Long Beach overspends on separation pay, health care costs, state board rules

New York State analysts recommended Long Beach officials cut separation payments and renegotiate labor contracts to reduce health care costs and the city's reliance on borrowing millions to pay for police and fire retirements.

The State Financial Restructuring Board released a report Wednesday detailing recommendations as the agency awarded the city $375,000 in grants to pay for a financial consulting firm hired in May and to replace the remaining 600 streetlights with LED lighting to save costs.

"While the City naturally would have preferred to receive additional grants at the outset, we appreciate their thoughtful approach, and we understand that the City is now a ‘lifetime customer’ of the FRB," Long Beach Acting City Manager Rob Agostisi said in a statement. "Their blueprint can be used now, or at any point in the future.”

Sen. Todd Kaminsky (D-Long Beach) referred the city to the state board last year to apply for up to $5 million in grants and loans if the city agrees to follow the state’s recommendations.

The board’s report includes an analysis highlighting the cause of the city’s fiscal crisis and a series of recommendations that could make the city more cost-efficient and eligible for future grants.

“Long Beach has borrowed $15 million since 2012 to fund high-cost separation payouts, made possible by generous time accrual policies,” the report states. “The board has yet to encounter a municipality in the state that provides payouts of this magnitude.”

Kaminsky said the board's findings regarding payouts was most glaring as unprecedented anywhere else in the state and should be reformed. He said the city should pursue additional grants by following the state recommendations.

"If the city demonstrates it's going to make financial and fiscal reforms, it can continue to receive assistance," Kaminsky said. "As long as it's acting in good faith, I will continue to recommend they receive such assistance." 

State officials said the average police and fire payouts ranged from $300,000 to $619,000. City employees can be paid up to 40 hours per year in retirement pay, in addition to unused sick, personal and vacation pay, and some police officers have retired with as much as 5,900 accumulated hours.

“Bonding for these costs forces future taxpayers to fund a current operating liability,” financial restructuring board secretary Tim Ryan said during a meeting Wednesday. “That’s something that needs to be addressed and that’s something they need to work out.”

The city’s separation payments and finances are under audit by the state comptroller and being investigated by the Nassau County District Attorney’s Office.

City Council members in 2018 rejected a $2.1 million bond to cover separation payments to current and former employees, including former City Manager Jack Schnirman. The city avoided layoffs using $555,000 of an old bond, but still created a $1.55 million shortfall.

The city has faced four deficits in the past four years, including ending 2018 with a $5.2 million deficit and projecting to end fiscal year 2019 with a $1 million deficit, state officials said. Four consecutive budgets were adopted with overestimated revenues and underestimated expenses

Budget surpluses were largely due to bond proceeds that masked the city’s finances while recovering after superstorm Sandy, according to the report.

The report states the city did not keep up with taxes to cover personnel costs. Nearly 90 percent of Long Beach union employees do not contribute to health care, amounting to $13 million in annual health care expenses. The board also recommended the city convert its payroll to an updated timekeeping system, instead of using paper documents.

State officials noted Long Beach's use of a paid municipal fire department — the only one on Long Island — while also maintaining a volunteer force. The state board said the city saved $600,000 in 2015 when it created a separate division for paramedics.

"This is something we would love for all our villages and cities to take advantage of,” Ryan said. “They should be commended as a model to make fire departments more sustainable.”

Other recommendations included adding parking meters and working with Nassau County on a $77 million sewer conversion project that would send Long Beach sewage to Bay Park while converting the city’s treatment plant to a pump station.

By John Asbury

john.asbury@newsday.comJohnAsbury

John Asbury is a breaking news and general assignment reporter. He has been with Newsday since 2014 and previously worked at The Press-Enterprise in Riverside, California.