New York’s Long Beach Declares Fiscal Crisis After Overtime Costs Surge

Long Beach (9309MF), New York (STONY1), the Long Island city whose credit rating was cut five levels in December, declared a fiscal crisis, giving its manager the authority to reappropriate a $60 million budget after a surge in overtime costs and a $500,000 payout to a retiring police official.

The City Council voted unanimously in favor of the resolution during a meeting yesterday. The measure gives Manager Jack Schnirman until June 30 to use his budget powers to get the 36,000-resident municipality’s finances back in order. Schnirman, 34, a former management consultant with a master’s degree from Harvard University, was hired last month.

“We will strike a balance, the numbers will be public and they’re going to make sense,” Schnirman said at the meeting, which was webcast.

Midway through the fiscal year ending June 30, eight departments had exceeded their overtime budgets by almost 41 percent, Schnirman said Jan. 24 in an interview. Since 2006, overtime costs have gone up $900,000, or 66 percent, he said.

On Dec. 20, Moody’s dropped the city’s rating on $48.3 million of general-obligation bonds to Baa3, the lowest investment grade, from A1. Earlier that month, Long Beach, about 30 miles (48 kilometers) east of Manhattan, borrowed $4.25 million to meet its monthly payroll, according to data compiled by Bloomberg and an offering statement.

Depleted Reserves

Reserves were depleted by overtime and a $500,000 payment to retiring Police Commissioner Thomas Sofield Sr., former City Manager Charles Theofan said in a December interview. Sofield, a lieutenant and 30-year veteran of the force, was serving as acting commissioner. His payout, required by a union contract, included accrued vacation time and unused sick days.

Two other police officers followed, raising the total retirement payouts for vacation and sick leave to $1.4 million. The payments are a portion of the $23.3 million the city will owe its more than 300 workers when they retire, according to an audit of the last fiscal year released yesterday.

The audit also said the city overestimated its revenue by about $1 million, and ended the year with a $1.1 million deficit in its water and sewer funds. Officials then pulled cash from the city’s general fund, lowering the balance to about $100,000 at the end of the fiscal year.

“In the absence of making decisions about revenue and expenses in the budget, they overestimated revenue year after year,” Schnirman said in the interview.

To contact the reporter on this story: Freeman Klopott in Albany, New York, at fklopott@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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