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Budget's reliance on borrowing puts Long Beach finances in peril, auditor says

The seal of the City of Long Beach

The seal of the City of Long Beach on display in Long Beach City Hall on May 7. Credit: Newsday/Thomas A. Ferrara

The New York State Comptroller’s Office concluded that Long Beach's proposed $97.5 million budget has reasonable projections, but cautioned that the city’s fiscal crisis and reliance on borrowing puts its finances in peril.

Comptroller Thomas DiNapoli’s office conducted an annual review of the city’s proposed budget under a 10-year state monitoring program.

“Based on our review of the proposed budget, city officials continue to take actions that are detrimental to the city’s financial position,” Executive Deputy Comptroller Andrew SanFilippo wrote in the audit. “It is imperative that officials address the city’s declining financial condition during this current budget cycle.”

City Council members could vote on the proposed budget Tuesday or during a special meeting May 28. The spending plan calls for a 7.9 percent tax increase and would raise the average residential tax bill $305  a year to help close a $2.8 million deficit.  

If the budget is not amended or passed by a majority vote, the proposed budget and tax hike would become permanent by default.

"It is the City’s hope that this proposed budget, if adopted, will provide the foundation needed to slowly incorporate this operating expense into the existing budget," according to a statement from the city.

City officials said Long Beach's fiscal crisis resulted from years of unbalanced budgets and an influx of state and federal funding after superstorm Sandy that masked the city’s deficits and reliance on borrowing.

Comptroller officials found about 90 percent of the city’s revenue is allocated to employee salaries, benefits and debt payments.

The budget includes more than $1 million in contractual raises to union workers and a $586,000 increase in health care costs.

The proposed budget includes plans to issue bonds to cover $1.87 million in anticipated employee retirements and separation payments. The city has averaged paying $2.2 million in separation payments during the past three years, including issuing $2.2 million in bonds this year to cover retirements.

City Council members rejected a $2.1 million bond last year that included $300,000 in payments to more than a dozen current and former management employees.

The comptroller is conducting a separate audit, expected this summer, on the city’s payments, which is also under investigation by the Nassau County district attorney.

City officials said they ended the policy of paying out accrued time to staff who remained employed by the city.

Comptroller officials said in the budget review that the city may not have allocated enough funding for retirement payments and the city’s funds could be further depleted.

“The city’s continued practice of borrowing to fund these operating costs is not fiscally prudent,” the comptroller’s report states. “Routine reliance on debt only perpetuates the city’s dire financial condition,” the report states. “We urge city officials to adopt a long-term planning approach that includes cash flow analysis.”

Long Beach officials said the city is not yet in a financial position to budget revenue for termination payments.

"Borrowing for these costs allows the City to pay them back over multiple years and smoothes out the effect to the budget," city officials said in a statement.

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