Long Beach Comptroller: City has no cash to make Christmas payroll, pay bills

City workers may not receive their paychecks on Dec. 23, just two days before Christmas, due to “unforeseen” cash-flow problems at City Hall, unless the City Council passes a resolution that would allow the city to borrow more than $1 million to cover the gap between cash on hand and expenses until anticipated January tax receipts and other revenue is received.

According to a Nov. 18 internal memo from City Comptroller Sandra Clarson addressed to City Manager Charles Theofan and other city officials, obtained by the Herald on Tuesday, the city will not be able to meet its payroll obligations in late December. The document illustrates an urgent cash flow shortage that will seriously “affect the city’s ability to pay its bills” unless the city takes quick action and approves a measure to borrow a Tax Anticipation Note, Clarson said.

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

Every two weeks, the city issues more than 600 paychecks to its employees totaling $1.4 million, Theofan said. In her memo, Clarson said that at present, the city has $3.9 million cash in its operating bank accounts, but is running a $1.3 million shortfall to meet its Dec. 23 payroll date.

In order to make up for the gap, Clarson advised the city to take out a short-term Tax Anticipation Note, which is payable no more than a year from the date of issuance. Authorization for the note would require a resolution approved by a majority of the City Council. She explained that if approved, a “fiscal adviser” can buy the note at a local bank, and that the entire process would take 14 business days.