which was attributed to emergency services and snowstorms.