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Mostly Cloudy Long Beach City Council approves $6 million borrowing measure
Amid deficit, administration says resolution would help them maintain services and pay workers
The City Council unanimously approved a $6 million borrowing measure on Tuesday in order to pay its workers and help close a $10.2 million deficit as the city attempts to avoid a further credit-rating downgrade by Moody’s Investors Service.
City Manager Jack Schnirman said that the move to issue revenue-anticipation notes — a short-term debt security issued on the premise that anticipated revenues will be sufficient to meet the city’s repayment obligation — would allow the city to maintain essential services, help it avoid laying off 20 to 30 percent of its employees and serve as a bridge to allow officials to balance the budget by the end of fiscal 2011-12, on June 30.
City officials said that since a key credit rating criteria used by Moody’s is liquidity, the administration wanted to issue the notes, which will mature after the receipt of next year’s property taxes and seasonal revenues. The money, officials said, will allow the city to function while the gap-closing measures take effect.
City Comptroller Jeff Nogid said that the administration was borrowing $6 million — which will have to be paid off in about a year — in an attempt to close most of its deficit and allow the city to meet its biweekly payroll of approximately $1.7 million.
“In order to meet payroll, in order to anticipate certain revenue receipts, we’d like to have at least two to three payroll amounts in hand,” Nogid said, adding that the city would otherwise essentially run out of money in April. Other than payroll, Nogid said, the money will be “used to pay bills for everything the city transacts.”
The estimated deficit for the current fiscal year is more than 12.4 percent of the city’s $83.6 million budget. The city currently has $631,419 in debt service payments due through the end of April that will be paid with approximately $5 million cash on hand.
But the council voted to issue additional short-term notes to raise cash for “ongoing liquidity needs.” Absent the additional cash flow, city officials said, the city might not have enough liquidity to make debt service payments in June.
