State Comptroller Tom DiNapoli’s office announced Tuesday that it would audit the City of Long Beach’s financial operations amid questions swirling around payouts to former City Manager Jack Schnirman and others that have residents and elected officials alike calling for an investigation into the city’s finances.
DiNapoli’s office announced the audit the same day that it released its annual review of the city’s proposed $95 million budget for the 2018-18 fiscal year — which, to the chagrin of residents — includes a 12.3 percent property tax increase. If the spending plan is approved, taxes on the average home would rise by $400 a year.
"Our budget review of the city of Long Beach is complete and it's clear that a more comprehensive review of the city's finances is needed,” DiNapoli said in a statement. “Given the ongoing issues in the city, my office will be conducting a full audit.”
DiNapoli’s office said that revenue and expenditure projections in the proposed spending plan were “reasonable,” but reiterated that the city is in significant fiscal stress and that its financial condition had been deteriorating in recent years.
City officials also said that they are now forced to look at layoffs and service cuts after the council voted 3-2 on April 17 to reject a $2.1 million bond measure to make up for “separation payouts” to 57 union and non-union employees. Without borrowing, officials said that the city would be broke before the end of the fiscal year because the bond measure had been included as revenue in the 2017-18 budget.
Council members John Bendo and Anissa Moore voted against the measure and questioned whether a number of management employees in particular — seven of whom remain on the payroll — should have received the separation payments that they recently did, including Schnirman, who left in January with a $108,000 payment when he began his term as Nassau County comptroller.
As the Herald reported last month, Schnirman earned $173,800 a year as city manager under his most recent contract, and served in the position from 2012 to 2017, until he became county comptroller this year. He received a payout amounting to at least 100 percent of his accrued sick days — or $73,100 — upon his departure from the city, according to a Herald analysis of his payment documents.
The city’s Code of Ordinances states that non-union, or management, employees like Schnirman should be paid 30 percent of total accrued sick days at the time of separation, and can claim up to 50 vacation days. Schnirman’s contract also specifies that he should be paid 30 percent, which would be $21,900.
The payouts prompted Nassau County Legislator Denise Ford (R-Long Beach), Assemblywoman Missy Miller (R-Atlantic Beach), State Sen. Todd Kaminsky (D-Long Beach) and many residents to call for an audit of the city by DiNapoli. City Council President Anthony Eramo said the council is committed to determining whether the separation payouts were appropriate, and also requested an audit.
"Taxpayers deserve answers and I will keep pushing until we get them," Kaminsky said in a statement. "DiNapoli’s full audit of the City of Long Beach’s finances is badly needed and I look forward to seeing what it uncovers.“
DiNapoli’s office said that it did not look at the “appropriateness” of the payouts as part of its recent budget review, but said that reference to the payments as “termination salaries” by city management was “somewhat misleading” because they also included cash payments for accrued leave to those who remain on the city’s payroll.
The budget review also criticized the city’s handling of separation payouts, saying that its continued practice of borrowing for the payments is not “fiscally prudent.”
“This practice will saddle future taxpayers with the repayment of past service costs, with interests, for which they received no benefit,"Deputy Comptroller Gabriel Deyo said in the report. “Based on our review of the proposed budget, city officials continue to take actions that are detrimental to the city’s financial position.”
Asked whether the payouts had prompted the comptroller to audit the city, spokesman Brian Butry would say only that there were “concerns that we had that arose during the budget review.”
“We have received requests regarding an audit of the city, which also played a role in the determination,” he said, adding that the audit could take six to nine months.
“We are pleased that Comptroller DiNapoli has provided us with a review of the city budget, indicating reasonable projections for the upcoming fiscal year,” City Council President Anthony Eramo said in a statement. “As per our request, his office will be conducting a full audit to provide us with a detailed look at the city's financial situation, and we look forward to working with his team to ensure Long Beach is on a secure fiscal trajectory going forward.”
Ford and residents also wrote letters to Nassau District Attorney Madeline Singas and others calling for an investigation into the payouts and Schnirman’s handling of Long Beach’s finances. Asked whether such an investigation was under way, a spokeswoman for Singas declined to comment.
In an op-ed in the Herald this week, Schnirman — who was endorsed by DiNapoli — said that he did not calculate his own payout and said it was his understanding that the payouts were made properly. He said he welcomed the audit, and said that if it is determined that he was overpaid, he would “immediately return any overage.”
“My leave pay was calculated the same way as all other management employees — no more, no less,” he wrote. “I reported my time off to the payroll staff as I took it, like all employees, and I played no role in calculating my own leave pay. It was based on a legal interpretation made years prior and applied evenly for many years.”
Asked whether he could produce any legal documentation in the city’s code regarding the interpretation for accrued leave payments, he deferred to the city. City officials said they intended to comment shortly.
At a recent council meeting, Acting City Manager Mike Tangney said that Schnirman’s payout form was signed in December by former acting comptroller Shari James, Deputy City Manager Mike Robinson and Tommy Larson, the head of the payroll department.
Schnirman said that it was not unusual for employees — both union and non-union — to request a “draw down” of their accrued time while still working for the city.
Schnirman acknowledged that he signed off on payments that were not his own, but claimed he was not involved in calculating them. He added that that was done by the city’s comptroller and payroll department, though former city Comptroller Kristie Hansen-Hightower recently told the council that individual calculations are made between the city manager’s office and payroll.
Ford and others continue to question how the payouts were calculated.
“I would urge the D.A. to really look into this,” she said. “We need to see the rest of the payouts. He was not just an employee; he was the manager. He was the guy in charge, and he understood his contract. He knew what he was entitled to, and for him to hand it off to a subordinate makes me concerned. It calls into question whether he is able to serve as comptroller."
Bendo said that he hopes that the audit will provide residents with answers.
“We look forward to getting the information so the city can take any necessary corrective action to put us back on a sound fiscal path,” Bendo said.