Long Beach budget calls for tax increase

Proposed $97.6 million spending plan includes 7.9 percent hike


City Council President Anthony Eramo said he wanted to see a proposed 7.9 percent tax increase in the planned 2019-20 city budget “significantly reduced.”

The city released a $97.6 million spending plan last week for the upcoming fiscal year, which begins July 1. If approved, the budget would raise taxes on the average home by $304.63 per year, in addition to separate sewer and water rate increases.

“I’d like to see [the tax increase] lowered significantly,” said Eramo, a Democrat and one of three council members up for re-election this year. “I voted for three budgets under the tax cap, and although we’re still climbing out of our recovery, which started before [Hurricane] Sandy, I think incremental tax increases is the plan we were on and what we have to stick with.”

Acting City Manager Rob Agostisi said the proposal maintains city services and programs and does not include layoffs. But it does include $1 million in salary increases, primarily due to contractual raises, and increased service costs that officials said equate to a 2.6 percent property-tax increase.

“On the expense side, [the budget is] driven by personnel costs, and the city has to properly budget for the level of staffing it’s been maintaining for the past few years,” said former city Comptroller Kristie Hansen- Hightower, who continues to work as a consultant.

She added that personnel costs make up just over 70 percent of the proposed budget.

Revenues declined by $1.6 million, with officials saying that funds related to federal operating grants, state grants, inter-fund items, and certain fees and permits were reduced to bring expected revenues closer to those of prior years. Health care costs are increasing $586,500, and officials said those expenses have risen more than 33 percent since 2015. Retirement and pension costs, however, have decreased by $80,000 in the budget, the second consecutive year that those costs have dropped, officials said.

This would mark the second year that residents are being hit with a tax increase, and the City Council will hold a public hearing on May 7 to discuss overriding the tax cap following a budget presentation.

Last May, after an outcry from residents over a proposed 12.3 percent tax increase — which officials had floated to help fill a $4.5 million deficit at the time — the City Council voted unanimously to approve a revised $95 million budget for the current fiscal year that avoided layoffs and drastic cuts to services, and reduced the tax increase to 8.3 percent after officials made a number of cuts.

Residents have criticized the city for its handling of finances, particularly under former City Manager Jack Schnirman.

Last month, DiNapoli’s office said that Long Beach remained in “significant fiscal stress” — the highest level under DiNapoli’s Fiscal Stress Monitoring System — in 2018 for the second consecutive year, again citing short-term borrowing, a deteriorating fund balance, structurally imbalanced budgets and operating deficits as main factors. Moody’s Investors Service also downgraded Long Beach’s credit rating from Baa1 to Baa2 — just two notches above junk bond status.

Agostisi said that city officials were working to turn the city’s finances around and looking at ways to increase revenue. Last week the city hired a consulting firm to develop a long-term financial recovery plan. It is close to hiring a full-time comptroller, and officials are awaiting recommendations from the state’s Financial Restructuring Board for Local Governments, which is conducting a comprehensive review of the city’s finances that could net $5 million in grants.

In a letter in the proposed budget, Agostisi, who was appointed on Jan. 30, said that officials were working to identify savings opportunities, while implementing financial controls to keep costs manageable.

“We are working to maximize existing revenue streams,” he wrote. “This summer, we will be implementing a strategic marketing plan to help boost beach revenue, and we are forming partnerships to help support various programs and initiatives. Our aim is to maintain the services that our residents expect and deserve, and produce a balanced budget that optimizes value for the taxpayer.”

“You’re talking about what amounts to a long-range plan that will entail multiple factors and considerations,” Agostisi told the Herald on Monday, “but the one we’re going to focus on over the course of the next year are smart-growth initiatives. Right now we’re doing our level best to catch up.”

Asked whether past management practices needed to be addressed, Agostisi said, “We’re waiting on guidance from the financial restructuring board to indicate what departments we should be looking at in terms of how to operate more efficiently.”

Eramo, who took office in 2014, expressed confidence in Agostisi’s efforts to turn things around. He said that the city was already dealing with a fiscal crisis in 2012, prior to Hurricane Sandy, and that the city had relied on federal funding after the storm to help balance its budgets and offset employee costs.

“Sandy and all the [Federal Emergency Management Agency] funds we got for years masked our structural imbalance that they were trying to fix prior to the storm,” Eramo said. “We were able to use the FEMA money to do all those projects, and we paid for a lot of our salaried employees because we did the work in house.”

Hansen-Hightower said that to date, the city has been reimbursed more than $100 million by FEMA for costs associated with Sandy, and was still owed $7 million as of the last fiscal year.

“Right now there aren’t any major impacts to the operating budget,” she said of ongoing recovery projects. “. . . ‘[W]e’re really closing those out as far as recovery goes.”

The council could amend the proposed budget and reduce the tax increase. However, if the council fails to pass the spending plan by majority vote by May 31, the 7.9 percent tax hike would take effect.

Councilman John Bendo said that the proposed spending plan is “structurally imbalanced” because the city continues to rely on borrowing. “It’s only balanced because of the borrowing that is assumed in the budget — if it passes,” he said. “We’re borrowing for separation payments, which really should be budgeted items.”

The council was expected to meet on Wednesday to schedule a public hearing on May 1 to discuss a proposed $400,000 bond measure to help cover $2.1 million in separation payments.

“This budget is sort of a more accurate reflection of where the city’s revenues and expenses really are,” Bendo added. “But there’s a caveat: This budget still has significant borrowing in it to pay for separation payments that is still not budgeted for, and that’s one of the items Moody’s has been beating the city up about . . . That’s been a factor in our downgrades.”