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Long Beach City Council rejects $98 million budget

But proposed spending plan β€” with 8 percent tax increase β€” will still go into effect by default

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After three public hearings, four meetings and hours of input from residents, the City Council voted unanimously at a special meeting on May 31 against a proposed a $98 million budget for the upcoming fiscal year after members failed to agree on a revised spending plan that would have only slightly reduced a planned tax increase.

However, because members failed to agree on a number of cuts, the initial budget and tax hike will take effect by default for the 2019-20 fiscal year, which will begin on July 1.

The budget, which was floated in April, includes an 8 percent tax increase, in addition to separate sewer and water rate increases. The spending plan raises taxes on the average home by $304.63 per year. Last year, residents were hit with an 8.3 percent tax hike.

Councilman Scott Mandel, who was elected in 2012 and is the longest-serving council member, called for a change in the city’s charter to allow for austerity budgets that would maintain essential services in the event that a proposed spending plan was rejected — a practice common among school districts. His sentiment was shared by residents and other council members alike.

“No matter how this vote turns out, this budget goes into effect at midnight tonight,” Councilman John Bendo said, adding that he attempted to change the charter last year. “The way our city charter is written is, the budget goes into effect anyway, unless the council does something different. This vote is almost pointless because the budget is going into effect anyway.”

Bendo apologized to residents, saying that he believed the council failed them.

“We’re sitting up here looking at a nearly $98 million budget, and the five of us did not meet one time to discuss this budget,” Bendo said. “That is inexcusable, and the residents deserve better than they got from us.”

‘Clearly deception’

In a recent budget review, State Comptroller Tom DiNapoli’s office — which is conducting a comprehensive audit of the city’s finances — said that city officials “continue to take actions that are detrimental to the city’s financial position. Though the state said that significant revenue and expenditure projections in the proposed $98 million spending plan were reasonable, the review, issued on May 10, noted that the city’s continued practice of borrowing to fund termination salaries is not fiscally prudent. The city’s long-term debt is more than $100 million.

Residents have criticized officials for their handling of the city’s finances and what they have called excessive borrowing, particularly under former City Manager Jack Schnirman. Before Schnirman left office in January 2018 after he was elected as Nassau County comptroller, he had touted a $9.4 million surplus, balanced budgets and said that the administration had turned the city’s finances around after it inherited a financial crisis in 2012.

“Since 2016 … we were told, and we were provided with data, that highlighted revenue growth and our commitment to reduce the debt service,” Councilwoman Anissa Moore said. “We continued to receive that information up until the time we had our new acting city manager. It’s come to my attention that all of this is clearly deception.”

Moore, who is up for re-election this year, said residents were again being asked to bail out the city with tax increases and fees. “Balancing a budget should never be done by raising taxes as an easy fix,” she said. “Good government lessens deficits, reduces taxes.”

Acting City Manager Rob Agostisi, who was appointed in January, said at past meetings that the tax increase was necessary to plug a $2.8 million deficit, turn the city’s finances around in the wake of a fiscal crisis, restore credibility with Moody’s Investors Service — which downgraded the city’s credit rating to two notches above junk bond status in March — and lay the foundation for a long-term financial recovery plan after years of structurally imbalanced budgets. Officials said that the 2018-19 fiscal year was expected to end with a $1 million deficit. Newsday reported that the city ended 2018 with a $5.2 million deficit.

Still, Council President Anthony Eramo and other members said they wanted to see the tax increase significantly reduced.

A ‘flawed’ mechanism

At a special meeting on May 28, the council voted unanimously to postpone the adoption of the budget after members made a number of changes and cuts to reduce the tax increase — and share those recommendations with the public.

But council members failed to agree on those amendments to the budget at last Friday’s meeting, and voted against adopting an errata sheet that would have cut more than $300,000 from the spending plan, including a number of part-time and overtime salaries, consultants and contracted services associated with publicity. The cuts included $52,500 in temporary recreation employee salaries, $50,000 in municipal building repairs, $19,000 in central administration temporary salaries and $16,500 in temporary beach maintenance salaries.

The proposed cuts would have reduced the tax increase from 7.9 percent to 7.09 percent — to $274 per year on the average home in Long Beach.

Bendo told the Herald on May 28 that there were two “competing” errata sheets, one of which was drafted by him and Mandel.

Council members, however, were divided over layoffs and cutting a number of positions that Bendo said would have saved several hundred thousand dollars, a proposal that was ultimately not included in the errata sheet because members could not reach an agreement.

“We went line by line; we cut where we could,” Mandel said. “We were unsuccessful in getting most of the things we wanted.”

Eramo, who is also up for re-election this year, said that the “general consensus” was not to include layoffs — especially of those workers “who helped put the city back together” after Hurricane Sandy — or a reduction in services.

Both council members and residents said that the proposed cuts — and reduction of the tax increase — did not do enough to ease the burden on residents and barely made a dent in the overall spending plan, which residents and council members said still included “excessive” borrowing — including $1.9 million for separation payouts — and failed to address years of unbalanced budgets.

“This budget overestimates revenue, underestimates expenses; it does nothing to address the financial crisis,” Bendo said. “It just continues the excessive borrowing.”

Mandel called on the council to support a resolution in the next few months to hire outside counsel to explore changing the city charter, while also moving forward with retaining a search firm to hire a permanent city manager.

“We need to change this system to an austerity budget system, similar to the school district,” Mandel said. “We should have some direction from the acting city manager as to what will be implemented — what methods for enforcing financial controls — in this budget that does pass by default tonight.”

Eramo said he appreciated Mandel’s recommendation to look into potentially changing the city charter to correct the “flawed” mechanism of the rejected budget taking effect.

“The one issue that I have with our budget … is it does nothing to address the structural imbalances that the city currently faces,” Eramo said. “And also, we need to find some more creative ways to increase revenue.”