Faced with nearly a half-billion dollars in debt and other liabilities and obligations, the City of Long Beach is looking to restructure its finances in hopes of staving off bankruptcy.
The Long Beach City Council voted during a special meeting Tuesday night to hire a team of financial advisers, as well as bankruptcy and restructuring attorneys, to help manage the city’s debt and chart a path toward fiscal recovery.
The New York City-based firms, M3 Partners and O’Melveny and Myers, will cost the city $1.5 million, but city officials are seeking to cover the costs with state or federal funding.
City Manager Donna Gayden said Long Beach’s $465 million in long-term debt exceeds the city’s operational costs and revenue under the city’s $83 million budget. She said she did not expect the restructuring to reduce city services or lead to layoffs.
"We have half a billion in debt and the bulk of our budget is going toward debt, and the city cannot sustain that," Gayden said.
Gayden said the debt burden could grow with additional liabilities facing the city or uncovered in future audited financials. She said the city would weather the fiscal plight.
"Long Beach will survive," Gayden said.
What to know
- The Long Beach City Council has hired firms M3 Partners and O’Melveny and Myers at a cost of $1.5 million to help manage the city’s debt and chart a path toward fiscal recovery.
- Long Beach remains the most fiscally stressed city in New York State.
- Any restructuring is not expected to reduce city services or lead to layoffs, City Manager Donna Gayden said.
The team of advisers said bankruptcy remained a possibility for the city, but advisers would attempt to avoid defaulting by managing long-term debt with creditors and seeking to boost revenue.
"Bankruptcy is not what we are focused on today. It’s an absolute last result," M3 Partners founder Mohsin Meghji said. "Any headlines of bankruptcy for the city is definitely premature and probably wrong."
The attorneys have been tapped to handle fiscal crises before, including representing Puerto Rico utilities and former President Barack Obama’s auto task force.
"No one particular option has been selected," said John Rapisardi, chief of the restructuring group for O’Melveny and Myers. "We’re evaluating all options and not ruling anything in or out, and complexities need to be thought about."
Long Beach remains the most-fiscally stressed city in New York State and carries a bond rating of Baa2, two steps above junk bond status. It carries $128 million in outstanding bonds, nearly $139 million in outstanding employee pension and benefit payments and $29.5 million in other compensated absences.
The city was dealt its latest blow in January when a Nassau County judge ordered the city to pay a $131 million judgment to Sinclair Haberman in a 30-year dispute over an oceanfront condo development.
An attorney for Haberman, Chris McGrath, said the judgment has totaled $158 million, with interest. He said interest is increasing at $1 million per month and the city has not engaged in settlement talks.
City Council members approved a separate settlement to offset the judgment by $20.5 million, after a neighboring building owner settled with Haberman for $23 million.
Several elected officials attended the special meeting online, including Rep. Kathleen Rice (D-Garden City); State Sen. Todd Kaminsky (D-Long Beach); Assemb. Missy Miller (R-Atlantic Beach); and Nassau County Legis. Denise Ford (R-Long Beach). It also included representatives from U.S. Sen. Chuck Schumer’s office and Nassau County Executive Laura Curran. Elected officials said they would seek funding for Long Beach to cover hiring the firms.