Long Beach City Council OK’s $4.5 million loan to pay workers

The City Council passed two resolutions during a contentious emergency meeting on Wednesday night that will allow the city to borrow $4.5 million in the face of a cash-flow problem that would have prevented the city from meeting its Dec. 23 payroll obligations and making payments to a number of retirees.

The meeting came on the heels of a Nov. 18 memo from Comptroller Sandra Clarson to City Manager Charles Theofan and other city officials, saying that the city would not be able to meet its payroll obligations later this month. The shortage of cash would seriously “affect the city’s ability to pay its bills” unless the city quickly approved a measure to borrow money by way of a tax anticipation note, Clarson wrote.

Every two weeks, the city issues more than 600 paychecks to employees totaling $1.4 million, Theofan said. In her memo, Clarson said that the city had $3.9 million in cash in its operating bank accounts, but was $1.3 million short of what it needed to meet the Dec. 23 payroll.

“Based on a preliminary review of the city’s finances, [its] daily financial operations have come to an immediate halt,” she wrote. “… [T]here is not enough cash to make the last payroll in December … there will be no vendor check payments.”

A tax anticipation note is a short-term debt security that helps governments smooth out the “ups and downs” in their revenue cycles, if the timing of their receipts does not match the timing of their expenditures.

In her memo, Clarson also said that unbudgeted termination payments — which include employees’ accrued vacation time and unused sick days — for three outgoing employees of the Police Department, would cost the city $1.4 million. That included Commissioner Thomas Sofield Sr., who has been with the department for more than 30 years and, as an acting lieutenant, is eligible for a $500,000 payout, Theofan said.