The Long Beach City Council voted 4-1 on Tuesday to enter into a $140,000 agreement with a financial consulting firm to help turn the city’s finances around and develop a long-term plan as officials begin budget talks next month.
The council approved a resolution to retain Great Neck-based Capital Markets Advisors LLC, a firm that has advised the city for several years — mostly related to the issuance of debt — to also “provide on-site consulting services to assist the city in improving the efficiency and effectiveness of our day-to-day operations,” Tuesday’s resolution read.
Acting City Manager Rob Agostisi, who was appointed on Jan. 30, had said that one of his first priorities would be to hire a new comptroller and bring in a group of financial specialists to deal with the city’s financial woes.
Last May, the council voted unanimously to approve a $95 million budget, with an 8.3 percent tax increase for the current fiscal year, that avoided layoffs and drastic cuts to services. The council also voted Tuesday to schedule a public hearing on May 7 to discuss overriding the state tax cap.
In February, Moody’s Investors Service downgraded Long Beach’s credit rating from Baa1 to Baa2 — just two notches above junk bond status.
Last month, state Comptroller Tom DiNapoli’s office said Long Beach remained in “significant fiscal stress” — the highest level under DiNapoli’s Fiscal Stress Monitoring System — in 2018. It was the second straight year that the city received the rating, and DiNapoli again cited short-term borrowing, a deteriorating fund balance, structurally imbalanced budgets and operating deficits as main factors.
DiNapoli’s office said it expected to release part of a comprehensive audit of the city’s “fiscally stressed” finances this summer, focusing on what many have called questionable calculations of separation payouts and draw-downs of accrued time to current and former employees — including a $108,000 payout to former City Manager Jack Schnirman — that sparked an outcry among residents last year.
The council voted Tuesday to enter into a one-year agreement with CMA at a cost of $10,000 per month through May 31, and $12,000 per month for the remainder of the contractual term, with city officials saying that such a move was necessary to help address the city’s financial practices.
“I’ve advocated . . . that the city would benefit from retaining a finance professional separate and apart from the city comptroller who is tasked with long-term financial planning and investments,” said Agostisi, who added that the city comptroller’s role has morphed into a “CFO-type position . . . where the comptroller is the only individual handling the finance side of the operation.”
“It’s also great, however, to have a financial planner whose job it is to develop a long-term financial vision and plan,” he said.
The city has been without a comptroller since July 2017, and Agostisi said he hoped to fill the position by the end of the month.
He also said that he had intended to create a new position in the 2019-20 budget for a dedicated financial professional, but learned that CMA — which advised the city in February on a measure to refinance $12.2 million in bonds to save $800,000 in interest payments — already provides such services, and would cost the city less than paying a new hire a salary and benefits.
“We are actually able to hire an entire firm to perform this function,” Agostisi said. “We hold CMA, internally, in very high regard. They have helped manage our relationship with our credit rating agency and helped us prepare for credit reviews. Most recently, they identified an opportunity to refinance our existing bonds, which will now save the city $100,000 a year for the foreseeable future.”
Agostisi said that CMA would conduct a comprehensive analysis of the city’s current fiscal condition, identify the root causes of structural imbalances and “provide a foundation for the development of a strategic multiyear fiscal improvement plan.” CMA would also work closely with the city’s comptroller, report directly to Agostisi and “restructure the city’s daily money-management and financial problem-solving approaches.”
“What CMA will do is fill a hole that’s existed here for a long time for a finance professional,” he said.
CMA is already working with the city, Agostisi said, as officials consider a bond measure to purchase new sanitation vehicles, and CMA is expected to issue a report this week on the proposal, followed by a series of other reports as its work with the city progresses.
City Council President Anthony Eramo said that CMA representatives gave the council a presentation on the scope of its work and how the firm helped the City of Rochester with its long-term planning.
“I think this is an important step for future planning to ensure that the city continues to take steps to be financially stable in terms of both our Moody’s rating and the operations of the city as a whole,” Council Vice President Chumi Diamond said. “We want this financial planner to be part of the budget process, but we also want it to, going forward . . . have a long-term plan.”
Several residents questioned the move, with some saying that both Moody’s and DiNapoli’s office had for years made recommendations on how the city could improve its financial practices. Some also called for the creation of an advisory committee made up of residents with financial expertise.
Two council members — including Councilman Scott Mandel, who voted against the measure — called for the item to be tabled until the next meeting, saying they would prefer to see the firm’s first report before committing to the agreement.
“We’re committing to them before seeing their work product,” Mandel said. “I can’t bring myself to vote for them now, while they’re already on the job, being paid, and the report is imminent.”
Agostisi said that officials were familiar with CMA’s work, and that postponing the vote would put the city “in limbo.” “CMA is not a stranger . . . CMA has been here for years,” he said. “We know what they’re capable of. Our credit rating agencies are very eager to make this happen . . . hopefully before the budget.”
Councilman John Bendo agreed with Mandel, saying that while CMA may have provided the city with expertise on bonding, the firm would now serve in a new capacity as financial adviser. Bendo’s motion to table the item was rejected 3-2, but he ultimately voted in favor of the agreement, saying, “This is something the city desperately needs.”